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Sherritt Coal Partnership et al. - MRRS Decision
IN THE MATTER OF
THE SECURITIES LEGISLATION
OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
MANITOBA, ONTARIO, QUEBEC, NOVA SCOTIA AND NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
SHERRITT COAL PARTNERSHIP,
SHERRITT INTERNATIONAL CORPORATION AND
LUSCAR COAL INCOME FUND
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of BritishColumbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and Newfoundland (the "Jurisdictions") hasreceived an application from Sherritt Coal Partnership (the "Partnership") and Sherritt International Corporation ("Sherritt"and collectively with the Partnership, the "Applicants") for a decision under the securities legislation of the Jurisdictions(the "Legislation") that, in connection with the offer (the "Unit Offer") by the Applicants to purchase all of the issued andoutstanding trust units (the "Units") of Luscar Coal Income Fund (the "Fund"), the Applicants shall be exempt from therequirement in the Legislation to offer all holders of the same class of securities identical consideration (the "IdenticalConsideration Requirement"), insofar as certain holders of Units who accept the Offer will receive the cash proceeds fromthe sale of restricted voting shares of Sherritt (the "Sherritt Shares") in accordance with the procedure described inparagraph 16 below, instead of receiving Sherritt Shares;
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS the Applicants have represented to the Decision Makers as follows:
1. The Partnership was formed under the laws of Ontario solely for the purpose of making the Unit Offer. Its headoffice is located in Toronto, Ontario. The partners of the Partnership are Sherritt and OTPPB SCP Inc., asubsidiary of the Ontario Teachers Pension Plan Board ("OTPPB").
2. Sherritt is a corporation incorporated under the laws of the Province of New Brunswick. Its head office islocated in Toronto, Ontario.
3. Sherritt is a reporting issuer or the equivalent in each of the Jurisdictions and is not in default of anyrequirement of the Legislation.
4. Sherritt's authorized capital consists of an unlimited number of Sherritt Shares and 100 multiple voting shares(the "Sherritt MVS"). As at December 31, 2000, there were 72,496,036 Sherritt Shares and 100 Sherritt MVSissued and outstanding. The Sherritt Shares are listed and posted for trading on The Toronto Stock Exchange(the "TSE").
5. The Fund is an open-ended trust established under the laws of the Province of Alberta. Its head office islocated in Edmonton, Alberta.
6. The Fund is a reporting issuer or the equivalent in each of the Jurisdictions.
7. According to publicly available information, the Fund's authorized capital consists of an unlimited number ofUnits, which are listed and posted for trading on the TSE. As at February 27, 2001, there were 90.7 millionUnits issued and outstanding. In addition, the Fund has issued and outstanding $100,000,000 principal amountof 10% convertible unsecured senior subordinated debentures (the "Debentures").
8. As at March 8, 2001, the Partnership owned 5,701,500 Units, representing approximately 6.3% of theoutstanding Units, and OTPPB owned $10,543,000 principal amount of the Debentures, representingapproximately 10.5% of the outstanding principal amount of the Debentures. The Debentures owned byOTPPB are convertible into approximately 1,561,924 Units representing approximately 1.7% of the outstandingUnits (including those issued upon conversion of the Debentures held by OTPPB).
9. On March 6, 2001, the Fund delivered to the Applicants a list (the "Unitholder List") of the registeredUnitholders. The Unitholder List disclosed that there were seven Unitholders who were citizens or residentsof the United States ("US Unitholders") holding, in the aggregate, less than 0.04% of the outstanding Units.The Fund, however, has advised the Applicants that more than 10% of the Units are held by US Unitholders.
10. On March 8, 2001, the Applicants made the Unit Offer by means of a formal take-over bid. On the same date,the Applicants made an offer to acquire all of the outstanding Debentures (the "Debenture Offer") forconsideration consisting of $1,050 cash for each $1,000 principal amount of Debentures accepted for purchaseunder the Debenture Offer.
11. The Unit Offer is being made in accordance with the Legislation of the Jurisdictions, except to the extent theexemptive relief from the Identical Consideration Requirement is granted hereby. The Debenture Offer doesnot constitute a take-over bid within the meaning of the Legislation.
12. Pursuant to the Unit Offer, holders of Units (the "Unitholders") may elect to receive for each Unit accepted underthe Unit Offer:
(a) $3.50 in cash (the "All Cash Option") for each Unit; or
(b) $2.38 in cash and 0.265 of a Sherrit Share (the "Cash and Share Option") for each Unit; or
(c) a combination thereof.
13. The Applicants have extended the Unit Offer to Unitholders in Canada and any jurisdiction outside Canada inwhich the making and accepting of the Unit Offer would not be illegal.
14. Sherritt indirectly holds interests in businesses in Cuba and, accordingly, does not carry on any business in theUnited States of America, which maintains an embargo against Cuba. Although Sherritt is eligible to use themulti-jurisdictional disclosure system (the "MJDS") to register Sherritt Shares for distribution under the securitieslegislation of the United States (an "MJDS Registration"), it has determined that an MJDS Registration is notfeasible in the circumstances for the reason, among others, that Sherritt attempts to avoid any requirement tomake a filing in the United States which could give rise to an allegation that it has any business in the UnitedStates.
15. Accordingly, the Sherritt Shares that may be issued under the Unit Offer have not been and will not beregistered or otherwise qualified for distribution under the securities legislation of the United States. Thedelivery of Sherritt Shares to US Unitholders may constitute a violation of the laws of the United States.
16. To the extent that US Unitholders who accept the Unit Offer are entitled to receive Sherritt Shares, Sherrittproposes to deliver Sherritt Shares to CIBC Mellon Trust Company (the "Depositary") substantiallysimultaneously with payment for Units tendered under the Unit Offer. As soon as reasonably possible aftersuch delivery, the Depositary will sell the Sherritt Shares on the US Unitholders' behalf and hold the aggregatenet proceeds after expenses of such sale in trust for such US Unitholders. All Sherritt Shares that theDepositary is required to sell will be pooled and sold through the TSE's facilities in a manner that is intendedto minimize any adverse effect such a sale might have on the market price of Sherritt Shares. As soon asreasonably possible after completion of such sale, and in any event no later than four business days aftercompletion of such sale, the Depositary will send to each US Unitholder whose Sherritt Shares have been soldby the Depositary a cheque in Canadian funds in an amount equal to such US Unitholder's pro rata share ofthe net proceeds of sale, less any applicable withholding taxes.
AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers under the Legislation is that, in connection with the Unit Offer, theApplicants are exempt from the Identical Consideration Requirement insofar as US Unitholders who accept the Cashand Share Option may receive cash proceeds from the Depositary's sale of Sherritt Shares in accordance with theprocedure set out in paragraph 16 above instead of Sherritt Shares.
March 28, 2001.
"J. A. Geller" "R. W. Davis"