Take-over bids and issuer bids

In general, take-over bids must follow these five guidelines.

1. Adequate disclosure

Target shareholders must be given adequate disclosure and must receive all of the following:

• a take-over bid circular that sets out the conditions of the bid, including prescribed disclosure and that is updated any time there is a variation in the terms of the bid or a change in information
• a directors’ circular within 15 days after the date of the bid that must include a recommendation of the target board to security holders to accept or reject the bid, or must communicate the decision of the target board that it is unable to make a recommendation (and must provide reasons for that recommendation)
• a valuation of the target’s securities and of any non-cash consideration being offered, if the bid is an “insider bid” under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101), unless an exemption is available

2. Sufficient time

Target shareholders must have sufficient time to assess the bid and information provided and make a tendering decision. 

Bids must be open for acceptance for a minimum of 105 days. This deposit period can be waived down to 35 days by the target (with the reduced deposit period also applying to any contemporaneous bids). The initial deposit period of contemporaneous bids is reduced to 35 days in the event that the target announces a plan of arrangement or similar change of control transaction to be approved by target shareholders. 

In addition to these basic timelines: 

• The bidder is required to take up and pay for securities if the conditions of the bid have been satisfied or waived within 10 days of the expiry of the bid.
• The bidder is required to extend the bid for an additional 10 days after the expiry of the initial deposit period if the bidder satisfies the mandatory minimum tender condition, all other conditions have been satisfied or waived, and the bidder announces its intention to take up and pay for securities deposited under the bid.
• Target shareholders can withdraw securities tendered to a bid:
  • at any time before securities are taken up by the bidder
  • for 10 days after a change in the bid
  • if securities have not been paid for within 3 business days of take up
• Bids must be kept open for 10 days after a variation to the bid (unless the variation is solely a waiver of a condition in an all-cash bid). Variations to a bid (other than an extension of the deposit period or an increase in consideration) are not permitted after the bidder becomes obligated to take up and pay for securities.

3. Equal treatment

Target shareholders must be treated equally, which means: 

• The bid must be made to all holders of the class.
• All holders must be offered identical consideration (or an identical choice of consideration). If the bidder increases the price during a bid, every shareholder gets the new price, even holders whose shares have been tendered and taken up.
• No “collateral benefits” are permitted. Bidders cannot enter into arrangements with any target shareholders that would have the effect of providing a shareholder with consideration of greater value.
• The bidder cannot acquire securities outside of the bid within 90 days preceding the bid unless the bidder offers the same consideration and acquires the same percentage from each holder under the bid.
• During a bid, the bidder cannot acquire securities subject to the bid until its expiry, other than a maximum of five per cent of the outstanding securities purchased in the normal course on a published market if the bidder has stated its intention to do so in the take-over bid circular, or a subsequently filed press release. 
• For partial bids, bidders have to take up tendered securities on a proportionate basis (i.e. not “first come, first served”). 

4. Minimum tender requirement

More than 50 per cent of the shares owned by persons other than the bidder and its joint actors must be tendered to the bid before the bidder can acquire any securities tendered. 

5. Bid financing 

A cash take-over bid cannot be conditioned on the bidder obtaining financing.

An issuer bid is an offer to acquire or redeem securities of an issuer made by the issuer itself. Unlike the take-over bid regime, which only applies to acquisitions of 20 per cent or more of a class of voting or equity securities of the issuer, an issuer bid is triggered regardless of the number of securities repurchased by the issuer.

The regulatory regime governing the conduct of issuer bids is harmonized in all Canadian jurisdictions through National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) and National Policy 62-203 Take-Over Bids and Issuer Bids (NP 62-203).

Except when an exemption is available, an issuer making an issuer bid must make the offer to all security holders of the class through an issuer bid circular that contains the specific information set out in both NI 62-104 and MI 61-101. The issuer bid requirements also include requirements for pro rata take up and identical treatment of shareholders. A valuation of the securities and any non-cash consideration being offered may also be required, subject to the availability of an exemption.

For more information on the OSC’s service standard timing to review take-over or issuer bids, see the OSC Service Commitment.