Clause 104(2)(c) - Issuer bid - relief from issuer bid requirements in sections 95, 96, 97, 98 and 100 of the Act - Issuer proposes to purchase, at a discounted purchase price, approximately 5,000,000 of its common shares from one shareholder and/or such shareholder's affiliates - due to discounted purchase price, proposed purchases cannot be made through TSX trading system - Issuer cannot rely on exemption available under section 93(3)(e) of the Act from issuer bid requirements because proposed purchases cannot be made through the facilities of the TSX - but for the fact that the proposed purchases cannot be made through the TSX trading system, the Issuer could otherwise acquire the sale shares in reliance upon the issuer bid exemption available under section 93(3)(e) of the Act and the block purchase exception available under TSX rules - no adverse economic impact on or prejudice to issuer or public shareholders - proposed purchases exempt from issuer bid requirements in sections 95, 96, 97, 98 and 100 of the Act, subject to conditions.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 93(3)(e), 95, 96, 97, 98, 100, 104(2)(c).
November 27, 2007
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c.S.5, AS AMENDED (the Act)
IN THE MATTER OF
CANADIAN NATIONAL RAILWAY COMPANY
UPON the application (the Application) of Canadian National Railway Company (the Issuer) to the Ontario Securities Commission (the Commission) for an order pursuant to clause 104(2)(c) of the Act exempting the Issuer from the requirements of sections 95, 96, 97, 98 and 100 of the Act (the Issuer Bid Requirements) in connection with the proposed purchases by the Issuer of up to 5,000,000 (the Subject Shares) of its common shares (the Common Shares) from one shareholder and/or such shareholder's affiliates (collectively, the Selling Shareholders);
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Issuer having represented to the Commission that:
1. The Issuer is a corporation governed by the Canada Business Corporations Act.
2. The head office and registered office of the Issuer are located at 935 de La Gauchetière West, Montreal, Quebec, H3B 2M9.
3. The Issuer is a reporting issuer in each of the provinces and territories of Canada and the Common Shares of the Issuer are listed for trading on the Toronto Stock Exchange (the TSX) and the New York Stock Exchange. The Issuer is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.
4. The authorized common share capital of the Issuer consists of an unlimited number of Common Shares, of which 489,514,735 were issued and outstanding as of November 23, 2007.
5. As of the date of this Order, the Selling Shareholders own at least 5,000,000 Common Shares.
6. The Issuer wishes to purchase Subject Shares from one or more of the Selling Shareholders. Each of the Selling Shareholders does not directly or indirectly own more than 5% of the issued and outstanding Common Shares and is not an "insider" of the Issuer or "associate" of an "insider" of the Issuer, or an "associate" or "affiliate" of the Issuer, as such terms are defined in the Act. In addition, each of the Selling Shareholders has its corporate headquarters in Toronto, Ontario and is an "accredited investor" within the meaning of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106).
7. On July 26, 2007, the Issuer commenced a normal course issuer bid (its Normal Course Issuer Bid) for up to 33,000,000 Common Shares through the facilities of the TSX in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the TSX NCIB Rules). As at November 20, 2007, 13,425,000 Common Shares have been purchased under the Normal Course Issuer Bid.
8. The Issuer and the Selling Shareholders intend to enter into one or more agreements of purchase and sale (each, an Agreement), pursuant to which the Issuer will agree to acquire the Subject Shares from the Selling Shareholders by one or more purchases occurring prior to February 29, 2008 (each such purchase, a Proposed Purchase) for a purchase price (the Purchase Price) that will be negotiated at arm's length between the Issuer and the Selling Shareholders. The Purchase Price will be at a discount to the closing price and below the bid-ask price for the Issuer's Common Shares at the time of the each Proposed Purchase.
9. The Subject Shares acquired under each Proposed Purchase will constitute a "block", as that term is defined in section 628 of the TSX NCIB Rules.
10. The purchase of the Subject Shares by the Issuer pursuant to each Agreement will constitute an "issuer bid" for purposes of the Act, to which the Issuer Bid Requirements would apply.
11. Because the Purchase Price will be at a discount to the closing market price and below the bid-ask price for the Issuer's Common Shares at the time of each Proposed Purchase, each Proposed Purchase cannot be made through the TSX trading system and, therefore, will not occur "through the facilities" of the TSX. As a result, the Issuer will be unable to acquire the Subject Shares from the Selling Shareholders in reliance upon the exemption from the Issuer Bid Requirements that is available pursuant to Section 93(3)(e) of the Act.
12. But for the fact that the Purchase Price will be at a discount to the closing market price and below the bid-ask price for the Issuer's Common Shares at the time of each Proposed Purchase, the Issuer could otherwise acquire the Subject Shares as a "block purchase" (a Block Purchase) in accordance with Section 629(1)7 of the TSX NCIB Rules and the exemption from the Issuer Bid Requirements that is available pursuant to Section 93(3)(e) of the Act. The notice of intention to make a normal course issuer bid filed with the TSX by the Issuer contemplates that purchases under the bid may be made by such other means as may be permitted by the TSX, including private agreements under an issuer bid exemption order issued by a securities regulatory authority.
13. For each Proposed Purchase, the Issuer will be able to acquire the Subject Shares from the Selling Shareholders in reliance upon the exemption from the dealer registration requirements of the Act that is available as a result of the combined effect of Section 2.16 of NI 45-106 and Section 4.1(a) of Commission Rule 45-501 Ontario Prospectus and Registration Exemptions.
14. Management is of the view that the Issuer will be able to purchase the Subject Shares at a lower price than the price at which the Issuer will be able to purchase the Common Shares under its Normal Course Issuer Bid and management is of the view that this is an appropriate use of the Issuer's funds.
15. The purchase of Subject Shares will not adversely affect the Issuer or the rights of any of the Issuer's securityholders and it will not materially affect control of the Issuer. The Proposed Purchases will be carried out with a minimum of cost to the Issuer.
16. To the best of the Issuer's knowledge, as of November 23, 2007, the public float for the Common Shares consisted of approximately 487,926,951 Common Shares, which represents approximately 99.68% of all issued and outstanding Common Shares for purposes of the TSX NCIB Rules.
17. The market for the Common Shares is a "liquid market" within the meaning of Section 1.2 of Commission Rule 61-501.
18. Other than the Purchase Price, no additional fee or other consideration will be paid in connection with the Proposed Purchases.
19. At the time that each Agreement is entered into by the Issuer and the Selling Shareholders and at the time of each Proposed Purchase, neither the Issuer nor the Selling Shareholders will be aware of any undisclosed material change or any undisclosed material fact in respect of the Issuer that could reasonably be expected to affect the value of the Common Shares.
AND UPON the Commission being satisfied 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 Issuer be exempt from the Issuer Bid Requirements in connection with each Proposed Purchase, provided that:
(a) the Issuer will refrain from conducting a Block Purchase in accordance with the TSX NCIB rules during the calendar week that it completes each Proposed Purchase and may not make any further purchases under its Normal Course Issuer Bid for the remainder of that calendar day;
(b) the purchase of the Subject Shares by the Issuer will be taken into account by the Issuer when calculating the maximum annual aggregate limit that is imposed upon the Issuer's Normal Course Issuer Bid in accordance with the TSX NCIB Rules;
(c) the Purchase Price is not higher than the last "independent trade" (as that term is used in paragraph 629(l)1 of the TSX NCIB Rules) of a board lot of Common Shares immediately prior to the execution of each Proposed Purchase by the Issuer and the Selling Shareholders;
(d) the Issuer will otherwise acquire any additional Common Shares pursuant to its Normal Course Issuer Bid and in accordance with the TSX NCIB Rules; and
(e) immediately following each Proposed Purchase of the Subject Shares from the Selling Shareholders, the Issuer will report the purchase of the Subject Shares to the TSX.