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Background

On November 23, 2016, Total Energy Services Inc. (Offeror) disclosed its intention to make an offer (Offer) to purchase all of the issued and outstanding common shares (Target Shares) of Savanna Energy Services Corp. (Target) for consideration consisting of common shares of the Offeror (Offeror Shares).

The Target responded in two press releases, dated November 24, 2016 and November 28, 2016, in which the Target indicated that any change of control on or before June 13, 2017 would result in all amounts (approximately $105 million) outstanding under a recently implemented term loan (Term Loan) becoming immediately due and payable plus a change of control fee in the amount of 3% of the $200 million commitment amount (approximately $6 million) (Loan Fee).

The Offeror filed its take-over bid circular (Bid Circular) outlining the Offer on December 9, 2016 and filed support agreements from significant shareholders of the Target representing approximately 43% of total number of issued and outstanding Target Shares.


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OSC and BCSC on Defensive Private Placements Under the New Take-Over Bids Regime

As discussed in our previous post, the first hostile take-over bid under the new Canadian take-over bid rules was launched by Hecla Mining Company (Hecla) in July 2016 for the purchase of all of the outstanding shares of Dolly Varden Silver Corporation (Dolly), a TSX Venture Exchange listed issuer. Since our initial post, this take-over bid has become of particular interest to capital market participants because applications were made by each of Hecla and Dolly to the Ontario Securities Commission (OSC) and the British Columbia Securities Commission (BCSC) related to the take-over bid and the subsequent private placement announced by Dolly. Many hoped that the OSC and BCSC (collectively, the Commissions) in deciding these applications would bring additional clarity on how regulators would review alleged defensive tactics in light of the new take-over bid rules.

A simultaneous hearing in front of the OSC and the BCSC was held on July 20 and 21, 2016 and while the applicable orders were rendered on July 22, 2016 by each of the Commissions, the highly anticipated joint reasons were not issued until October 24, 2016. In their reasons, the Commissions concluded that the question of whether a private placement is an abusive defensive tactic requiring regulator intervention is a fact-dependent balance between policy considerations and bona fide corporate objectives and outlined a two-step test for regulators to weigh the relevant factors.

Defensive Private Placements

The most anticipated portion of the Commissions’ reasons relates to Hecla’s application to cease-trade the private placement Dolly announced after Hecla announced its take-over bid. In its application, Hecla argued that the private placement should be cease-traded either as an abusive defensive tactic under National Policy 62-202 Take-Over Bids – Defensive Tactics (NP 62-202) or under the Commissions’ broader public interest mandate.


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The views expressed in this post, as in all of my posts, are mine alone and should not be taken to represent the views of Fasken Martineau DuMoulin LLP or any of my partners or associates.

A little over five years have passed since the U.K. Takeover Code was reformed on September 19, 2011 in order to prohibit deal protection provisions — including lock-ups, “no shop/no talk” covenants and termination or “break” fees — in M&A deals involving the acquisition of publicly-listed U.K. companies.  Seizing upon a rare and valuable opportunity to conduct some natural experiments into the effect on the U.K. M&A market of this regulatory change, a pair of students from Stanford and Harvard recently published a study on the impact of the 2011 Reforms on U.K. deal volumes, the incidence of competing offers, deal premiums and deal completion rates.[i]  The results of their study are both interesting and instructive.

Among other things, they found that:

  • the ratio of U.K. deals to non-U.K. deals[ii] decreased by approximately 50% after the 2011 Reforms;
  • this reduction in deal volume was not offset by any increase in the incidence of competing offers or deal premiums in the U.K.; and
  • as a result, the U.K. M&A market experienced an estimated quarterly loss of approximately US$19.3 billion in deal volume following the 2011 Reforms, implying a quarterly loss, assuming a conservative average deal premium of 20%, of approximately $3.3 billion to shareholders of U.K. public companies since the 2011 Reforms were put in place.


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