Dutch auction issuer bid - With respect to securities tendered at or below the clearingprice, offer providing for full take-up of and payment for shares tendered by odd lotholders, as well as additional purchases from certain shareholders in order to preventthe creation of odd lots - Offeror exempt from the requirement in the legislation to takeup and pay for securities proportionately according to the number of securitiesdeposited by each securityholder and the associated disclosure requirement - Offeroralso exempt from the requirement to disclose the exact number of shares it intends topurchase - Offeror also exempt from the valuation requirement on the basis that thereis a liquid market for the securities
Ontario Statutes Cited
Securities Act, R.S.O. 1990, c. S.5, as am, ss. 95(7) and 104(2)(c)
Ontario Regulations Cited
Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., s. 189(b)and Items 2 and 9 of Form 33
ALBERTA, MANITOBA,ONTARIO AND QUEBEC
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
RUSSEL METALS INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Manitoba, Ontario and Québec(collectively, the "Jurisdictions") has received an application (the "Application") fromRussel Metals Inc. ("Russel") for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that, in connection with the proposed purchase byRussel of a portion of its outstanding common shares ("Common Shares") pursuant toan issuer bid (the "Offer"), Russel be exempt from the requirements in the Legislationto:
(1) take up and pay for securities proportionately according to the number ofsecurities deposited by each securityholder (the "Proportionate Take-up andPayment Requirement");
(2) provide disclosure in the issuer bid circular (the "Circular") of such proportionatetake-up and payment (the "Associated Disclosure Requirement");
(3) state the number of securities sought under the Offer (the "Number of SecuritiesRequirement"); and
(4) obtain a valuation of the Common Shares and provide disclosure in the Circularof such valuation, or a summary thereof, and of prior valuations (the "ValuationRequirement").
AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for the Application;
AND WHEREAS Russel has represented to the Decision Makers as follows:
1. Russel is a reporting issuer or the equivalent in each of the Jurisdictions. It isnot in default of any requirement of the Legislation.
2. Russel's authorized capital consists of an unlimited number of Common Shares,an unlimited number of Class I preferred shares, issuable in series, and anunlimited number of Class II preferred shares, issuable in series. As at February14, 2000, there were 47,489,547 Common Shares and 1,200,000 Class IIPreferred Shares, Series C (the "Preferred Shares") issued and outstanding.
3. The Common Shares and Preferred Shares are listed and posted for trading onThe Toronto Stock Exchange (the "TSE"). The Common Shares also are listedand posted for trading on the Winnipeg Stock Exchange and the NasdaqNational Market. On February 29, 2000, the closing price of the CommonShares on the TSE was $4.04.
4. During the 12 months ended February 29, 2000:
A. the number of outstanding Common Shares was at all times at least29,161,810, excluding Common Shares that either were beneficiallyowned, directly or indirectly, or over which control or direction wasexercised, by related parties with respect to Russel or were not freelytradeable;
B. the aggregate trading volume of the Common Shares on the TSE was14,085,000 Common Shares;
C. there were approximately 3,300 trades in Common Shares on the TSE;and
D. the aggregate trading value based on the price of the trades referred to inparagraph 4(C) was approximately $48,940,000.
5. The market value of the Common Shares described in paragraph 4(A) abovewas approximately $107,340,000 for the month of February 2000.
6. Pursuant to the proposed Offer, Russel proposes to acquire Common Shares inaccordance with the following modified Dutch auction procedure (the"Procedure"), as disclosed in the Circular to be sent by Russel to each holder ofCommon Shares (collectively, the "Shareholders"):
A. The Circular will specify that the maximum number of Common Shares(the "Specified Number") that Russel intends to purchase pursuant to theOffer is 8,000,000, excluding any Common Shares that Russel intends topurchase in accordance with the procedures described in paragraph 6(N)below.
B. The Circular will specify that the maximum amount that Russel will expendpursuant to the Offer is $30,000,000 (the "Specified Amount"), excludingthe amount that Russel will spend to purchase Common shares inaccordance with the procedures described in paragraph 6(N) below.
C. The Circular will specify the range of prices (the "Range") within whichRussel is prepared to purchase Common Shares under the Offer.
D. Any Shareholder wishing to tender to the Offer will have the right eitherto: (i) elect to retain his, her or its proportionate interest in Russelfollowing the Offer (a "Proportionate Tender Election"); or (ii) tender aspecified number of Common Shares, representing all or a portion of theShareholder's Common Shares at the Shareholder's discretion (a"Specified Tender Election").
E. All Common Shares tendered by Shareholders who fail to specify whetherthey are making a Proportionate Tender Election or Specified TenderElection will be considered to have been tendered pursuant to a SpecifiedTender Election.
F. In addition to having the right to make a Proportionate Tender Election orSpecified Tender Election, any Shareholder wishing to tender to the Offerwill have the right either to: (i) specify the lowest price within the Range atwhich he, she or it is willing to sell the tendered Common Shares (an"Auction Tender"); or (ii) elect to be deemed to have tendered theCommon Shares subject to his, her or its Proportionate Tender Election orSpecified Tender Election at the Purchase Price determined inaccordance with subparagraph 6(I) below.
G. All Common Shares tendered by Shareholders who fail to specify anytender price for such tendered Common Shares and fail to indicate thatthey have tendered their Common Shares pursuant to a Purchase PriceTender will be considered to have been tendered pursuant to a PurchasePrice Tender.
H. On the expiry date of the Offer, each Shareholder who makes aProportionate Tender Election (collectively, the "Proportionate TenderGroup") will be deemed to have tendered that percentage of his, her or itsCommon Shares equal to that percentage of the outstanding CommonShares, excluding Common Shares owned by the Proportionate TenderGroup, tendered to the Offer by the Shareholders who made a SpecifiedTender Election (collectively, the "Specified Tender Group").
I. The purchase price (the "Purchase Price") of the Common Sharestendered to the Offer will be the lowest price that will enable Russel topurchase the lesser of the Specified Number and the maximum number ofCommon Shares that may be purchased with the Specified Amount, andwill be determined based upon the number of Common Shares tenderedpursuant to an Auction Tender at each price within the Range andtendered pursuant to a Purchase Price Tender, with each Purchase PriceTender being considered a tender at the lowest price within the range forthe purpose of calculating the Purchase Price.
J. All Common Shares tendered at prices above the Purchase Price will bereturned to the appropriate Shareholders.
K. All Common Shares tendered by Shareholders who specify a tender pricefor such tendered Common Shares that falls outside the Range will beconsidered to have been improperly tendered, will be excluded from thedetermination of the Purchase Price, will not be purchased by Russel andwill be returned to the appropriate Shareholders.
L. If the aggregate Purchase Price for Common Shares validly tendered tothe Offer and not withdrawn is less than or equal to the Specified Amountand the aggregate number of Common Shares validly tendered pursuantto a Specified Tender Election, or deemed to have been tenderedpursuant to a Proportionate Tender Election, to the Offer and notwithdrawn is less than or equal to the Specified Number, Russel willpurchase all Common Shares so deposited pursuant to Specified TenderElections and such percentage of the Common Shares of each member ofthe Proportionate Tender Group as will maintain such Shareholder'sproportionate equity interest in Russel following completion of the Offer.
M. If the aggregate Purchase Price for Common Shares validly tendered tothe Offer and not withdrawn exceeds the Specified Amount or theaggregate number of Common Shares validly tendered pursuant to aSpecified Tender Election, or deemed to have been tendered pursuant toa Proportionate Tender Election, to the Offer and not withdrawn exceedsthe Specified Number (each, an "Over-Subscription"), Russel will take upand pay for tendered Common Shares on a pro rata basis according tothe number of Common Shares tendered by each member of theSpecified Tender Group and deemed to have been tendered by eachmember of the Proportionate Tender Group. Subject to paragraph 6(N)below, any Common Shares tendered but not taken up and paid for byRussel in accordance with this procedure will be returned to theappropriate tendering Shareholders.
N. If, after giving effect to Russel's purchase of Common Shares inaccordance with procedure described in paragraph 6(M) above, aShareholder who had properly tendered all of his, her or its CommonShares to the Offer at or below the Purchase Price pursuant to aSpecified Tender Election were to hold fewer than 100 Common Shares(an "Odd Lot"), Russel also will purchase any such Odd Lot at thePurchase Price. In determining whether a Shareholder would hold anOdd Lot, all of the Common Shares held by the Shareholder underseparate certificates or in different accounts or tendered by theShareholder pursuant to separate Auction Tenders or Purchase PriceTenders and that otherwise would be retained by the Shareholder aftergiving effect to the purchase of Common Shares in accordance with theprocedure described in paragraph 6(M) above will be aggregated.
O. The aggregate amount that Russel will expend pursuant to the Offer willnot be determined until the number of Common Shares, if any, to bepurchased in accordance with the procedure described in paragraph 6(N)is determined.
7. Prior to the Offer's expiry, all information regarding the number of CommonShares tendered and the prices at which such Common Shares are tendered willbe kept confidential, and the depository will be directed by Russel to maintainsuch confidentiality until the Purchase Price is determined.
8. Since the Offer is for fewer than all the Common Shares, if the number ofCommon Shares tendered to the Offer at or below the Purchase Price exceedsthe Specified Number or exceeds the maximum number of Common Shares thatcould be purchased for the Specified Amount, the Legislation would requireRussel to take up and pay for deposited Common Shares proportionately,according to the number of Common Shares deposited by each Shareholder. Inaddition, the Legislation would require disclosure in the Circular that Russelwould, if Common Shares tendered to the Offer exceeded the Specified Numberor exceeded the maximum number of Common Shares that could be purchasedfor the Specified Amount, take up such Common Shares proportionatelyaccording to the number of Common Shares tendered by each Shareholder.
9. It is anticipated that, following completion of the Offer, there will be a market forthe beneficial owners of Common Shares who do not tender to the Offer that isnot materially less liquid than the market that exists at the time the Offer ismade.
10. To Russel's knowledge, no person or company other than Hamblin WatsaInvestment Counsel Ltd. ("Hamblin Watsa") and Trimark Financial Corporation("Trimark") holds more than 10% of the issued and outstanding Common Shares.
11. Hamblin Watsa beneficially owns or exercises control or direction over12,518,200 Common Shares, representing approximately 26.36% of theoutstanding Common Shares. Hamblin Watsa has advised Russel that it doesnot intend to tender any Common Shares to the Offer.
12. Trimark beneficially owns or exercises control or direction over 5,093,024Common Shares, representing approximately 10.72% of the outstandingCommon Shares. Upon inquiry, Trimark has advised Russel that it has notdetermined yet whether it will tender any Common Shares to the Offer.
13. The Circular will:
A. disclose the mechanics for the take-up of and payment for, or the returnof, Common Shares as described in paragraph 6 above;
B. explain that, by tendering Common Shares at the lowest price in theRange, a Shareholder reasonably can expect that the Common Shares sotendered will be purchased at the Purchase Price, subject to proration asdescribed in paragraph 6 above;
C. describe the background to the Offer;
D. disclose every prior valuation of Russel that has been made in the 24month period preceding the Offer and whose existence is known afterreasonable inquiry to Russel or any of its directors or senior officers;
E. disclose any bona fide prior offer that relates to the Common Shares or isotherwise relevant to the Offer, where such prior offer was received byRussel in the 24 month period preceding the date the Offer was publiclyannounced, together with a description of such prior offer and thebackground to it;
F. describe the review and approval process adopted by the board ofdirectors of Russel (the "Board") for the Offer, including any materiallycontrary view or abstention by a director;
G. include a statement of the intention, if known to Russel after reasonableinquiry, of every person or company, other than a bona fide lender, that,whether alone or in combination with others, holds or would reasonablybe expected to hold, upon successful completion of the Offer, securities ofRussel sufficient to affect materially its control (an "Interested Party") toaccept or not accept the Offer;
H. include a description of the effect that Russel anticipates the Offer, ifsuccessful, will have on the direct or indirect voting interest of everyInterested Party.
AND WHEREAS pursuant to the System this MRRS Decision Documentevidences the decision of each of the Decision Makers (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test containedin the Legislation that provides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers in the Jurisdictions pursuant to theLegislation is that, in connection with the Offer, Russel is exempt from theProportionate Take-up and Payment Requirement, the Associated DisclosureRequirement, the Number of Securities Requirement and the Valuation Requirement,provided that Common Shares tendered to the Offer are taken up and paid for, orreturned to the Shareholders, in the accordance with the Procedure.
March 14th, 2000.
"J. A. Geller" "R. Stephen Paddon"