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Takeover Bid
Plan of Arrangement
Takeover Bid
A transaction that acquire shareholders share of Target Company directly is called as
Takeover bid. The target company can set up a board of directors to make changes and
recommendations to its shareholder. This board of directors has an impact on the
decision that is taken by the shareholders. Although support of the board is not legally
required to effect a takeover bid. This board will become mandatory when the
transactions become unsolicited or hostile takeover. The provincial security law
regulates the conduct and timing of takeover bid, and delivery and disclosure of the
offer document.
The takeover bid is similar to the tender offer under US securities laws. But
the only difference is the objective of take over bid; a formal takeover bid to all
shareholder is required when a company acquires 20% or more of the outstanding
voting or equity securities of the target company. If the bid is made for cash
consideration or has a cash component, the bidder should make arrangement to make
the payment available before the takeover bid take place. And should make sure to
make full payment to all shareholder of target company. In most of the takeover bid in
Canada, financial conditions are not included.
Effective from May 9, 2016, there are three fundamental changes made to the
Canadian takeover bid regime. They are,
50% Minimum Tender Requirement: Takeover bid should have a nonavoidable 50% minimum tender of the outstanding securities, excluding those
beneficially owned, or which bidder can control or direction is exercised.
105-Day Bid Period: The takeover bid should remain open for minimum of
105 days, subjected to two exception the deposit period news release and
alternative transaction.
The takeover bid results in the acquisition of all the outstanding shares and
may results in private transaction if the transaction is less than 90% of shares
tendered.
The time period will be increased to six to eight weeks to obtain 100%
ownership after going into private transaction.
The mandatory financial requirements that are applicable for transition are
problematic for some purchases.
The new firm will find hard to keep up with the economical aspects
Plan of Arrangement
It offers the flexibility over the structuring and also it can accommodate the
needs of numerous classes of security holders.
It helps to acquire 100% of the target with the approval of the two bodies and
also with the voting.
The information is circulated with respect to meeting and it need not to be
translated.
It eliminates all the restriction faced by the takeover bid
It has longer time frame. Normally more that 60 days and it will increase the
cost simultaneously.
Even when shareholder and the board approve the transaction, there are
chances of it get rejected by the court.
It can be only used in the friendly acquisition situation.
the share capital of the target companys document that results in a mandatory transfer
of the target companys shares to the acquirer in exchange for cash or shares of the
acquirer. There are some of other transaction structures, which are rarely used by the
Canadian public companies. They are Protection of minority shareholder in conflict of
interest transactions, Defensive tactics and shareholder right plans and Stock
exchange requirement.
Reference
Canadian Public Company Merger and Acquisition: A practical guide to the issue
surrounding acquisitions of public companies in Canada. (2016). Retrieved
from: https://www.osler.com/osler/media/Osler/reports/mergersacquisitions/Canadian-Public-Company-M-A-Guide-2016.pdf
Zerdin, M. (2014). The Merger and Acquisitions reviews. Canada (pp. 144-159).
London, United Kingdom: Gideon Roberton.
Pettinger, T. (2012, November 28). Takeovers. Retrieved from:
http://www.economicshelp.org/blog/glossary/takeover/