National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Take-over bid and subsequent business combination -- Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions requires sending of information circular and holding of meeting in connection with second step business combination -- target's trust agreement provides that a resolution in writing executed by unitholders holding at least 66 2/3% of the outstanding units is as valid as if such voting rights had been exercised at a meeting of unitholders -- relief granted from requirement that an information circular be sent and a unitholder meeting be held -- minority approval required under MI 61-101 effectively obtained in writing rather than at a meeting.
Applicable Legislative Provisions
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions.
June 23, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
THE TAKE-OVER BID FOR
BORALEX POWER INCOME FUND BY
7503679 CANADA INC.
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation), in connection with a take-over bid for all of the issued and outstanding trust units of Boralex Power Income Fund (the Fund), including Units issuable upon the conversion, exchange or exercise of any securities that are convertible into or exchangeable or exercisable for Units (collectively, the Units), except for Units issuable upon the exchange of the outstanding Class B limited partnership units (collectively, the Class B LP Units) of Boralex Power Limited Partnership (the Partnership) (together with the Special Trust Unit (as defined below) associated therewith), on the basis of 0.05 of a $100 principal amount of 6.25% convertible unsecured subordinated debentures (Convertible Debentures) of Boralex Inc. (Boralex) for each Unit of the Fund (the Offer), that the following requirements of section 4.2 of Regulation 61-101 respecting Protection of Minority Security Holders in Special Transactions (Regulation 61-101) be waived (the Exemption Sought):
1. a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below), be approved at a meeting of the holders of Units (the Unitholders) and special trust units of the Fund (the Special Trust Units); and
2. an information circular be sent to the Unitholders in connection with either a Compulsory Acquisition or Subsequent Acquisition Transaction.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
1. the Autorité des marchés financiers is the principal regulator for this application; and
2. the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in Regulation 14-101 respecting definitions and Regulation 11-102 respecting passport system 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 Fund is an unincorporated, open-ended limited purpose trust established under the Laws of the Province of Québec on December 20, 2001 by a trust indenture (the Trust Agreement). The business of the Fund is administered through Boralex Power Inc., a wholly-owned subsidiary of Boralex, and it has no employees. The registered office of the Fund is located at 36 Lajeunesse Street, Kingsey Falls, Québec, J0A 1B0, and its principal office is located at 772 Sherbrooke Street West, Suite 200, Montréal, Québec, H3A 1G1.
2. The Fund is a reporting issuer in each of the provinces of Canada and is authorized to issue an unlimited number of Units which are listed on the Toronto Stock Exchange (the TSX) under the trading symbol "BPT.UN" and an unlimited number of Special Trust Units.
3. The capital of the Fund is composed of 45,300,002 issued and outstanding Units and one Special Trust Unit (representing an interest in the Fund held through 13,767,990 issued and outstanding Class B LP Units of the Partnership).
4. Boralex is a corporation existing under the laws of Canada. The head office and principal place of business of Boralex is located at 36 Lajeunesse Street, Kingsey Falls, Québec, J0A 1B0. Boralex also has administrative offices located at 772 Sherbrooke Street West, Montréal, Québec, H3A 1G1.
5. Boralex is a reporting issuer in each of the provinces of Canada and is authorized to issue an unlimited number of Class A shares, which are listed on the TSX under the trading symbol "BLX" and an unlimited number of preferred shares.
6. The Filer is a corporation incorporated under the Canada Business Corporations Act. The Filer was formed and organized solely for the purpose of making the Offer and has not carried on any activities other than those incidental to its formation and those relating to the making of the Offer. The registered office of the Filer is located at 772 Sherbrooke Street West, Suite 200, Montréal, Québec, H3A 1G1. The Filer is a wholly-owned subsidiary of Boralex. The Filer is not a reporting issuer in any of the provinces or territories of Canada.
7. Neither the Filer, nor Boralex, is in default of securities legislation in any jurisdiction.
8. On May 3, 2010, Boralex, Boralex Power Inc. and the Fund entered into a support agreement (the Support Agreement) pursuant to which Boralex, directly or through a wholly-owned direct or indirect subsidiary, agreed to make the Offer and the Fund agreed to recommend that Unitholders accept the Offer.
9. As provided in the Support Agreement, the Filer has prepared the take-over bid circular (the Circular) and the related letter(s) of transmittal with respect to the Offer in both English and French and mailed the Circular, along with the Fund's trustees' circular, to all Unitholders.
10. The Offer is for all of the outstanding Units, except for Units issuable upon the exchange of the Class B LP Units, on the basis of 0.05 of a $100 principal amount of Convertible Debentures for each Unit, subject to certain adjustments.
11. The Offer is conditional upon, among other things, there shall have been deposited under the Offer that number of Units constituting (a) at least a majority of the total number of Units issued and outstanding the votes to which would be included in the minority approval of a second step business combination under Regulation 61-101, and (b) together with the Units issuable upon the exchange of Class B LP Units held by Boralex and its joint actors, at least 66 2/3% of the Units (calculated on a fully-diluted basis) (the Minimum Tender Condition). The Support Agreement provides that Boralex and the Filer cannot waive the Minimum Tender Condition without the prior written consent of the Fund. In addition, if the Offer is accepted by holders of not less than 90% of the issued and outstanding Units, excluding Units held at the date of the Offer by or on behalf of Boralex, the Filer, or an affiliate or an associate of either Boralex or the Filer, the Filer may complete a compulsory acquisition as soon as practicable (the Compulsory Acquisition) as provided by Section 6.29 of the Trust Agreement.
12. Boralex currently holds 13,767,990 Class B LP Units which are exchangeable on a one-for-one basis for 13,767,990 Units. Boralex does not currently have the intention to exercise its right to exchange any of the Class B LP Units into Units but such Class B LP Units will be counted in determining the Minimum Tender Condition.
13. In connection with either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction (as defined below), the Filer intends to cause the Fund to amend the provisions of Section 6.29 of the Trust Agreement to provide that (i) Unitholders who do not deposit their Units under the Offer (Dissenting Offerees) will be deemed to have transferred their Units to the Filer immediately on the giving of the Filer's notice (and not on the expiry of the 20 day period after the sending of the Filer's notice) and (ii) the Dissenting Offerees will cease to have any rights as Unitholders from and after that time, other than the right to be paid the same consideration per Unit that the Filer would have paid to the Dissenting Offerees if they had deposited those Units under the Offer (the Notice Amendment). If the Filer elects to proceed by way of Compulsory Acquisition or Subsequent Acquisition Transaction, it is the current intention of the Filer to provide the Filer's notice immediately following the take up and payment of Units deposited under the Offer with the result that the Filer would, at that time, acquire all of the Units.
14. If a Compulsory Acquisition as permitted under the Trust Agreement is not available to the Filer or the Filer elects not to proceed under those provisions, the Filer currently intends to acquire the Units not acquired under the Offer (a Subsequent Acquisition Transaction) by, among other means:
i. amending, by Unitholders' resolution, Section 6.29 of the Trust Agreement to provide that a Subsequent Acquisition Transaction may be effected if the Filer, after take up and payment of Units deposited under the Offer, holds not less than 66 2/3% of the outstanding Units calculated on a fully-diluted basis; provided that notwithstanding that this resolution has been passed by the Unitholders, the Filer is authorized without further notice to, or approval of, the Unitholders not to proceed with a Subsequent Acquisition Transaction if for whatever reason the Filer determines it not appropriate to do so;
ii. approving any Subsequent Acquisition Transaction that may be undertaken by the Filer under the Trust Agreement, as amended in accordance with the foregoing; and
iii. amending the Trust Agreement to permit the Filer, notwithstanding anything to the contrary contained therein, to vote, execute and deliver any instruments of proxy, authorizations, requisitions, resolutions, consents or directions in respect of the Units taken up under the Offer which are at the time beneficially owned by the Filer, if determined necessary or appropriate by the Filer, and authorizing the Filer to execute any such amendment to the Trust Agreement in connection therewith;
(collectively referred to as the Subsequent Acquisition Amendments).
15. In order to effect either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction in accordance with the foregoing, rather than seeking the Unitholders' approval at a special meeting to be called for such purpose, the Filer intends to rely on Section 7.8 of the Trust Agreement, which specifies that a resolution in writing circulated to all Unitholders and executed by Unitholders holding at least 66 2/3% of the outstanding Units on a fully-diluted basis entitled to be voted on such resolution, if such resolution is a special resolution, is as valid and binding as if such resolution had been passed at a meeting of Unitholders. Such special written resolution (the Special Written Resolution) will approve, among other things, the Notice Amendment and/or the Subsequent Acquisition Amendments and the Subsequent Acquisition Transaction undertaken in accordance therewith, as applicable.
16. A Compulsory Acquisition or a Subsequent Acquisition Transaction would be a "business combination" under Regulation 61-101.
17. Notwithstanding the fact that Section 7.8 of the Trust Agreement permits certain actions of the Fund to be authorized by written resolution, Section 4.2 of Regulation 61-101 may require, in certain circumstances, that the Compulsory Acquisition or Subsequent Acquisition Transaction be approved at a meeting of Unitholders called for that purpose.
18. To carry out either a Compulsory Acquisition or a Subsequent Acquisition Transaction, the Filer will, in effect, obtain the minority approval in accordance with Part 8 of Regulation 61-101 (Minority Approval) by way of Special Written Resolution rather than at a Unitholders' meeting.
19. The Circular provided to Unitholders in connection with the Offer contains all disclosure required by applicable securities laws, including without limitation, the disclosure required under the take-over bid provisions and form requirements of applicable securities legislation and the provisions of Regulation 61-101 relating to the disclosure required to be included in information circulars distributed in respect of business combinations. The Circular contains disclosure substantially to the same effect as that set out in paragraphs 10 to 15 above.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that (a) Minority Approval shall have been obtained by way of Special Written Resolution, and (b) the Filer has taken up and paid for the required number of Units under the Offer.