7027940 Canada Limited

Decision

Headnote

Multilateral Instrument 11-02 -- Passport System -- relief from requirement to pay for securities deposited under offer within 10 days of expiry date due to practical problems associated with executing an international transfer of funds under current economic conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 98.3, 104(2)(b).

October 30, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

7027940 CANADA LIMITED

(the Filer)

 

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer (the Application) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for a decision under the Legislation exempting the Filer from the requirement contained in Section 98.3(1) of the Securities Act (Ontario) to pay for securities deposited under the bid not later than 10 days after the expiry date of the offer to purchase all of the issued and outstanding shares of PBS Coals Limited (the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

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

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, the Yukon Territory and the Nunavut Territory.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined. In addition, capitalized terms used but not defined herein have the meaning attributed to such term in the Application.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation incorporated under the Canada Business Corporations Act (CBCA), with its head office in Toronto, Ontario. The Filer is an affiliate of Mining Holding Company LLC, a limited liability company incorporated under the laws of Russia.

2. The Filer is not, to its knowledge, in default of its obligations under the securities legislation of Ontario or the securities legislation of the Passport Jurisdictions.

3. PBS Coals Limited (PBS Coals) is a corporation incorporated under the Canada Business Corporations Act (CBCA), with its head office in Friedens, Pennsylvania. PBS Coals does not have any material assets or operations in Canada.

4. PBS Coals is a reporting issuer or the equivalent thereof in Ontario, Alberta and British Columbia. To the knowledge of the Filer, PBS Coals is not in default of its obligations under the securities legislation of Ontario or the securities legislation of the Passport Jurisdictions.

5. PBS Coals is a reporting issuer in Ontario, the shares of PBS Coals are listed and posted for trading on the TSX (under the symbol "PBS") and the Filer believes that the majority of the shareholders of PBS Coals are located in Ontario. Therefore, PBS Coals has the most significant connection to Ontario.

6. On August 22, 2008, the Filer and PBS Coals, among others, entered into a support and purchase agreement (the Support Agreement) pursuant to which the Filer agreed to make, and PBS Coals agreed to support, an offer to acquire all of the issued and outstanding shares of PBS Coals (the Offer), on the terms and conditions set forth in the Support Agreement.

7. On September 5, 2008, the Filer mailed its Offer and take-over bid circular to, among others, shareholders of PBS Coals.

8. On October 10, 2008, the initial expiry date of the Offer, the Filer extended its Offer for an additional 10-day period to allow for the receipt of a required regulatory approval. The Expiry Time under the Offer, as extended, was 11:59 p.m. Toronto time on October 24, 2008.

9. Immediately prior to the Expiry Time, the Filer, PBS Coals and the Principal Shareholders reached an agreement (the Supplemental Agreement) pursuant to which (A) the Filer agreed to (a) take-up all shares tendered under the Offer within 10 days of the Expiry Time, and (b) waive all conditions to the Offer; and (B) the Principal Shareholders agreed to (i) a reduction of the proceeds payable to them (but not the other shareholders) under the Offer, and, (ii) subject to regulatory approval, an extension of the time for payment for shares tendered under the Offer to eight business days (November 5, 2008) after the Expiry Time.

10. The eight business day period contemplated by the Supplemental Agreement for payment for shares tendered under the Offer equates to 12 calendar days from the Expiry Time.

11. All of the conditions to the Offer were satisfied or waived at the Expiry Time. On October 25, 2008, the Filer issued a press release announcing the results of the Offer, including that a total of approximately 140,650,905 shares of PBS Coals, which represents approximately 99% of the outstanding shares of PBS Coals, have been tendered and not withdrawn pursuant to the Offer.

12. The Filer and its affiliates are using all reasonable efforts to have the funds available to make payment for the shares tendered under the Offer not later than 10 calendar days after the Expiry Time. However, given the settlement of the Supplemental Agreement immediately prior to the Expiry Time, and in light of the challenging circumstances in the world's financial and commodity markets and the complexities of funding the purchase price from Russia, the Filer may not have the funds from its affiliates within such 10-day period. The Filer expects to receive the funds by that time or shortly thereafter, which is why the Filer, PBS Coals and the Principal Shareholders agreed to extend the date for payment for shares tendered to the Offer, subject to regulatory approval, as provided for in the Supplemental Agreement.

13. As a result of the current global financial and credit crisis, the Filer's affiliates, which are providing the funds for the Offer, have recently experienced undue delays in the processing of wire payments, particularly for substantial amounts of funds across national borders. The combination of these delays, together with the time to comply with Russian hard currency control legislations and the fact that there are four weekend days between the Expiry Time of the Offer and the 10th calendar day following the Expiry Time, may result in the Filer not having received funds to complete the Offer by the close of business on November 3, 2008.

14. The Filer has made adequate arrangements for financing of the Offer and has complied with the financing requirements of the Securities Act (Ontario) and is seeking the requested relief to accommodate the practical problems associated with executing an international transfer of funds under current economic conditions.

15. The offer price of C$8.30 per share offered to shareholders, other than the Principal Shareholders, remains unchanged. Approximately 140,650,905 shares of PBS Coals, which represents approximately 99% of the outstanding shares of PBS Coals, have been tendered and not withdrawn pursuant to the Offer.

16. PBS Coals and the Principal Shareholders have agreed to the payment for shares deposited under the Offer not later than 12 days after the Expiry Time.

17. The Principal Shareholders represent approximately 80% of the outstanding shares of PBS Coals and include institutional and individual shareholders, as well as each member of the board of directors of PBS Coals and each member of management who is a shareholder of Mincorp Acquisition Corp., a subsidiary of PBS Coals.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that the Filer pays for shares deposited under the Offer not later than 12 days after the Expiry Time.

"James. E.A. Turner"
Commissioner
Ontario Securities Commission
 
"Lawrence E. Ritchie"
Commissioner
Ontario Securities Commission