Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Take-over Bids -- Exemption from the extension take-up requirements in section 98.3(4) of the Securities Act (Ontario) -- Dutch auction -- An issuer conducting an issuer bid under a modified Dutch auction procedure requires relief from the requirement to take up and pay for securities if all terms and conditions are met and the issuer bid is under-subscribed. The issuer is disclosing the maximum number of shares it will acquire under the bid, and the minimum and maximum amount it will pay for shares tendered; as a result, the potential for confusion is minimal -- the issuer will comply with the U.S. regime in connection with the Offer.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 98.3(4), 104(2)(c).
OSC Rule 62-504, s. 4.2(2).
March 12, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATION IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
The securities regulatory authority or regulator in the Jurisdiction (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") that, in connection with the purchase by the Filer of a portion of its outstanding common shares ("Shares") pursuant to an issuer bid (the "Offer"), the Filer be exempt from the requirements of the Legislation:
(a) That the Offer not be extended if all the terms and conditions of the Offer have been complied with or waived unless the Filer first takes up all Shares deposited under the Offer and not withdrawn (the "Extension Take Up Requirements" or the "Exemption Sought")
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for dual application):
(a) the Ontario Securities Commission is the principal regulator for this application;
(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 the Yukon Territory, the Northwest Territories and Nunavut and the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador and Prince Edward Island; and
(c) this decision (the "Decision") is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario pursuant to Section 104(2)(c) of the Securities Act (Ontario).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this Decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is validly existing under the Canada Business Corporations Act and has its head office in Mississauga, Ontario.
2. The authorized capital of the Filer consists of an unlimited number of Shares of which 120,137,829 Shares were issued and outstanding as at February 18, 2010.
3. The Shares are listed and posted for trading on the Toronto Stock Exchange (the "TSX") under the symbol "MDS" and on the New York Stock Exchange (the "NYSE") under the symbol "MDZ". On February 18, 2010, the last full trading day prior to which the Offer was announced, the closing price of the Shares was US$8.10 on the NYSE and Cdn$8.44 on the TSX.
4. The Filer is a reporting issuer in each of the Territories and Provinces of Canada and, to its knowledge, is not in default of any requirement of the securities legislation of any of the jurisdictions in which it is a reporting issuer.
5. The Offer is subject to Rule 13e-4 adopted under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and is not exempt therefrom. At least 50% of the Shares are beneficially owned by persons in the United States. During the six month period ended February 18, 2010, more than 50% trading volume and trading value in the Shares took place over exchange facilities in the United States including the NYSE.
6. ValueAct Capital Master Fund, L.P. owns approximately 19.23% of the issued and outstanding Shares. To the knowledge of the Filer, after reasonable enquiry, no other shareholder of the Filer holds, or exercises control and direction over, more than 10% of the outstanding Shares. As of March 11, 2010, ValueAct Capital Master Fund, L.P. has not advised the Filer whether it intends to tender any Shares under the Offer.
7. Under the proposed terms of the Offer, a depositing shareholder will be permitted to select a price between US$8.10 per share and US$9.30 per share (the "Price Range") at which the shareholder is willing to sell his, her or its Shares. The Filer proposes to purchase up to US$450 million worth of its Shares. The Filer proposes to use cash on hand to acquire Shares tendered to the Offer. The maximum of 55,555,555 Shares that the Filer is offering to purchase under the Offer represents approximately 46.2% of the total number of Shares issued and outstanding as at February 18, 2010. Assuming the Offer is fully subscribed, the minimum of 48,387,096 Shares that the Filer is offering to purchase under the Offer represents approximately 40.3% of the total number of Shares issued and outstanding as at February 18, 2010.
8. The Offer will be made pursuant to a modified "Dutch Auction" procedure as follows:
(a) The issuer bid circular mailed to shareholders (the "Circular") specifies that the Filer intends to purchase up to US$450 million worth of its Shares.
(b) The Circular specifies that the Price Range will be US$8.10 per share to US$9.30 per share.
(c) A shareholder may elect to tender Shares to the Offer pursuant to either an auction tender ("Auction Tender") or purchase price tender ("Purchase Price Tender"). A shareholder tendering Shares to the Offer pursuant to an Auction Tender may specify a price within the Price Range at which he, she or it is willing to sell all or a portion of the tendered Shares. A shareholder tendering Shares pursuant to a Purchase Price Tender will be deemed to have tendered such Shares to the Offer at the purchase price (as calculated in accordance with paragraph (e) below).
(d) All Shares deposited by a shareholder who fails to indicate whether the deposited Shares have been deposited pursuant to an Auction Tender or a Purchase Price Tender will be deemed to have deposited such Shares pursuant to a Purchase Price Tender. The Filer will not accept deposits of Shares pursuant to an Auction Tender whereby a shareholder failed to specify a purchase price for such Shares or indicated that the deposited Shares have been deposited pursuant to both an Auction Tender and a Purchase Price Tender.
(e) The purchase price ("Purchase Price") will be the lowest price per Share of not more than US$9.30 and not less than US$8.10 per Share at which shares have been deposited or have been deemed to be deposited under the Offer that will enable the Filer to purchase the maximum number of Shares deposited pursuant to the Offer, having an aggregate purchase price not exceeding US$450 million.
(f) The Purchase Price and the aggregate number of Shares that the Filer will purchase under the Offer will not be determined until after the Offer expires, provided that the aggregate amount that the Filer will pay for Shares under the Offer will not exceed US$450 million.
(g) Subject to the conditions of the Offer, if the number of Shares validly deposited and not withdrawn prior to expiry of the Offer pursuant to Auction Tenders at a price equal to or less than the Purchase Price or pursuant to Purchase Price Tenders would result in an aggregate purchase price in excess of US$450 million, then such deposited Shares will be purchased on a pro rata basis according to the number of Shares deposited or deemed to be deposited at a price equal to or less than the Purchase Price by the depositing shareholders (with adjustments to avoid the purchase of fractional Shares), except that odd lot deposits will not be subject to proration.
(h) Certificates for all Shares not purchased, including all Shares deposited pursuant to Auction Tenders at prices in excess of the Purchase Price, Shares not purchased due to proration and Shares not accepted for purchase, will be returned as soon as practicable after the expiry of the Offer or termination of the Offer without expense to the depositing shareholder.
(i) In the event the Shares validly deposited to the Offer and not withdrawn are less than the maximum number of Shares that the Filer is offering to purchase under the Offer, the Filer may extend the Offer.
9. Under the Legislation, an issuer may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the issuer first takes up all the securities deposited under the issuer bid and not withdrawn. Rule 13e-4 of the Exchange Act requires an issuer to take up all securities deposited under an issuer bid concurrently and, as a consequence, prohibits an issuer from taking up securities prior to the expiry of an issuer bid.
10. There is a "liquid market" in the Shares, as such term is defined in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101), because:
(a) there is a published market for the Shares (the TSX and NYSE); and
(b) during the period of twelve months before February 19, 2010, the date the Offer was publicly announced:
(i) the number of outstanding Shares was at all times not less than 5,000,000, excluding Shares beneficially owned, directly or indirectly, or over which control or direction was exercised, by related parties and Shares that were not freely tradeable;
(ii) the aggregate trading volume of the Shares on the TSX, being the published market on which the Shares are principally traded, was at least 1,000,000 Shares;
(iii) there were at least 1,000 trades in Shares on the TSX; and
(iv) the aggregate value of the trades in Shares on the TSX was at least $15,000,000.
(c) the market value of the Shares on the TSX, as determined in accordance with MI 61-101, was at least $75,000,000 for January 2010, being the calendar month preceding the calendar month in which the Offer was publicly announced.
11. Based on the facts set forth in paragraph 10 and the maximum number of Shares that may be purchased under the Offer, the Filer has determined that there is a liquid market for the Shares and that it is reasonable to conclude that, following the completion of the Offer, there will be a market for holders of Shares who do not tender all of their Shares to the Offer that is not materially less liquid than the market that existed at the time the Offer was announced.
12. Based on the facts set forth in paragraphs and 11, the Filer intends to rely upon the "liquid market" exemption (the "Liquid Market Exemption") from the formal valuation requirements otherwise applicable to issuer bids under MI 61-101.
13. The Circular:
(a) discloses the mechanics for the take up of and payment for or, where applicable, the return of Shares tendered to the Offer as described in paragraph 8 above;
(b) explains that, by tendering Shares at the lowest price in the Price Range or by tendering Shares pursuant to Purchase Price Tenders, shareholders can reasonably expect that the Shares so tendered will be purchased at the Purchase Price, if any Shares are purchased under the Offer (subject to proration provisions and the preferential acceptance of odd lots);
(c) discloses the fact that the Filer has filed for an exemption from the Extension Take Up Requirements;
(d) discloses the facts supporting the Filer's reliance on the Liquid Market Exemption; and
(e) except to the extent exemptive relief is granted by this Decision, contains the disclosure prescribed by the Legislation for issuer bids.
14. Prior to the expiry of the Offer, all information regarding the number of Shares tendered and the prices at which such Shares are tendered shall be kept confidential, and the Filer's depository for the Offer will be directed by the Filer to maintain such confidentiality until the Purchase Price has been determined.
The Decision Maker is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make this Decision has been met.
The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted provided that:
(a) Shares deposited under the Offer and not withdrawn are taken up and paid for or, where applicable, returned to shareholders in the manner described in paragraph 8 of this Decision;
(b) the Filer is eligible to rely on the Liquid Market Exemption and complies with the representations in paragraph 10 of this Decision; and
(c) the Filer complies with the requirements of the Exchange Act in respect of the conduct of the Offer.