Further to our earlier post discussing COVID-19 and Material Adverse Change (“MAC”) provisions in mergers and acquisitions agreements and the hearing held last week in connection with an application for the final order (“Final Order Application”) in respect of the proposed plan of arrangement (the “Arrangement”) involving Rifco Inc. (“Rifco”), an alternative auto financing company that trades on the TSX Venture Exchange, its potential acquiror, ACC Holdings Inc. (“Purchaser”), and the Purchaser’s parent company, CanCap Management Inc. (“CanCap”), the Court of Queen’s Bench of Alberta (the “Court”) made a procedural ruling (the “Ruling”) yesterday related to CanCap and the Purchaser’s purported termination of the Arrangement on the basis that Rifco has suffered a MAC.

While the Ruling did not determine if the purported termination of the Agreement was unlawful or if the Purchaser and CanCap were required to close the Arrangement, the Court did make several key procedural and other rulings. In the Ruling, the Court:

  • rejected a procedural objection by the Purchaser and CanCap that the validity of the Purchaser’s termination of the Agreement could not be determined at a Final Order Application;
  • rejected an argument by the Purchaser and CanCap that delivering a notice of termination of the Agreement was sufficient to defeat a Final Order Application;
  • was satisfied that it was potentially empowered to require the Purchaser to complete the Arrangement (but that a definitive ruling on this point would be made at a later date);
  • noted that the Purchaser provided limited evidence that the Agreement was validly terminated and that additional evidence would be required;
  • determined that a lengthy trial process is not required by the Court;
  • acknowledged an undertaking by the Purchaser that it would not rely on the Agreement’s “Outside Date” of May 7, 2020 in order to terminate the Agreement; and
  • found that the Purchaser’s delivery of the termination notice is not sufficient evidence to prove that the Agreement had been terminated.

We will continue following these court proceedings, and will provide updates as the situation evolves and new information becomes available.