SPX Corporation & United Dominion Industries Ltd. - s. 3.1 of 54-501

Ruling

Headnote

Rule 54 501   Request for relief from the requirement to reconcile to Canadian GAAP  financial statements included in an Information Circular which are prepared in accordance with U.S. GAAP.

Ontario Rule Cited

Rule 54 501, Prospectus Disclosure in Certain Information Circulars, s. 3.1.

Rule 41 501, General Prospectus Requirements, s. 9.1.

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, CHAPTER .S. 5, AS AMENDED (the "Act")

AND

IN THE MATTER OF

SPX CORPORATION

AND

IN THE MATTER OF

UNITED DOMINION INDUSTRIES LIMITED

RULING

(Section 3.1 of Rule 54-501)

UPON the application of SPX Corporation ("SPX") and United Dominion Industries Limited ("UDI") (collectively, the "Applicant") to the Ontario Securities Commission (the "Commission") for an order pursuant to Section 3.1 of Rule 54 501 that UDI be exempt from any requirement to provide the following with respect to SPX in the management information circular (the "Circular") to be sent to UDI Shareholders (as defined below):

  1. the requirement set forth in Section 9.1 of the General Prospectus Requirements of Rule 41 501 and Item 8.4 of Form 41 501F1 that historical and pro forma financial statements of SPX prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") be accompanied by a note to explain and quantify the effect of material differences between Canadian generally accepted accounting principles ("Canadian GAAP") and U.S. GAAP that relate to measurements and provide a reconciliation of such financial statements to Canadian GAAP;
  2. the requirement set forth in Section 9.4 of the General Prospectus Requirements of Rule 41 501 that the SPX auditor’s report disclose any material differences in the form and content of its auditor’s report as compared to a Canadian auditor’s report and confirming that the auditing standards applied are substantially equivalent to Canadian generally accepted auditing standards;  and
  3. the requirement of Section 8.5(2) of Form 41 501F1 that the SPX MD&A provide a restatement of those parts of the SPX MD&A that would read differently if the SPX MD&A were based on statements prepared in accordance with Canadian GAAP and the requirement of Section 8.5(4) of Form 41 501F1 that the SPX MD&A provide a cross reference to the notes in the financial statements that reconcile the differences between U.S. GAAP and Canadian GAAP.

AND UPON considering the application and the recommendation of the staff of the Director;

AND UPON the Applicant having represented to the Director that:

  1. Pursuant to a merger agreement dated as of March 10, 2001 between SPX and UDI, SPX intends to acquire all of the outstanding common shares of UDI (the "UDI Common Shares") in a transaction (the "Transaction") to be effected pursuant to plan of arrangement (the "Arrangement").  The Arrangement will be carried out under section 192 of the Canada Business Corporations Act (the "CBCA").  The effect of the Arrangement will be to provide shareholders of UDI ("UDI Shareholders") (other than dissenting shareholders) with common shares of SPX, together with the associated preference stock purchase rights (collectively, the "SPX Transaction Shares") in exchange for their UDI Common Shares, based on the Exchange Ratio of 0.2353 SPX Transaction Shares for each UDI Common Share (the "Exchange Ratio"), and for UDI to amalgamate (the "Amalgamation") with an indirect wholly owned subsidiary of SPX ("Mergeco") such that, upon completion of the Transaction, SPX will indirectly beneficially own all of the common shares of the amalgamated company ("Amalco").
  2. SPX is a company incorporated under the laws of Delaware.  SPX Common Shares are listed on the New York Stock Exchange (the "NYSE") and the Pacific Stock Exchange under the symbol "SPW".  SPX is currently subject to the United States Exchange Act of 1934, as amended (the "Exchange Act").  SPX is not a "reporting issuer" or the equivalent in any province or territory of Canada and has no intention of becoming one in the future.
  3. As of March 20, 2001 there were 68 shareholders in Canada holding 3,596 SPX Common Shares, representing approximately .0001% of the total number of issued and outstanding SPX Common Shares.  As of March 20, 2001, of all of the options outstanding under the SPX stock option plans ("SPX Options") there were 14 persons in Canada holding options to purchase an aggregate 24,250 SPX Common Shares, representing approximately .0029% of the SPX Options.
  4. UDI is a company incorporated under the CBCA.  The UDI Common Shares are listed on The Toronto Stock Exchange (the "TSE") and the NYSE under the symbol "UDI".  UDI is a "reporting issuer" or the equivalent in all provinces of Canada.  To the best of the knowledge of SPX and UDI, UDI is not in default of any of the requirements of the securities legislation of Ontario.  UDI is also currently subject to the reporting requirements applicable to foreign private issuers under the Exchange Act. 
  5. As of February 28, 2001, there were 884 shareholders in Canada holding 24,634,830 UDI Common Shares, representing approximately 63% of the total number of issued and outstanding UDI Common Shares.  As of March 21, 2001, of all of the options outstanding under the UDI stock option plans ("UDI Options") approximately 126,000 UDI Options were held by residents in Canada, representing approximately 4.1% of the total number of outstanding UDI Options.
  6. UDI is currently eligible to file under National Instrument 44 101 – "Short Form Prospectus Distributions".
  7. A special meeting (the "Special Meeting") of the UDI Shareholders will be held on or about May 18, 2001 at which UDI will seek the requisite shareholder approval (of 66 2/3% of the votes attached to the UDI Common Shares represented at the Special Meeting) for the special resolution approving the Arrangement.
  8. In connection with the Special Meeting, UDI will mail on or about April 17, 2001 to each UDI Shareholder (i) a notice of annual and special meeting, (ii) a form of proxy, and (iii) the Circular.  The Circular will be prepared in accordance with OSC Rule 54 501, except with respect to any relief granted therefrom, and will contain disclosure of the Transaction and the business and affairs of each of SPX and UDI.
  9. The Circular will contain the following financial statements:
    1. unaudited pro forma consolidated balance sheet of SPX as of December 31, 2000 as if the Arrangement had occurred on that date and unaudited pro forma consolidated profit and loss account for the year ended December 31, 2000 as if the Arrangement had occurred on January 1, 2000 and the compilation report thereon, all in accordance with U.S. GAAP;
    2. audited annual financial statements of SPX for each of the three fiscal years ended December 31, 2000, December 31, 1999 and December 31, 1998 together with balance sheets as at the end of such periods and the auditor’s reports thereon, all in accordance with U.S. GAAP; and
    3. audited annual financial statements of UDI for each of the three fiscal years ended December 31, 2000, December 31, 1999 and December 31, 1998 together with balance sheets as at the end of such periods and the auditors reports thereon, all in accordance with Canadian GAAP.
  10. SPX is making an application to the NYSE in order that the SPX Transaction Shares issued pursuant to the Arrangement, and the SPX Common Shares issuable on exercise of options issued in connection with the Arrangement to replace UDI Options, be listed for trading on the NYSE.
  11. SPX intends to have Amalco delisted from the TSE and the NYSE and intends to file an application with the applicable Canadian securities regulators to have Amalco deemed to cease to be a reporting issuer upon the consummation of the Arrangement or shortly thereafter.
  12. Upon the completion of the Arrangement, assuming that all of the UDI Shareholders elect to exchange their UDI Common Shares for SPX Transaction Shares, it is expected that the beneficial holders of SPX Common Shares resident in Canada will hold approximately 14.3% of the issued and outstanding shares of SPX.  That percentage would increase to approximately 14.7% if it is assumed that all of the UDI Options held by Canadian residents will be exercised prior to the Effective Time and that only the SPX Options held by Canadian residents will have been so exercised.

AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest,

THE DECISION of the Director is that, pursuant to Section 3.1 of Rule 54 501, UDI shall be exempt from any requirement to provide the following in the Circular with respect to SPX:

  1. the requirement set forth in Section 9.1 of the General Prospectus Requirements of Rule 41 501 and Item 8.4 of Form 41 501F1 that historical and pro forma financial statements of SPX prepared in accordance with U.S. GAAP be accompanied by a note to explain and quantify the effect of material differences between Canadian GAAP and U.S. GAAP that relate to measurements and provide a reconciliation of such financial statements to Canadian GAAP;
  2. the requirement set forth in Section 9.4 of the General Prospectus Requirements of Rule 41 501 that the SPX auditor’s report disclose any material differences in the form and content of its auditor’s report as compared to a Canadian auditor’s report and confirming that the auditing standards applied are substantially equivalent to Canadian generally accepted auditing standards;  and
  3. the requirement of Section 8.5(2) of Form 41 501F1 that the SPX MD&A provide a restatement of those parts of the SPX MD&A that would read differently if the SPX MD&A were based on statements prepared in accordance with Canadian GAAP and the requirement of Section 8.5(4) of Form 41 501F1 that the SPX MD&A provide a cross reference to the notes in the financial statements that reconcile the differences between U.S. GAAP and Canadian GAAP.

April 6, 2001.

"Kathryn Soden"