Rexel
Headnote
Process for Exemptive Relief Applications in Multiple Jurisdictions Securities Act (Ontario), ss. 25 and 53 - Application for relief from the dealer registration requirement and prospectus requirement in respect of certain trades made in connection with an employee share offering by a French issuer. The offering involves the use of collective employee shareholding vehicles, each a fonds commun de placement d'enterprise (FCPE). The issuer cannot rely on the employee exemption in section 2.24 of National Instrument 45-106 Prospectus and Registration Exemptions as the shares are not being offered to Canadian participants directly by the issuer, but through the FCPEs. The offering does not contain a "leveraged fund" component. Canadian participants will not be induced to participate in the offering by expectation of employment or continued employment. Canadian participants will receive certain disclosure documents. The FCPEs are subject to the supervision of the French Autorité des marchés financiers. Relief granted, subject to conditions.
Securities Act (Ontario), s. 25 - Application for relief from the dealer registration requirement and adviser registration requirement for the manager of the FCPEs. The management company will not be involved with providing advice to Canadian participants and its activities do not affect the underlying value of the shares being offered. Relief granted in respect of specified activities of the management company, subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74.
National Instrument 45-106 Prospectus and Registration Exemptions, ss. 2.24, 2.28.
National Instrument 45-102 Resale of Securities, s. 2.14.
November 25, 2008
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(THE "JURISDICTION")
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
REXEL
(THE "FILER")
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for:
1. an exemption from the prospectus requirements of the Legislation{1} (the "Prospectus Relief") and the dealer registration requirements of the Legislation{2} (the "Registration Relief") so that such requirements do not apply to:
(a) trades in units ("Units") of
(i) Rexel International Classique (the "Principal Classic Compartment"), a compartment of Rexel Actionnariat International (the "Fund", which is a fonds communs de placement d'entreprise or "FCPE"); and
(ii) Rexel International Relais 2008 (the "Temporary Fund", and together with the Principal Classic Compartment, the "Compartments") made pursuant to the global employee share offering of the Filer (the "Employee Share Offering") to or with Qualifying Employees (as defined below) resident in the Jurisdiction who elect to participate in the Employee Share Offering (the "Canadian Participants");
(b) trades of ordinary shares of the Filer (the "Shares") by the Compartments to Canadian Participants upon the redemption of Units by Canadian Participants;
2. an exemption from the adviser registration requirements and dealer registration requirements of the Legislation{3} so that such requirements do not apply to the manager of the Funds, BNP Paribas Asset Management SAS (the "Management Company"), to the extent that its activities described in paragraphs 9 and 10 of the Representations require compliance with the adviser registration requirements and dealer registration requirements (collectively, with the Prospectus Relief and the Registration Relief, the "Initial Requested Relief"); and
3. an exemption from the dealer registration requirements of the Legislation{4} so that such requirements do not apply to the first trade in any Units or Shares acquired by Canadian Participants under the Employee Share Offering (the "First Trade Relief").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application),
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador and Northwest Territories.
Interpretation
Terms defined in National Instrument 14-101 Definitions and Ml 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation formed under the laws of France. It is not and has no current intention of becoming a reporting issuer under the Legislation. The Shares are listed on Euronext Paris. The head office of the Filer is located in Paris, France.
2. The Filer carries on business in Canada through the following affiliated companies: Rexel North America Inc. and Rexel Canada Electrical Inc. (collectively, the "Canadian Affiliates," together with the Filer and other affiliates of the Filer, the "Rexel Group"). Each of the Canadian Affiliates is a direct or indirect controlled subsidiary of the Filer and is not, and has no current intention of becoming, a reporting issuer under the Legislation. The greatest number of employees of Canadian Affiliates are employed in Ontario and in comparison with the other Jurisdictions, the greatest proportion of Rexel's Canadian operations is located in Ontario.
3. As of the date hereof and after giving effect to the Employee Share Offering, Canadian residents do not and will not beneficially own (which term, for the purposes of this paragraph, is deemed to include all Shares held by the Compartments on behalf of Canadian Participants) more than 10% of the Shares and do not and will not represent in number more than 10% of the total number of holders of the Shares as shown on the books of the Filer.
4. Only persons who are employees of a member of the Rexel Group during the subscription period for the Employee Share Offering and who meet other employment criteria (the "Qualifying Employees") will be allowed to participate in the Employee Share Offering.
5. As set forth above, the Temporary Fund is and the Principal Classic Compartment is a compartment of, a fonds communs de placement d'entreprise, or FCPE, which is a shareholding vehicle of a type commonly used in France for the conservation or custodianship of shares held by employee investors, which must be registered with and approved by the Autorité des marchés financiers in France (the "French AMF") at the time of its creation. The Compartments are established for the purpose of implementing the Employee Share Offering. There is no current intention for the Compartments to become reporting issuers under the Legislation. Only Qualifying Employees will be allowed to purchase Units of the Compartments and such holdings will be in an amount reflecting the number of Shares held by the Compartments on their behalf.
6. Qualifying Employees will be invited to participate in the Employee Share Offering under the following terms:
(a) Canadian Participants will receive Units in the Temporary Fund, which will subscribe for Shares on behalf of the Canadian Participants at a subscription price that is equal to the price calculated as the average of the opening price of the Shares on the 20 trading days preceding the date of fixing of the subscription price by the Management Board of the Filer (the "Reference Price"), less a 20% discount.
(b) After completion of the Employee Share Offering, the Temporary Fund will be merged with the Principal Classic Compartment (subject to the approval of the French AMF and the decision of the Supervisory Board of the Fund). Units of the Temporary Fund held by Canadian Participants will be replaced with Units of the Principal Classic Compartment on a pro rata basis and the Shares subscribed for under the Employee Share Offering will be held in the Principal Classic Compartment (the "Merger"). The term "Classic Compartment" used herein means, prior to the Merger, the Temporary Fund, and following the Merger, the Principal Classic Compartment.
(c) All Units will be subject to a hold period of approximately five years (the "Lock-Up Period"), subject to certain exceptions prescribed by French law (such as a release on death or termination of employment).
(d) At the end of the Lock-Up Period, a Canadian Participant may:
(i) redeem Units in the Classic Compartment in consideration for the underlying Shares or a cash payment equal to the then-market value of the Shares; or
(ii) continue to hold Units in the Classic Compartment and redeem those Units at a later date.
(e) In the event of an early redemption resulting from the Canadian Participant exercising one of the exceptions to the Lock-Up Period prescribed by French law, the Canadian Participant may redeem Units in the Classic Compartment in consideration for a cash payment equal to the then-market value of the Shares.
(f) For dividends paid on the Shares held in the Classic Compartment, Canadian Participants may choose (i) to receive a pay-out of any dividend payment, or (ii) to contribute any dividend payment to the Classic Compartment for purchase of additional Shares. To reflect this reinvestment, new Units (or fractions thereof) of the Classic Compartment will be issued to participants.
(g) In addition, for every Unit purchased, the Filer will grant the Canadian Participant the right to receive, free of charge, one Share shortly after the end of the Lock-Up Period, subject to a continued employment condition with certain exceptions (the "Matching Contribution") and subject to a cap. Shares granted under the Matching Contribution shall be, subject to French regulation, directly delivered to the Canadian Participant or delivered to the Classic Compartment or another FCPE made available by Rexel, if any. No dividends will be distributed for Shares received through the Matching Contribution during the Lock-Up period.
7. The Classic Compartment's portfolio will consist almost entirely of Shares of the Filer and may, from time to time, include cash in respect of dividends paid on the Shares which may be paid out to Canadian Participants or reinvested in Shares and cash or cash equivalents pending investments in Shares and for the purpose of Unit redemptions.
8. The Management Company is a portfolio management company governed by the laws of France. The Management Company is registered with the French AMF to manage French investment funds. The Management Company is not a reporting issuer under the Legislation.
9. The Management Company's portfolio management activities in connection with the Employee Share Offering and the Compartments are limited to subscribing for Shares from the Filer and selling such Shares as necessary in order to fund redemption requests.
10. The Management Company is also responsible for preparing accounting documents and publishing periodic informational documents as provided by the rules of the Compartments. The Management Company's activities in no way affect the underlying value of the Shares and the Management Company will not be involved in providing advice to any Canadian Participants.
11. Shares issued in the Employee Share Offering will be deposited in the Temporary Fund through BNP Paribas Securities Services (the "Depositary"), a large French commercial bank subject to French banking legislation.
12. Under French law, the Depositary must be selected by the Management Company from among a limited number of companies identified on a list by the French Minister of the Economy, Finance and Industry and its appointment must be approved by the French AMF. The Depositary carries out orders to purchase, trade and sell securities in the portfolio and takes all necessary action to allow the Classic Compartment to exercise the rights relating to the securities held in its portfolio.
13. Participation in the Employee Share Offering is voluntary, and the Canadian resident Qualifying Employees will not be induced to participate in the Employee Share Offering by expectation of employment or continued employment.
14. The total amount invested by a Canadian Participant in the Employee Share Offering cannot exceed 25% of his or her estimated gross annual remuneration for the 2008 calendar year, or of his or her gross annual remuneration for the 2007 calendar year.
15. None of the Filer, the Management Company, the Canadian Affiliates or any of their employees, agents or representatives will provide investment advice to the Canadian Participants with respect to an investment in the Shares or the Units.
16. The Shares are not currently listed for trading on any stock exchange in Canada and there is no intention to have the Shares so listed. As there is no market for the Shares in Canada, and as none is expected to develop, first trades of Shares by Canadian Participants will be effected through the facilities of, and in accordance with, the rules and regulations of Euronext Paris.
17. The Canadian Participants will receive an information package in the French or English language, as applicable, which will include a summary of the terms of the Employee Share Offering, a tax notice containing a description of Canadian income tax consequences of subscribing to and holding the Units in the Classic Compartment and redeeming Units for cash or Shares at the end of the Lock-Up Period.
18. Upon request, Canadian Participants may receive copies of the Filer's annual report and/or the French Document de Référence filed with the French AMF and a copy of the rules of the Classic Compartment (which are analogous to company by-laws). The Canadian Participants will also have access to copies of the continuous disclosure materials relating to the Filer that are furnished to holders of the Shares.
19. There are approximately 2,368 Qualifying Employees resident in Canada, with the largest number of Qualifying Employees in the Province of Ontario (1000). Qualifying Employees are also located in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island and the Northwest Territories . In total, there are approximately 2368 Qualifying Employees resident in Canada, who represent in the aggregate less than 8% of the number of Qualifying Employees worldwide.
20. The Filer is not, and none of the Canadian Affiliates are, in default under the Legislation.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Initial Requested Relief is granted provided that
1. the first trade in any Units or Shares acquired by Canadian Participants pursuant to this Decision in a Jurisdiction is deemed a distribution or a primary distribution to the public under the Legislation of such Jurisdiction unless the following conditions are met:
(a) the issuer of the security
(i) was not a reporting issuer in any jurisdiction of Canada at the distribution date, or
(ii) is not a reporting issuer in any jurisdiction of Canada at the date of the trade;
(b) at the distribution date, after giving effect to the issue of the security and any other securities of the same class or series that were issued at the same time as or as part of the same distribution as the security, residents of Canada
(i) did not own directly or indirectly more than 10% of the outstanding securities of the class or series, and
(ii) did not represent in number more than 10% of the total number of owners directly or indirectly of securities of the class or series; and
(c) the first trade is made
(i) through an exchange, or a market, outside of Canada, or
(ii) to a person or company outside of Canada;
It is further the decision of the Decision Makers under the Legislation that the First Trade Relief is granted provided that the conditions set out in paragraphs 1(a), (b) and (c) under this decision granting the Initial Requested Relief are satisfied.
{1} Section 53 of the Securities Act (Ontario) (the "OSA").
{2} Section 25(1)(a) of the OSA.
{3} Section 25(1)(a) and (c) of the OSA.
{4} Section 25(1)(a) of the OSA.