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, 8.2, 9.1.

December 5, 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

TAYLOR NGL LIMITED PARTNERSHIP

BY AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF

ALTAGAS INCOME TRUST

 

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 AltaGas Income Trust ("AltaGas") 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 (the "Unitholders") of Taylor NGL Limited Partnership ("Taylor"); 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 AltaGas Holding Limited Partnership No. 1 (the "Offeror"), an indirect wholly-owned subsidiary of AltaGas, for Taylor.

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 AltaGas and the Offeror:

1. The Offeror is a limited partnership formed under the laws of Alberta with AltaGas General Partner Inc. as its general partner and is an indirect wholly-owned subsidiary of AltaGas.

2. AltaGas is an unincorporated open ended investment trust governed by the laws of Alberta and created pursuant to a declaration of trust dated March 26, 2004, as from time to time amended, supplemented or restated.

3. The trust units of AltaGas ("Trust Units") are listed and posted for trading on the Toronto Stock Exchange under the symbol ALA.UN.

4. On November 11, 2007, AltaGas and Taylor entered into a support agreement (the "Support Agreement") pursuant to which AltaGas agreed, through one or more of its subsidiaries, and subject to the terms and conditions set forth in the Support Agreement, to make the Bid for all of the outstanding limited partnership units of Taylor ("Taylor Units") on the basis of, at the election of the holder: (a) $11.20 in cash; (b) 0.42 of a Trust Unit; or (c) a combination of class B limited partnership units of the Offeror and Trust Units (the "Exchangeable Alternative"), for each Taylor Unit, in each case subject to proration and in the case of the Exchangeable Alternative only, eligibility. The entry into of the Support Agreement was announced by AltaGas and Taylor on November 12, 2007. AltaGas and the Offeror are proceeding to prepare the Circular to be sent to Unitholders in connection with the Bid.

5. One of the conditions of the Bid is that there shall have been validly deposited under the Bid and not withdrawn at the expiry of the Bid that number of Taylor Units representing at least 66 2/3% of the Taylor Units (excluding Taylor Units held at the date of the Bid by or on behalf of the Offeror or associates or affiliates thereof) (the "Minimum Condition").

6. If the conditions to the Bid are satisfied (or waived by the Offeror), including the Minimum Condition, and the Offeror takes up and pays for Taylor Units deposited pursuant to the Bid, the Offeror will be entitled to acquire the Taylor Units held by Unitholders who did not accept the Bid pursuant to the limited partnership agreement governing Taylor (the "Limited Partnership Agreement") for the same consideration per Unit as was paid under the Bid (or, at the election of the dissenting offeree exercised in accordance with the Limited Partnership Agreement, the fair value of the Taylor Units), by sending, within 60 days after the termination of the Bid, and in any event within 180 days after the date of the Offer, a notice to the dissenting offerees and otherwise complying with the Limited Partnership Agreement (a "Compulsory Acquisition").

7. If a Compulsory Acquisition as permitted under the Limited Partnership Agreement is not available to the Offeror, or the Offeror elects not to proceed under those provisions, the Offeror currently intends to take such action as is necessary, including calling a special meeting of the Unitholders to approve (or otherwise effecting by written resolution) an amendment to the Limited Partnership Agreement, a capital reorganization, a sale of assets or another transaction to effectively acquire the Taylor Units not tendered to the Bid (a "Subsequent Acquisition Transaction").

8. In order to effect either a Compulsory Acquisition (if available and if the Offeror 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, the Offeror 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 Taylor 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") .

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

10. 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.

11. 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.

12. 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