Securities Law & Instruments

Headnote

Mutual Reliance Review System -- OSC Rule 61-501 -- take-over bid and subsequent business combination -- Rule 61-501 requires sending of information circular and holding of meeting in connection with second step business combination -- target's limited partnership agreement provides that a resolution in writing executed by unitholders holding more than 66 2/3% of the outstanding units is valid and binding as if such voting rights had been exercised in favour of such resolution at a meeting of Unitholders -- second step business combination to be subject to minority approval, calculated in accordance with section 8.2 of Rule 61-501 -- relief granted from requirement that information circular be sent and meeting be held.

Applicable Ontario Rule

OSC Rule 61-501 Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions, ss. 4.2, 9.1.

October 30, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUEBEC AND ONTARIO

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF THE

POTENTIAL TAKE-OVER BID FOR

TRANSALTA POWER, L.P. BY AN

INDIRECT WHOLLY-OWNED SUBSIDIARY OF

CHEUNG KONG INFRASTRUCTURE

HOLDINGS LIMITED

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of Quebec and Ontario (the "Jurisdictions") has received an application from Cheung Kong Infrastructure Holdings Limited ("CKI") for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the requirements of the Legislation that:

(a) a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below), as applicable, be approved at a meeting of the unitholders of TransAlta (the "Unitholders"); and

(b) an information circular be sent to the Unitholders in connection with either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable,

be waived (the "Requested Relief") in connection with a potential take-over bid (the "Bid") by Stanley Power Inc. ("Bidco"), an indirect wholly-owned subsidiary of CKI, for TransAlta Power, L.P. ("TransAlta").

Under the Mutual Reliance Review System ("MRRS") for Exemptive Relief Applications:

(a) the Ontario Securities Commission ("OSC") is the principal regulator, for this application; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 - Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following representations by CKI and Bidco (collectively, the "Filers"):

1. CKI is a company incorporated in Bermuda with limited liability, the shares of which are listed for trading on the Stock Exchange of Hong Kong.

2. On October 14, 2007, CKI and TransAlta entered into a Support Agreement pursuant to which CKI agreed, subject to the terms and conditions set out in the agreement, to make the Bid for all of the outstanding limited partnership units of TransAlta (the "Units") at $8.38 per Unit.

3. Bidco was incorporated and organized under the laws of the province of British Columbia on October 23, 2007 to undertake the Bid.

4. The Units are held by CDS Clearing and Depository Services Inc. in book entry only form.

5. It is currently expected that:

(a) one of the conditions of the Bid will be that there shall have been validly deposited under the Bid and not withdrawn at the expiry of the Bid that number of Units representing at least 66 2/3% of the Units on a fully diluted basis (the "Minimum Condition");

(b) if the conditions to the Bid are satisfied (or waived by Bidco) and Bidco takes up and pays for Units deposited pursuant to the Bid, Bidco may proceed with a compulsory acquisition of the Units not deposited to the Bid as permitted by the limited partnership agreement governing TransAlta (the "Limited Partnership Agreement") for the same consideration per Unit as was paid under the Bid if, within the time provided in the Bid for its acceptance or within 45 days after the date of Bid is made, whichever period is shorter, the Bid is accepted by Unitholders of at least 90% of the Units (other than Units owned or over which control or direction is exercised at the date of the Bid by the Filers or an affiliate or an associate of the Filers or any person acting jointly or in concert with the Filers) (a "Compulsory Acquisition");

(c) if a Compulsory Acquisition as permitted under the Limited Partnership Agreement is not available to Bidco, or Bidco elects not to proceed under those provisions, Bidco currently intends to acquire the Units not deposited to the Bid by:

(i) amending the Limited Partnership Agreement to: (A) provide that a Compulsory Acquisition may be effected if the Bid is accepted by Unitholders representing at least 66 2/3% of the Units calculated on a fully-diluted basis (the "Threshold Amendment") and (B) if necessary, to provide that such acceptance must occur within the time provided in the Offer for its acceptance or within 90 days after the date the Bid is made, whichever period is shorter, (the "Timing Amendment") (a Compulsory Acquisition, as amended by the Threshold Amendment and/or Timing Amendment, being referred to herein as a "Subsequent Acquisition Transaction"); and

(ii) proceeding with the Subsequent Acquisition Transaction in respect of the Units not deposited to the Bid as permitted by the Limited Partnership Agreement, as so amended;

(d) in order to effect either a Compulsory Acquisition (if available and if Bidco elects to proceed thereunder), or a Subsequent Acquisition Transaction in accordance with the foregoing, rather than seeking the Unitholders' approval to the required amendments at a special meeting of the Unitholders to be called for such purpose, Bidco intends to rely on the definition of "Extraordinary Resolution" in the Limited Partnership Agreement, which specifies that a written resolution in one or more counterparts signed by Unitholders holding in the aggregate at least 66 2/3% of the aggregate number of outstanding Units is as valid as approval by at least 66 2/3% of the votes cast in person or by proxy at a duly constituted meeting of the Unitholders (a "Written Resolution"); and

(e) if Bidco decides not to pursue either the Compulsory Acquisition or the Subsequent Acquisition Transaction in the manner described above, Bidco reserves the right, to the extent permitted by applicable law, to purchase additional Units in the open market or in privately negotiated transactions or otherwise, or take no further action to acquire additional Units, or acquire TransAlta's assets by way of an arrangement, amalgamation, merger, reorganization, consolidation, recapitalization, redemption or other transaction involving Bidco, CKI and/or any of their respective subsidiaries and TransAlta. Alternatively, Bidco may sell or otherwise dispose of any or all Units acquired pursuant to the Bid.

6. Notwithstanding the definition of "Extraordinary Resolution" in the Limited Partnership Agreement, section 4.2 of Autorité des marchés financiers du Québec Regulation Q-27 -- Respecting Protection of Minority Shareholders in the Course of Certain Transactions ("Regulation Q-27") and section 4.2 of OSC Rule 61-501 -- Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions ("Rule 61-501") may require in certain circumstances that the Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, be approved at a meeting of Unitholders called for that purpose.

7. To effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, the Filer will obtain minority approval, as that term is defined in the Legislation, calculated in accordance with the terms of section 8.2 of Regulation Q-27, and section 8.2 of Rule 61-501 (the "Minority Approval"), albeit not at a meeting of Unitholders, but by Written Resolution.

8. The offer and take-over bid circular provided to Unitholders in connection with the Bid will contain all disclosure required by applicable securities laws, including without limitation the take-over bid provisions and form requirements of the securities legislation in the Jurisdictions and the provisions of Rule 61-501 relating to the disclosure required to be included in information circulars distributed in respect of business combinations.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that Minority Approval shall have been obtained by Written Resolution.

"Naizam Kanji"
Manager, Mergers & Acquisitions
Ontario Securities Commission