NP 11-203 -- relief from prospectus requirements to allow U.S. parent company to spin-off shares of its U.S. subsidiary to investors by way of distribution -- Distribution not covered by legislative exemptions - U.S. parent company having a de minimis shareholder presence in Canada - U.S. parent company was a public company in the U.S., but not a reporting issuer in Canada. Following distribution, U.S. subsidiary will not be a reporting issuer in Canada - No investment decision required from Canadian shareholders in order to receive shares from distribution.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).
November 23, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
MOTOROLA, INC. ("Motorola") AND
MOTOROLA MOBILITY HOLDINGS, INC.
("Mobility" and, together with Motorola, the "Filers")
The principal regulator in the Jurisdiction has received an application from the Filers (the "Application") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for relief from the prospectus requirement in connection with the proposed distribution to Motorola's shareholders, pro rata, of all the outstanding shares of common stock of Mobility (the "Mobility Shares") immediately prior to the distribution (the "Exemption Sought").
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 Filers have provided notice that section 4.7 of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of the other provinces and territories of Canada (the "Jurisdictions").
Terms defined in MI 11-102 and National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. Motorola is a corporation constituted pursuant to the laws of Delaware and provides mobile communications technologies, products and services. Two of Motorola's businesses are its mobile devices ("Mobile Devices") and home ("Home") businesses. The Mobile Devices business is a provider of mobile devices and related products and services designed to deliver mobile communications, such as voice, messaging, push-to-talk and video, and to deliver mobile Internet access and content, including multimedia, social networking, navigation and other mobile applications. The Home business is a provider of products and services to cable and wireline telecommunications service providers that enable the delivery of video, voice and data services to consumers, including interactive set-top boxes, end-to-end digital video and Internet protocol television distribution systems, broadband access infrastructure platforms, and associated data and voice customer premises equipment.
2. Motorola is not a reporting issuer under the securities laws of any province or territory of Canada. Motorola has no intention of becoming a reporting issuer under the securities laws of any province or territory of Canada.
3. The shares of common stock of Motorola ("Motorola Shares") are widely held and trade on the New York Stock Exchange (the "NYSE"). Motorola Shares are not listed on any Canadian stock exchange.
4. As of September 1, 2010 there were 303 registered holders of Motorola Shares resident in Canada holding 54,126 shares, representing less than 0.002% of the 2,344,090,359 outstanding Motorola Shares. The registered Canadian shareholders represent approximately 0.4% of Motorola's 70,884 registered shareholders. As such, the proportion of Motorola Shares held by residents of Canada is de minimis.
5. Mobility is a wholly-owned subsidiary of Motorola. Effective on July 31, 2010 Motorola and its subsidiaries transferred certain assets and liabilities associated with the Mobile Devices and the Home businesses to Mobility or entities that are or will become subsidiaries of Mobility. Subject to a number of conditions, including, among others, final approval by Motorola's Board of Directors, Motorola will distribute all of the outstanding Mobility Shares immediately prior to the distribution (the "Distribution") to the holders of Motorola Shares (the "Motorola Shareholders") as of the record date to be established for the Distribution, on a pro rata basis. Motorola expects to effect the Distribution in the first quarter of 2011. The Distribution will be a "distribution" or a "distribution to the public" for the purposes of the Legislation.
6. The Distribution was publicly announced by Motorola on February 11, 2010 by way of press release. The United States Securities and Exchange Commission (the "SEC") will be reviewing the disclosure documents filed in connection with the Distribution, namely a registration statement on Form 10 under the United States Securities Exchange Act of 1934, which contains an information statement regarding the Distribution and which includes pro forma financial statements. Motorola will distribute the information statement to its shareholders following completion of the SEC's review of the registration statement.
7. Motorola Shareholders will not be required to pay for the Mobility shares received in the Distribution, or to surrender or exchange Motorola Shares or take any other action to be entitled to receive their Mobility Shares. The Distribution will occur automatically and without any investment decision on the part of the Motorola Shareholders.
8. After the Distribution, Motorola Shares will continue to be listed and traded on the NYSE.
9. Mobility intends to apply to list the Mobility Shares on the NYSE.
10. Mobility does not intend to list its shares on any stock exchange in Canada and it does not intend to become a reporting issuer in any of the Jurisdictions.
11. The Distribution will be effected in compliance with Delaware law and United States federal securities laws.
12. Because the Distribution of Mobility Shares will be by way of distribution to the Motorola Shareholders, no shareholder approval of the proposed transaction is required under Delaware law.
13. All materials relating to the Distribution sent by or on behalf of Motorola to registered Motorola Shareholders in the United States will be sent concurrently to registered Motorola Shareholders resident in Canada.
14. The Motorola Shareholders in Canada who receive Mobility Shares pursuant to the Distribution will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Distribution that are available to Motorola Shareholders in the United States.
15. The distribution of Mobility Shares to Canadian shareholders would be exempt from the prospectus requirement pursuant to subsection 2.31(2) of National Instrument 45-106Prospectus and Registration Exemptions but for the fact that Mobility is not a reporting issuer under the Legislation.
16. The Filers are not in default of any securities legislation in any of the provinces or territories of Canada.
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 Exemption Sought is granted provided that the first trade in Mobility Shares issued pursuant to the Distribution will be deemed to be a distribution unless the conditions in section 2.6 or subsection 2.14(1) of National Instrument 45-102 Resale of Securities are satisfied.