Securities Law & Instruments

Headnote

Clause 104(2)(c) - direct and indirect issuer bids resulting from a reorganization involving issuer and a significant shareholder - purpose of reorganization is to allow shareholder to make use of its proportionate share of issuer's "safe income" for tax planning purposes -- after reorganization, the issuer will have the same number of shares issued and outstanding, and each shareholder will have the same number of shares and same relative ownership that they owned prior to the reorganization - shareholder to indemnify and reimburse issuer for costs and liabilities associated with reorganization - no adverse economic impact on or prejudice to issuer or public shareholders - issuer exempt from requirements of sections 95, 96, 97, 98 and 100 of the Act.

Ontario Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 89(1), 92, 95, 96, 97, 98, 100 and 104(2)(c).

Ontario Rules Cited

Rule 61-501 -- Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions.

IN THE MATTER OF

THE SECURITIES ACT, R.S.O. 1990,

CHAPTER S.5, AS AMENDED (THE "ACT")

AND

IN THE MATTER OF

CANGENE CORPORATION AND

APOTEX HOLDINGS INC.

 

ORDER

(Clause 104(2)(C))

UPON the application (the "Application") of Cangene Corporation ("Cangene") and Apotex Holdings Inc. ("Apotex") to the Ontario Securities Commission (the "Commission") for an order pursuant to clause 104(2)(c) of the Act that certain acquisitions by Cangene of its common shares ("Common Shares") pursuant to a proposed reorganization (the "Reorganization") described below are exempt from the requirements of sections 95, 96, 97, 98 and 100 of the Act;

AND UPON considering the Application and the recommendation of the Staff of the Commission;

AND UPON Cangene and Apotex having represented to the Commission as follows:

1. Cangene is a corporation incorporated under the laws of Ontario and is a reporting issuer under the Act not in default of any requirements of the Act.

2. The authorized capital of Cangene consists of an unlimited number of Common Shares, an unlimited number of preferred shares and an unlimited number of Class A preferred shares. As of December 31, 2004, 64,346,870 Common Shares, no preferred shares and no Class A preferred shares were issued and outstanding.

3. The Common Shares are listed on the Toronto Stock Exchange (the "TSX").

4. Apotex is a corporation incorporated under the laws of Ontario and is not a reporting issuer under the Act.

5. As of December 31, 2004, Apotex directly owned 37,707,808 Common Shares, representing approximately 58.6% of Cangene's issued and outstanding Common Shares.

6. Dr. Bernard Sherman ("Sherman") controls Apotex. He also controls other companies and charitable foundations that directly and indirectly own 14,157,979 Common Shares and personally holds 110,000 Common Shares. Accordingly, through Apotex and these other companies and charitable foundations and through his personal holdings, Sherman controls 51,975,787 Common Shares, representing approximately 80.8% of Cangene's issued and outstanding Common Shares.

7. Apotex is proposing the Reorganization to allow it to make use of its proportionate share of Cangene's "safe income" for tax planning purposes.

8. The Reorganization entails a number of transactions which may be summarized as follows:

(a) Apotex will incorporate two new wholly-owned subsidiaries ("Newco1" and "Newco2" and together, the "Newcos"). The authorized share capital of each Newco will consist of an unlimited number of common shares and an unlimited number of preference shares. Apotex will transfer all or a portion of its Common Shares to Newco1 in consideration for common shares of Newco1. Prior to the transfer of the Common Shares, the Newcos will have no material assets and the Newcos will have no liabilities at any time;

(b) Newco1 will declare and pay a stock dividend to Apotex in the form of preference shares of Newco1, in an amount not to exceed Apotex's estimated portion of safe income attributable to the Common Shares;

(c) Apotex will transfer the Newco1 preference shares to Newco2 in consideration for the issuance of Newco2 common shares;

(d) Apotex will transfer (the "Newco1 Transfer") all of the common shares of Newco1 to Cangene in exchange for newly issued Common Shares;

(e) Newco2 will transfer its Newco1 preference shares to Cangene in exchange for newly issued Common Shares. The aggregate number of Common Shares issued by Cangene pursuant to the transfer of the Newco1 preference shares and the Newco1 Transfer will be equal to the number of Common Shares owned by Newco1; and

(f) Newco1 will then be wound up (the "Wind-up") into Cangene and upon such Wind-up the Common Shares held by Newco1 will be transferred to Cangene and cancelled.

9. The Reorganization will not change the number of Common Shares issued and outstanding, as Cangene will have the same aggregate number of Common Shares outstanding following the Reorganization as it did immediately prior to the Reorganization.

10. Following the Reorganization, each of Apotex, Sherman and the public shareholders of Cangene (the "Public Shareholders") will beneficially own the same aggregate number and same relative percentages of Common Shares that they owned immediately prior to the Reorganization and will have the same rights and benefits in respect of such shares that they currently have.

11. All costs and expenses incurred by Cangene in connection with the Reorganization will be paid for by Apotex and Apotex will indemnify Cangene, the Public Shareholders from time to time, and the present and future directors and officers of each of Cangene and its subsidiaries from any losses which may be incurred by them as a result of the Reorganization.

12. The Reorganization will have no adverse economic effect on, or adverse tax consequences to, or in any way prejudice Cangene or the Public Shareholders.

13. The Reorganization has been approved by the board of directors of Cangene excluding those directors who are also directors, significant shareholders or employees of Apotex.

14. The TSX has accepted notice of the Reorganization subject to receipt of the customary documentation, including a copy of this order and confirmation of the reliance by Cangene and Apotex upon an exemption from the related party requirements of Commission Rule 61-501.

15. Upon the Newco1 Transfer, the offer by Cangene (the "Cangene Offer") to acquire all of the shares of Newco1 will constitute an issuer bid under subsection 89(1) and section 92 of the Act in that it will constitute an indirect offer by Cangene for the Common Shares owned by Newco1 at the time of the Newco1 Transfer. Further, the offer by Cangene (the "Wind-up Offer") to acquire the Common Shares held by Newco1 on the Wind-up will constitute an issuer bid under subsection 89(1) of the Act (the Cangene Offer and the Wind-up Offer are collectively referred to as the "Offers"). The Offers will not be exempt issuer bids under the Act.

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

IT IS ORDERED pursuant to clause 104(2)(c) of the Act that the Offers are exempt from the requirements of sections 95, 96, 97, 98 and 100 of the Act.

January 14, 2005.

"Robert W. Davis"
"Suresh Thakrar"