Proceedings

IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c.S.5, AS AMENDED

AND

IN THE MATTER OF
CANADIAN 88 ENERGY CORP. AND
WEST CENTRAL CAPITAL CORPORATION

STATEMENT OF ALLEGATIONS OF STAFF OF
THE ONTARIO SECURITIES COMMISSION

 

        Staff of the Ontario Securities Commission (the "Commission") allege that:

A.       BACKGROUND
 
1. Canadian 88 Energy Corp. ("Canadian 88") is a reporting issuer in Ontario. The common shares of Canadian 88 are listed and posted for trading on The Toronto Stock Exchange and the Alberta Stock Exchange. Canadian 88 is engaged in the resource business in the exploration, development, production and processing of natural gas and oil.
 
2. Morrison Petroleums Ltd. ("Morrison") is a reporting issuer in Ontario. The common shares of Morrison are listed and posted for trading on The Toronto Stock Exchange and the Montreal Exchange. Morrison is engaged in the exploration, development, production and acquisition of oil and natural gas reserves and gas processing in Canada.
 
3. West Central Capital Corporation ("West Central") is a private company incorporated under the laws of Alberta. The sole shareholder of West Central is David DiPaolo.
 
B. PRE-BID TRANSACTIONS
 
4. In December 1996, Canadian 88 and West Central entered into an agreement whereby:
 
 
a.       Canadian 88 provided a loan to West Central in the principal amount of $44,525,959.25. Proceeds of the loan were to be used by West Central to purchase common shares of Morrison;
 
b. all purchases and sales of Morrison common shares by West Central were to be made upon the instructions of Greg Noval, President and Chief Executive Officer of Canadian 88;
 
c. any profit realized on the sale of Morrison common shares by West Central was to be shared between Canadian 88 and West Central as to 66 2/3% for Canadian 88 and as to 33 1/3% for West Central;
 
d. West Central agreed to bear any losses on the sale of Morrison common shares held by it; and
 
e. West Central agreed to deposit any Morrison common shares held by it to any take- over bid by Canadian 88 for the securities of Morrison.
 
5. From December 18, 1996 to January 10, 1997, West Central made purchases and sales of common shares of Morrison as set forth in Schedule A. The highest consideration paid on a per security basis for common shares of Morrison by West Central during this period was $8.25 in cash.
 
C. TAKE-OVER BID
 
6. On January 13, 1997 Canadian 88 announced its intention to make, and on January 16, 1997 Canadian 88 made, a formal take-over bid (the "Take-over Bid") for all the common shares, including associated poison pill rights, of Morrison on the basis of, at the election of the holder, $10.00 in cash, up to an aggregate maximum of $140,000,000, or 1.5 common shares of Canadian 88 for each common share of Morrison.
 
7. West Central was acting jointly and in concert with Canadian 88 and, accordingly, is an offeror under clause 94(1)(b) of the Act. Under clause 94(5)(a), since the pre-bid transactions were made in cash, Canadian 88 is required to offer consideration under the Take-over Bid at least equal to the highest consideration that was paid on a per security basis under any of such prior transactions or at least the cash equivalent of such consideration.
 
8. The circular (the "Circular") prepared in connection with the Take-over Bid fails to comply with Form 32 to the regulations to the Act in that it does not contain disclosure of all material facts relating to the agreement between Canadian 88 and West Central.
 
9. The conduct as hereinbefore described of West Central and Canadian 88 was contrary to the public interest insofar as West Central and Canadian 88 failed to comply with the provisions in Part XX of the Act and related regulations pertaining to take-over bids and the purpose and intent thereof.
 
10. Staff of the Commission are reviewing trading activities of Canadian 88 and West Central in the shares of Morrison during the period from December 18, 1996 to January 10, 1997. This review, or the fact thereof, should be disclosed in the Circular.
 
  DATED at Toronto, this 6th day of February, 1997.