CGI Group Inc. and The Toronto-Dominion Bank – s. 6.1 of NI 62-104 Take-Over Bids and Issuer Bids
Section 6.1 of NI 62-104 – Issuer bid – relief from the requirements applicable to issuer bids in Part 2 of NI 62-104 – issuer proposes to purchase, pursuant to a repurchase program and at a discounted purchase price, up to a specified number of its subordinate voting shares under its normal course issuer bid from a third party – the third party will abide by the requirements governing normal course issuer bids as though it was the issuer, subject to certain modifications, including that the third party will not make any purchases under the program pursuant to a pre-arranged trade – subordinate voting shares delivered to the issuer for cancellation will be subordinate voting shares from the third party's existing inventory – the third party will purchase subordinate voting shares under the program on the same basis as if the Issuer had conducted the bid in reliance on the normal course issuer bid exemptions set out in securities legislation – no adverse economic impact on, or prejudice to, the Issuer or its security holders – acquisition of securities exempt from the requirements applicable to issuer bids in Part 2 of NI 62-104, subject to conditions, including that the number of subordinate voting shares transferred by the third party from its existing inventory to the issuer for purchase under the program be equivalent to the number of subordinate voting shares that the third party has purchased, or had purchased on its behalf, on Canadian markets.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
AND
IN THE MATTER OF
CGI GROUP INC. AND
THE TORONTO-DOMINION BANK
ORDER
(Section 6.1 of National Instrument 62-104)
UPON the application (the “Application”) of CGI Group Inc. (the “Issuer”) and The Toronto-Dominion Bank (“TD” and, together with the Issuer, the “Filers”) to the Ontario Securities Commission (the “Commission”) for an order pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (“NI 62-104”) exempting the Issuer from the requirements applicable to issuer bids in Part 2 of NI 62-104 (the “Issuer Bid Requirements”) in respect of the proposed purchases by the Issuer of up to 1,500,000 (the “Program Maximum”) of the Issuer’s Class A subordinate voting shares (the “Subordinate Voting Shares”) from TD pursuant to a repurchase program (the “Program”).
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Issuer (and the TD Entities (as defined below) in respect of paragraphs 6 to 9, inclusive, 20 to 24, inclusive, 27, 28, 30 to 35, inclusive, 37, 41, 43 and 44 as they relate to the TD Entities) having represented to the Commission that:
1. The Issuer was incorporated on September 29, 1981 under Part IA of the Companies Act (Québec), predecessor to the Business Corporations Act (Québec) which now governs the Issuer. The Issuer continued the activities of Conseillers en Gestion et Informatique CGI Inc., which was originally founded in 1976.
2. The head office of the Issuer is situated at 1350 René-Lévesque Blvd. West, 15th Floor, Montreal, Québec, H3G 1T4.
3. The Issuer is a reporting issuer in each of the provinces of Canada. It is also registered as a foreign private issuer with the United States Securities and Exchange Commission. The Issuer is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.
4. The Issuer’s authorized share capital consists of an unlimited number of Subordinate Voting Shares, an unlimited number of Class B shares (multiple voting) (the “Multiple Voting Shares”), an unlimited number of first preferred shares, issuable in series, and an unlimited number of second preferred shares, issuable in series, all without par value, of which 272,098,920 Subordinate Voting Shares and 32,852,748 Multiple Voting Shares were issued and outstanding as of October 31, 2016.
5. The Subordinate Voting Shares are listed for trading on the Toronto Stock Exchange (the “TSX”) and the New York Stock Exchange (the “NYSE”).
6. TD is a full service Schedule 1 bank governed by the Bank Act (Canada). The corporate headquarters of TD is located in the Province of Ontario.
7. TD does not directly or indirectly own more than 5% of the issued and outstanding Subordinate Voting Shares.
8. TD is the beneficial owner of at least that number of Subordinate Voting Shares equal to the Program Maximum, none of which were acquired by, or on behalf of, TD in anticipation or contemplation of resale to the Issuer (such Subordinate Voting Shares over which TD has beneficial ownership, the “Inventory Shares”). All of the Inventory Shares are held by TD in the Province of Ontario. No Subordinate Voting Shares were acquired by, or on behalf of, TD on or after October 31, 2016, being the date that was 30 days prior to the date of the Application, in anticipation or contemplation of a sale of Subordinate Voting Shares by TD to the Issuer.
9. TD is at arm’s length to the Issuer and is not an “insider” of the Issuer or an “associate” of an “insider” of the Issuer, or an “associate” or “affiliate” of the Issuer, as such terms are defined in the Securities Act (Ontario) (the “Act”). TD is an “accredited investor” within the meaning of National Instrument 45-106 Prospectus Exemptions.
10. Pursuant to a “Notice of Intention to Make a Normal Course Issuer Bid” accepted by the TSX effective February 9, 2016 (the “NCIB Notice”), the Issuer was permitted to make a normal course issuer bid (the “NCIB”) to purchase up to 21,425,992 Subordinate Voting Shares, representing approximately 10% of the Issuer’s public float of Subordinate Voting Shares as of the date specified in the NCIB Notice. In accordance with the NCIB Notice, the NCIB is conducted through the facilities of the TSX in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the “TSX NCIB Rules”) and the Issuer may also purchase Subordinate Voting Shares on the open market through the facilities of the NYSE and through alternative trading systems, as well as outside the facilities of the TSX pursuant to exemption orders issued by securities regulatory authorities.
11. The NCIB is being conducted in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(2) of NI 62-104 (the “Designated Exchange Exemption”).
12. The NCIB is also being conducted in the normal course on the NYSE and other permitted published markets (collectively with the NYSE, the “Other Published Markets”) in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(3) of NI 62-104 (the “Other Published Markets Exemption”, and together with the Designated Exchange Exemption, the “Exemptions”).
13. Pursuant to the TSX NCIB Rules, the Issuer has appointed National Bank Financial Inc. as its designated broker in respect of the NCIB (the “Responsible Broker”).
14. The Issuer may, from time to time, appoint a non-independent purchasing agent (a “Plan Trustee”) to fulfill requirements for the delivery of Subordinate Voting Shares under the Issuer’s security-based compensation plans (the “Plan Trustee Purchases”). A Plan Trustee has not been appointed by the Issuer and no Plan Trustee Purchases will be required during the Program Term (as defined below).
15. The maximum number of Subordinate Voting Shares that the Issuer is permitted to repurchase under the NCIB, being 21,425,992 Subordinate Voting Shares, will be reduced by the number of Plan Trustee Purchases, if any.
16. To the best of the Issuer’s knowledge, as of October 31, 2016, the “public float” in respect of the Subordinate Voting Shares for the purposes of the TSX NCIB Rules (as defined below) consisted of a total of 217,121,835 Subordinate Voting Shares. The Subordinate Voting Shares are “highly-liquid securities” as that term is defined in section 1.1 of OSC Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactions (“OSC Rule 48-501”) and section 1.1 of the Universal Market Integrity Rules (“UMIR”).
17. The Autorité des marchés financiers (Québec) granted the Issuer an order on March 3, 2016 pursuant to section 263 of the Securities Act (Québec) from the Issuer Bid Requirements in connection with the purchase by the Issuer of 7,112,375 Subordinate Voting Shares from Caisse de dépôt et placement du Québec, which was concluded on March 3, 2016 and settled on March 8, 2016 as part of the NCIB.
18. The Commission granted the Issuer and Canadian Imperial Bank of Commerce (“CIBC”) an order on December 2, 2016 pursuant to section 6.1 of NI 62-104 exempting the Issuer from the Issuer Bid Requirements in connection with the proposed purchases by the Issuer of up to 2,750,000 Subordinate Voting Shares from CIBC pursuant to a share repurchase program (the “CIBC Program”). The CIBC Program will terminate on the earlier of February 3, 2017 and the date on which the Issuer will have purchased 2,750,000 Subordinate Voting Shares from CIBC under the CIBC Program. The Issuer expects the CIBC Program to be completed on or about December 21, 2016.
19. On December 16, 2016, the Issuer intends to implement an automatic repurchase plan with the Responsible Broker (the “ARP”) to permit the Issuer to make purchases under the NCIB during a regularly scheduled quarterly blackout period that is imposed by the Issuer on its directors, executive officers and other insiders pursuant to the Issuer’s internal insider trading policy (a “Blackout Period”). The ARP will be approved by the TSX and will be in compliance with the TSX Rules and applicable securities law. The ARP will not be in effect until the trading day following the completion of the Program.
20. The Filers wish to participate in the Program during, and as a part of, the NCIB to enable the Issuer to purchase from TD, and for TD to sell to the Issuer, that number of Subordinate Voting Shares equal to the Program Maximum.
21. TD has retained TD Securities Inc. (“TDSI”) to acquire Subordinate Voting Shares through the facilities of the TSX and on Other Published Markets in Canada (each, a “Canadian Other Published Market” and collectively with the TSX, the “Canadian Markets”) under the Program. No Subordinate Voting Shares will be acquired under the Program on any Other Published Markets other than Canadian Other Published Markets.
22. TDSI is registered as an investment dealer under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Yukon, the Northwest Territories and Nunavut. It is also registered as a futures commission merchant under the Commodity Futures Act (Ontario), a derivatives dealer under the Derivatives Act (Québec) and a dealer (futures commission merchant) under The Commodity Futures Act (Manitoba). TDSI is a member of the Investment Industry Regulatory Organization of Canada (“IIROC”) and the Canadian Investor Protection Fund, a participating organization or member of the TSX, TSX Venture Exchange and Canadian Securities Exchange, and an approved participant of the Bourse de Montréal. The head office of TDSI is located in the Province of Ontario.
23. The Program will be governed by, and conducted in accordance with, the terms and conditions of a Repurchase Program Agreement (the “Program Agreement”) that will be entered into among the Filers and TDSI prior to the commencement of the Program and a copy of which will be delivered by the Filers to the Commission promptly thereafter.
24. The Program will begin on the Trading Day following the completion of the CIBC Program and terminate on the earlier of February 3, 2017 and the date on which the Issuer will have purchased the Program Maximum under the Program (the “Program Term”). Neither the Issuer nor any of the TD Entities may unilaterally terminate the Program Agreement during the Program Term, except in the case of an event of default by a party thereunder.
25. At least two clear trading days prior to the commencement of the Program, the Issuer will issue a press release that will have been pre-cleared by the TSX and will describe the material features of the Program and disclose the Issuer’s intention to participate in the Program during the NCIB (the “Press Release”).
26. The Program Maximum will be less than the number of Subordinate Voting Shares remaining that the Issuer is entitled to acquire under the NCIB, calculated as at the date of the Program Agreement.
27. The Program Term will include a Blackout Period. During the Blackout Period, the Program will be an “automatic securities purchase plan” as defined in National Instrument 55-104 Insider Reporting Requirements and Exemptions (as applied, mutatis mutandis, to purchases made by an issuer), and TDSI will conduct the Program in its sole discretion, in accordance with the irrevocable instructions established by the Issuer, and conveyed by the Issuer to TDSI, at a time when the Issuer has not imposed a Blackout Period, in compliance with exchange and securities regulatory requirements applicable to automatic share repurchase plans. The TSX will be advised of the Issuer’s intention to enter into the Program and will be provided with a copy of the Program Agreement, and the Program will be pre-cleared by the TSX.
28. At such times during the Program Term when the Issuer has not imposed a Blackout Period, TDSI will purchase Subordinate Voting Shares on the applicable Trading Day (as defined below) in accordance with instructions received by TDSI from the Issuer prior to the opening of trading on such day, which instructions will be the same instructions that the Issuer would give to the Responsible Broker as its designated broker in respect of the NCIB if it was conducting the NCIB in reliance on the Exemptions.
29. The Issuer will not give purchase instructions in respect of the Program to TDSI at any time that the Issuer is aware of Undisclosed Information (as defined below).
30. All Subordinate Voting Shares acquired for the purposes of the Program by TDSI on a day during the Program Term on which Canadian Markets are open for trading (each, a “Trading Day”) must be acquired on Canadian Markets in accordance with the TSX NCIB Rules and any by-laws, rules, regulations or policies of any Canadian Markets upon which purchases are carried out (collectively, the “NCIB Rules”) that would be applicable to the Issuer in connection with the NCIB, provided that:
(a) the aggregate number of Subordinate Voting Shares to be acquired on Canadian Markets by TDSI on each Trading Day shall not exceed the maximum daily limit that is imposed upon the NCIB pursuant to the TSX NCIB Rules, determined with reference to an average daily trading volume that is based on the trading volume of the Subordinate Voting Shares on all Canadian Markets rather than being limited to the trading volume on the TSX only (the “Modified Maximum Daily Limit”), it being understood that the aggregate number of Subordinate Voting Shares to be acquired on the TSX by TDSI on each Trading Day will not exceed the maximum daily limit that is imposed on the NCIB pursuant to the TSX NCIB Rules; and
(b) notwithstanding the block purchase exception provided for in the TSX NCIB Rules, no purchases will be made by TDSI on any Canadian Markets pursuant to a pre-arranged trade.
31. The aggregate number of Subordinate Voting Shares acquired by TDSI in connection with the Program:
(a) shall not exceed the Program Maximum; and
(b) on Canadian Other Published Markets, shall not exceed that number of Subordinate Voting Shares remaining eligible for purchase by the Issuer pursuant to the Other Published Markets Exemption, calculated as at the date of the Program Agreement.
32. On every Trading Day, TDSI will purchase the Number of Subordinate Voting Shares. The “Number of Subordinate Voting Shares” will be no greater than the least of:
(a) the maximum number of Subordinate Voting Shares established in the instructions received by TDSI from the Issuer prior to the opening of trading on such day;
(b) the Program Maximum less the aggregate number of Subordinate Voting Shares previously purchased by TDSI under the Program;
(c) on a Trading Day where trading ceases on the TSX or some other event that would impair TDSI’s ability to acquire Subordinate Voting Shares on Canadian Markets occurs (a “Market Disruption Event”), the number of Subordinate Voting Shares acquired by TDSI on such Trading Day up until the time of the Market Disruption Event; and
(d) the Modified Maximum Daily Limit.
33. The “Discounted Price” per Subordinate Voting Share will be equal to (i) the volume weighted average price of the Subordinate Voting Shares on the Canadian Markets on the Trading Day on which purchases were made for the period from 9:31 a.m. to 3:30 p.m. (Eastern time) (excluding blocks of 10,000 or more shares and any trade above the maximum price established in the instructions received by TDSI from the Issuer prior to the opening of trading on such day) less an agreed upon discount, or (ii) upon the occurrence of a Market Disruption Event, the volume weighted average price of the Subordinate Voting Shares on the Canadian Markets from 9:31 a.m. (Eastern time) up to the time the Market Disruption Event occurred (subject to the same exclusions) less an agreed upon discount.
34. TD will deliver to the Issuer that number of Inventory Shares equal to the number of Subordinate Voting Shares purchased by TDSI on a Trading Day under the Program on the second Trading Day thereafter, and the Issuer will pay TD a purchase price equal to the Discounted Price for each such Inventory Share. Each Inventory Share purchased by the Issuer under the Program will be cancelled upon delivery to the Issuer.
35. TD will not sell any Inventory Shares to the Issuer under the Program unless TDSI has purchased the equivalent number of Subordinate Voting Shares on Canadian Markets. The number of Subordinate Voting Shares that are purchased by TDSI on Canadian Markets on a Trading Day will be the Number of Subordinate Voting Shares for such Trading Day. TDSI will provide the Issuer with a daily written report of TDSI’s purchases, which report will indicate, inter alia, the aggregate number of Subordinate Voting Shares acquired, the Canadian Market on which such Subordinate Voting Shares were acquired and the Modified Maximum Daily Limit.
36. During the Program Term, the Issuer will (a) not purchase any Subordinate Voting Shares (other than Inventory Shares purchased under the Program), (b) prohibit the Responsible Broker from acquiring any Subordinate Voting Shares on its behalf, (c) prohibit any Plan Trustee from undertaking any Plan Trustee Purchases, and (d) prohibit the designated broker under the ARP from acquiring any Subordinate Voting Shares on its behalf.
37. All purchases of Subordinate Voting Shares under the Program will be made by TDSI and neither of the TD Entities will engage in any hedging activity in connection with the conduct of the Program.
38. The Issuer will report its purchases of Subordinate Voting Shares under the Program to the TSX in accordance with the TSX NCIB Rules. In addition, immediately following the completion of the Program, the Issuer will: (a) report the total number of Subordinate Voting Shares acquired under the Program to the TSX and the Commission, and (b) file a notice on the System for Electronic Document Analysis and Retrieval (“SEDAR”) disclosing the number of Subordinate Voting Shares acquired under the Program and the aggregate dollar amount paid for such Subordinate Voting Shares.
39. The Issuer is of the view that (a) it will be able to purchase Subordinate Voting Shares from TD at a lower price than the price at which it would be able to purchase an equivalent quantity of Subordinate Voting Shares under the NCIB in reliance on the Exemptions, and (b) the purchase of Subordinate Voting Shares pursuant to the Program is in the best interests of the Issuer and constitutes a desirable use of the Issuer’s funds.
40. The entering into of the Program Agreement, the purchase of Subordinate Voting Shares by TDSI in connection with the Program, and the sale of Inventory Shares by TD to the Issuer will not adversely affect the Issuer or the rights of any of the Issuer’s security holders and it will not materially affect control of the Issuer.
41. The sale of Inventory Shares to the Issuer by TD will not be a “distribution” (as defined in the Act).
42. The Issuer will be able to acquire the Inventory Shares from TD without the Issuer being subject to the dealer registration requirements of the Act.
43. At the time that the Issuer and the TD Entities enter into the Program Agreement, neither the Issuer, nor any member of the Equity Derivatives Trading Group of TD, nor any personnel of either of the TD Entities that negotiated the Program Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Program Agreement and sell the Subordinate Voting Shares, will be aware of any “material change” or “material fact” (each as defined in the Act) with respect to the Issuer or the Subordinate Voting Shares that has not been generally disclosed (the “Undisclosed Information”).
44. Each of the TD Entities:
(a) has policies and procedures in place to ensure that the Program will be conducted in accordance with, among other things, the Program Agreement and this Order, and to preclude those persons responsible for administering the Program from acquiring any Undisclosed Information during the conduct of the Program; and
(b) will, prior to entering into the Program Agreement, (i) ensure that its systems are capable of adhering to, and performing in accordance with, the requirements of the Program and this Order, and (ii) provide all necessary training and take all necessary actions to ensure that the persons administering and executing the purchases under the Program are aware of, and understand the terms of this Order.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED pursuant to section 6.1 of NI 62-104 that the Issuer be exempt from the Issuer Bid Requirements in respect of the purchase of Inventory Shares from TD pursuant to the Program, provided that:
(a) at least two clear trading days prior to the commencement of the Program, the Issuer issues the Press Release;
(b) all purchases of Subordinate Voting Shares under the Program are made on Canadian Markets by TDSI, and are:
i) made in accordance with the NCIB Rules applicable to the NCIB, as modified by paragraph 29 of this Order;
ii) taken into account by the Issuer when calculating the maximum annual aggregate limits that are imposed upon the NCIB in accordance with the TSX NCIB Rules, with those Subordinate Voting Shares purchased on Canadian Other Published Markets being taken into account by the Issuer when calculating the maximum aggregate limits that are imposed upon the Issuer in accordance with the Other Published Markets Exemption;
iii) marked with such designation as would be required by the applicable marketplace and UMIR for trades made by an agent of the Issuer; and
iv) monitored by the TD Entities on a continual basis for the purposes of ensuring compliance with the terms of this Order, NCIB Rules, and applicable securities law;
(c) during the Program Term, (i) the Issuer does not purchase any Subordinate Voting Shares (other than Inventory Shares purchased under the Program), (ii) no Subordinate Voting Shares are purchased on behalf of the Issuer by the Responsible Broker, (iii) no Plan Trustee Purchases are undertaken by any Plan Trustee, and (iv) no Subordinate Voting Shares are acquired on behalf of the Issuer by the designated broker under the ARP;
(d) the number of Inventory Shares transferred by TD to the Issuer for purchase under the Program in respect of a particular Trading Day is equivalent to the number of Subordinate Voting Shares purchased by TDSI on Canadian Markets in respect of the Trading Day;
(e) no hedging activity is engaged in by the TD Entities in connection with the conduct of the Program;
(f) at the time that the Program Agreement is entered into by the Filers and TDSI:
i) the Subordinate Voting Shares are “highly liquid securities”, as that term is defined in section 1.1 of OSC Rule 48-501 and section 1.1 of UMIR; and
ii) none of the Issuer, any member of the Equity Derivatives Trading Group of TD, or any personnel of either of the TD Entities that negotiated the Program Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Program Agreement and sell the Subordinate Voting Shares, was aware of any Undisclosed Information;
(g) no purchase instructions in respect of the Program are given by the Issuer to TDSI at any time that the Issuer is aware of Undisclosed Information;
(h) the TD Entities maintain records of all purchases of Subordinate Voting Shares that are made by TDSI pursuant to the Program, which will be available to the Commission and IIROC upon request; and
(i) in addition to reporting its purchases of Subordinate Voting Shares under the Program to the TSX in accordance with the TSX NCIB Rules, immediately following the completion of the Program, the Issuer will: (i) report the total number of Subordinate Voting Shares acquired under the Program to the TSX and the Commission, and (ii) file a notice on SEDAR disclosing the number of Subordinate Voting Shares acquired under the Program and the aggregate dollar amount paid for such Subordinate Voting Shares.
DATED at Toronto, Ontario, this 16th day of December, 2016.
"Naizam Kanji"
Director, Office of Mergers & Acquisitions
Ontario Securities Commission