Securities Law & Instruments


Headnote

Take-over bid - Indirect Offer -

Collateral benefits - Agreement entered into between an offeror and a shareholder -Agreement made for reasons other than to increase the consideration to theshareholder under the bid - Agreement may be entered into despite subsection 97(2) ofthe Act.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as amended, ss. 92, 97(2), 104(2)(a), and 104(2)(c)


IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF
BCE INC.

ORDER AND DECISION
(Clause 104(2)(c) and Clause 104(2)(a))


UPON the application (the "Application") by BCE Inc. ("BCE") to the OntarioSecurities Commission (the "Commission") for: (i) an order pursuant to clause104(2)(c) of the Act that BCE be exempt from the application of section 92 of the Act inconnection with BCE's proposed offer (the "CTV Offer") to purchase all of theoutstanding common shares (the "CTV Shares") of CTV Inc. ("CTV") and BCE'sproposed offer (the "EBI Offer") to purchase all of the outstanding voting Class Xparticipating shares (the "Class X Shares") and non-voting Class Y participating shares(the "Class Y Shares" and, collectively with the Class X Shares, the "EBI Shares") ofElectrohome Broadcasting Inc. ("EBI"); and (ii) a decision pursuant to clause 104(2)(a)of the Act that the support agreement (the "Support Agreement") which BCE hasentered into with EBI is made for reasons other than to increase the value of theconsideration paid to EBI for its CTV Shares and that the Support Agreement may beentered into notwithstanding subsection 97(2) of the Act;

AND UPON considering the Application and the recommendation of the staff ofthe Commission;

AND UPON BCE having represented to the Commission as follows:

1. BCE is a corporation governed by the Canada Business Corporations Act.

2. BCE is a reporting issuer under the Act and is not on the list of defaultingreporting issuers maintained pursuant to subsection 72(9) of the Act.

3. CTV is a corporation governed by the Business Corporations Act (Ontario) (the"OBCA").

4. CTV's authorized capital consists of an unlimited number of CTV Shares. TheCTV Shares are listed for trading on The Toronto Stock Exchange (the "TSE").According to CTV's management information circular dated December 17, 1999,as of December 1, 1999 there were 57,872,500 CTV Shares issued andoutstanding.

5. CTV is a reporting issuer under the Act and is not on the list of defaultingreporting issuers maintained pursuant to subsection 72(9) of the Act.

6. EBI was incorporated under the OBCA on March 31, 1998.

7. EBI's authorized capital consists of 5,000,000 Class X Shares and 10,000,000Class Y Shares. The Class Y Shares benefit from certain "coat-tail" protections.The Class X Shares and the Class Y Shares are listed for trading on the TSE.According to EBI's management information circular dated December 2, 1999,as of November 30, 1999 there were 1,800,127 Class X Shares, 6,392,665Class Y Shares and options to purchase 208,600 Class Y Shares issued andoutstanding.

8. EBI is a reporting issuer under the Act and is not on the list of defaultingreporting issuers maintained pursuant to subsection 72(9) of the Act.

9. EBI's only assets, other than a minimal amount of cash, consist of 7,000,000CTV Shares representing approximately 11.6% of all of the issued andoutstanding CTV Shares on a fully-diluted basis (the "EBI Block").

10. BCE currently does not own any CTV Shares or EBI Shares.

11. Pursuant to the CTV Offer, BCE will offer to acquire all of the issued andoutstanding CTV Shares for consideration equal to $38.50 per CTV Share (the"CTV Purchase Price"). The CTV Offer will be made in compliance with Part XXof the Act.

12. Pursuant to the proposed EBI Offer, BCE will offer to acquire all of the issuedand outstanding EBI Shares for consideration per EBI Share (the "EBI PurchasePrice") that is equivalent to a price of $38.50 per CTV Share owned by EBI. TheEBI Offer will be made in compliance with Part XX of the Act, except to theextent relief is granted herein.

13. If the CTV Purchase Price is increased, the EBI Purchase Price will be increasedproportionately. Similarly, if the EBI Purchase Price is increased (for a reasonthat does not relate only to an increase in the cash held by EBI or a decrease inits liabilities), the CTV Purchase Price will be increased proportionately.

14. The initial expiry time of the EBI Offer will be no later than the initial expiry timeof the CTV Offer.

15. In connection with the EBI Offer, BCE has entered into a lock-up agreement (the"Lock-up Agreement") with John A. Pollock and Barbara L. Steele and certainrelated parties (collectively, the "Principal Shareholders") pursuant to which thePrincipal Shareholders have agreed to deposit irrevocably and unconditionallyunder the EBI Offer Class X Shares representing, in the aggregate, 71% of theoutstanding Class X Shares and Class Y Shares (including Class Y Sharesissuable upon the exercise of outstanding options) representing, in theaggregate, 19% of the outstanding Class Y Shares.

16. BCE has also entered into the Support Agreement with EBI pursuant to whichEBI has provided various representations, warranties and covenants in favour ofBCE that are customarily found in such agreements and has agreed not totender the EBI Block to any offer to purchase CTV Shares if BCE makes the EBIOffer. BCE has also entered into a support agreement with CTV in connectionwith the CTV Offer.

17. The Support Agreement has been entered into for valid business reasons andnot for the purpose of conferring an economic or collateral benefit on EBI thatother holders of CTV Shares do not enjoy, and is being entered into for reasonsother than to increase the value of the consideration to be paid to EBI pursuantto the CTV Offer.

18. The CTV Offer will be conditional upon, among other things, there having beenvalidly deposited under the CTV Offer and not withdrawn at the expiry time of theCTV Offer, more than 50% of the outstanding CTV Shares, calculated on a fully-diluted basis (the "CTV Minimum Tender Condition"). The EBI Block will becounted as CTV Shares validly deposited to the CTV Offer in determiningwhether the CTV Minimum Tender Condition has been satisfied, provided thatBCE takes up more than 50% of the Class X Shares deposited under the EBIOffer.

19. The EBI Offer will be conditional upon, among other things:

(a) there having been validly deposited under the EBI Offer and notwithdrawn at the expiry time of the EBI Offer at least 66% of theoutstanding Class X Shares on a fully-diluted basis and at least 66% ofthe outstanding Class Y Shares on a fully-diluted basis; and

(b) BCE having obtained the exemptive relief provided for herein from theCommission and from the securities regulatory authorities in otherprovinces where similar relief is required in order to make the EBI Offer.

20. The EBI Block constitutes substantially all of EBI's assets and, accordingly, anyproposed disposition of the EBI Block would have to be approved by holders ofthe EBI Shares at a meeting called for that purpose. EBI consistently hasindicated that it would not dispose of the EBI Block because of the potential taxliability EBI would incur as a result of such a disposition. Accordingly, BCEbelieves that the EBI Offer is, for all practical purposes, the only method bywhich BCE can acquire the EBI Block.

21. The EBI Offer could be characterized as an indirect offer to acquire the CTVShares within the meaning of section 92 of the Act and, therefore, a formal bidfor the CTV Shares within the meaning of section 89 of the Act for which noexemptions would be available from the requirements of Part XX of the Act.

AND UPON the Commission being satisfied that to do so would not beprejudicial to the public interest;

IT IS: (i) ordered that pursuant to subsection 104(2)(c) of the Act, in connectionwith the EBI Offer, BCE is exempt from the application of section 92 of the Act; and (ii)decided that pursuant to subsection 104(2)(a) of the Act, for the purpose of subsection97(2) of the Act, the Support Agreement has been made for reasons other than toincrease the value of the consideration to be paid to EBI for its CTV Shares and thatthe Support Agreement may be entered into notwithstanding subsection 97(2) of theAct.

March 14th, 2000.

"J. A. Geller"     "R. Stephen Paddon"