Securities Law & Instruments

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions -- Take-over bid and subsequent business combination -- MI 61-101 requires sending of information circular and holding of meeting in connection with second step business combination -- Target's declaration of trust to be amended to provide that a resolution in writing executed by unitholders holding more than 66 2/3% of the outstanding units valid as if such voting rights had been exercised at a meeting of unitholders -- Relief granted from requirement that information circular be sent and meeting be held -- Minority approval to be obtained albeit in writing rather than at a meeting of unitholders.

Applicable Legislative Provisions

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdiction.

Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions.

January 11, 2013

IN THE MATTER OF

THE SECURITIES LEGISLATION OF ONTARIO

AND

IN THE MATTER OF THE PROCESS FOR

EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

THE TAKE-OVER BID FOR

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST

BY KS ACQUISITION II LP

DECISION

Background

The principal regulator (the "Decision Maker") in Ontario (the "Jurisdiction") has received an application from KS Acquisition II LP (the "Filer") in connection with a take-over bid (the "Take-Over Bid") for Primaris Retail Real Estate Investment Trust ("Primaris") by the Filer for a decision pursuant to the securities legislation of the Jurisdiction (the "Legislation") that the following requirements of Section 4.2 of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions ("MI 61-101") (where applicable):

1. to call a meeting of unitholders of Primaris ("Unitholders") to approve a Compulsory Acquisition or a Subsequent Acquisition Transaction (each as defined below), as applicable, but rather that the Filer be permitted to effect the Unitholder approvals of either a Compulsory Acquisition or a Subsequent Acquisition Transaction, as may be undertaken by the Filer in accordance with the foregoing, including the Notice Amendment, the Threshold Amendment and the Capital Reorganization (each as defined below), as applicable, by way of the Written Resolution (as defined below), as expressly permitted by Sections 8.14 and 8.16 of the sixth amended and restated declaration of trust of Primaris (the "Declaration of Trust"); and

2. to send an information circular to Unitholders in connection with a Compulsory Acquisition or a Subsequent Acquisition Transaction, as may be undertaken by the Filer in accordance with the foregoing, including the Notice Amendment, the Threshold Amendment and the Capital Reorganization, as applicable;

be waived (the "Requested Relief").

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

(a) the Ontario Securities Commission ("OSC") 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 the Province of Québec.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning in this decision unless they are defined in this decision.

Representations

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

1. The Filer is a limited partnership whose partnership interests are owned equally by KS Bidco LP, a wholly-owned subsidiary of KingSett Real Estate Growth LP No. 5 ("KingSett LP No. 5"), an affiliate of KingSett Capital Inc. ("KingSett Capital"), and OPB Finance Trust II ("OPB Trust"), an associate of Ontario Pension Board ("OPB"). The Filer was formed under the Limited Partnerships Act (Ontario) and has not carried on any business other than that incidental to making the Take-Over Bid. The Filer's registered office is located at Toronto-Dominion Centre, TD Tower, 66 Wellington Street West, P.O. Box 163, Suite 4400, Toronto, Ontario M5K 1H6.

2. KingSett LP No. 5 is a private investment fund formed under the laws of Manitoba. Its sole general partner, KingSett Real Estate Growth GP No. 5 Inc., is a corporation incorporated under the Canada Business Corporations Act and is an affiliate of KingSett Capital.

3. KingSett Capital is a leading private equity real estate investment business, co-investing with pension fund and high net worth individual clients.

4. OPB Trust is a special purpose trust formed for purposes of the Take-Over Bid. The sole beneficiary of OPB Trust is OPB Real Estate Investments 2 Limited, a corporation incorporated under the Business Corporations Act (Ontario) and a wholly-owned subsidiary of OPB. OPB is the administrator of the Ontario Public Service Pension Plan and is responsible for providing retirement income to more than 42,711 employees of the government of the Province of Ontario and its agencies, boards and commissions, 35,361 retired employees of the Province of Ontario and their families and 4,391 former employees of the Province of Ontario with entitlements under the Ontario Public Service Pension Plan.

5. Primaris is an unincorporated open-ended real estate investment trust governed by the Declaration of Trust. The head and registered office of Primaris is located at Suite 900, 1 Adelaide Street East, Toronto, Ontario M5C 2V9. Primaris specializes in owning and operating Canadian enclosed shopping centres.

6. The authorized capital of Primaris consists of an unlimited number of units (the "Units"). As at September 30, 2012, 92,899,547 Units were outstanding. The Units are listed for trading on the Toronto Stock Exchange under the symbol "PMZ.UN".

7. On December 5, 2012, prior to the opening of markets, KingSett Capital and OPB issued a press release announcing their intention to make the Take-Over Bid through the Filer.

8. On December 10, 2012, the Take-Over Bid was formally commenced by publication of an advertisement in The Globe & Mail and La Presse newspapers.

9. On December 10, 2012, a copy of the take-over bid circular (the "Circular"), the letter of transmittal, and the notice of guaranteed delivery relating to the Take-Over Bid (collectively, the "Offer Documents") were delivered to Primaris at its principal office, and the Offer Documents were filed in SEDAR, all in accordance with Section 94.2(2)(a) of the Securities Act (Ontario) and Section 2.10(2)(a) of Multilateral Instrument 62-104.

10. The Take-Over Bid includes the following terms and conditions:

(a) the Filer has offered to acquire all of the issued and outstanding Units (together with the rights associated therewith under the unitholder rights plan of Primaris) at a price of $26.00 in cash per Unit, including any Units that may become issued and outstanding after the date of the Take-Over Bid but before the Expiry Time (as defined below) upon the conversion, exercise or exchange of any securities that are convertible into or exchangeable or exercisable for, Units;

(b) the Take-Over Bid is open for acceptance until 5:00 p.m. (Toronto time) on January 17, 2013, unless the Take-Over Bid is extended or withdrawn (the "Expiry Time");

(c) there shall have been validly deposited pursuant to the Take-Over Bid and not withdrawn at the Expiry Time, such number of Units which, together with any Units owned directly or indirectly by the Filer and its affiliates, constitutes at least 66% of the outstanding Units (calculated on a fully-diluted basis) (the "Minimum Tender Condition"); and

(d) if the Filer takes up and pays for Units deposited under the Take-Over Bid, the Filer currently intends to carry out a compulsory acquisition or a subsequent acquisition transaction to acquire all of the Units not deposited under the Take-Over Bid, as more particularly described below.

11. Section 7.26 of the Declaration of Trust permits an offeror to acquire any Units not tendered to a take-over bid if, within 120 days after the date of a take-over bid, the take-over bid is accepted by the holders of not less than 90% of the outstanding Units, other than Units held at the date of the take-over bid by or on behalf of the offeror or an affiliate or associate of the offeror (a "Compulsory Acquisition").

12. If the Filer takes up and pays for the Units deposited pursuant to the Take-Over Bid, the Filer may proceed with a Compulsory Acquisition of the Units not deposited to the Take-Over Bid as expressly permitted under the Declaration of Trust.

13. If a Compulsory Acquisition, as permitted under the Declaration of Trust, is not available to the Filer or if the Filer chooses not to proceed under those provisions, the Filer currently intends to:

(a) amend Section 7.26 of the Declaration of Trust to provide that a Compulsory Acquisition may be effected immediately if the Filer and its affiliates, after the take-up and payment of Units deposited under the Take-Over Bid, hold more than 66% of the outstanding Units (calculated on a fully-diluted basis) (the "Threshold Amendment"); and/or

(b) amend the Declaration of Trust to change the rights, privileges, restrictions and conditions attaching to the Units (other than Units held by the Filer and its affiliates) and redesignate and reclassify such Units as special units ("Special Units") such that, at the time of delivery by Primaris of a transfer notice to Primaris' transfer agent (the "Transfer Time") and immediately following any issuance of Special Units at and after the Transfer Time, each holder of Special Units shall transfer, and shall be deemed to have transferred, to the Filer all of such holder's right, title and interest in and to its Special Units and the Filer shall acquire, and shall be deemed to have acquired, from each such holder of Special Units all, but not less than all, of the Special Units held by each such holder and at and after the Transfer Time, each holder of Special Units shall cease to be a holder of such Special Units and shall not be entitled to exercise any of the rights of a holder of Special Units in respect thereof other than the right to receive $26.00 in cash per Special Unit (such amendments to the Declaration of Trust and transfer of Special Units as a result thereof, the "Capital Reorganization").

14. Following such amendments to the Declaration of Trust, it is the current intention of the Filer to avail itself of the Compulsory Acquisition, as amended by the Threshold Amendment, or the Capital Reorganization, as the case may be, to acquire the Units not deposited under the Take-Over Bid (each of the Compulsory Acquisition, as so amended, and the Capital Reorganization, as applicable, is referred to herein as a "Subsequent Acquisition Transaction"). If the Filer elects to proceed with a Subsequent Acquisition Transaction, the consideration payable to acquire the remainder of the Units will be the same consideration per Unit payable by the Filer under the Take-Over Bid.

15. To exercise its rights in respect of a Compulsory Acquisition under Section 7.26 of the Declaration of Trust, the Filer must send notice (the "Offeror's Notice") to each holder of Units who did not accept the Take-Over Bid (in each case a "Dissenting Unitholder") of such proposed acquisition by registered mail within 60 days after the date of termination of the Take-Over Bid and in any event within 180 days after the date of the Take-Over Bid. In accordance with the Declaration of Trust, within 20 days after it receives the Offeror's Notice, each Dissenting Unitholder must send its Units to Primaris. Within 30 days after the Offeror sends the Offeror's Notice, Primaris must transfer the Units of the Dissenting Unitholders to the Offeror.

16. In connection with either a Compulsory Acquisition or a Subsequent Acquisition Transaction, the Filer currently intends to amend the provisions of Section 7.26 of the Declaration of Trust to provide that Units held by Dissenting Unitholders will be deemed to have been transferred to the Filer immediately on the giving of the Offeror's Notice (as opposed to within the 30 day period after the Filer sends the Offeror's Notice, as currently provided in the Declaration of Trust) and that those Dissenting Unitholders will cease to have any rights as Unitholders from and after that time, other than the right to be paid the same consideration that the Filer would have paid to Dissenting Unitholders if they had deposited those Units to the Take-Over Bid (the "Notice Amendment").

17. 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 Unitholder approval at a special meeting of the Unitholders to be called for such purpose, the Filer intends to rely on Sections 8.14 and 8.16 of the Declaration of Trust, which together expressly provide that a resolution in writing executed by Unitholders and holders of Special Voting Units (together, the "Voting Unitholders") holding outstanding Units and Special Voting Units equal to 66% of the outstanding votes is valid as if it had been passed at a meeting of Voting Unitholders.

18. A Compulsory Acquisition or Subsequent Acquisition Transaction undertaken by the Filer would be a "business combination" pursuant to MI 61-101.

19. Notwithstanding the fact that Sections 8.14 and 8.16 of the Declaration of Trust expressly provide for a written resolution of Voting Unitholders, Section 4.2 of MI 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.

20. To effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, the Filer will comply with the provisions of MI 61-101 and will obtain minority approval (as that term is defined in MI 61-101), calculated in accordance with the terms of Part 8 of MI 61-101 (the "Minority Approval"), albeit not at a meeting of Unitholders, but by Written Resolution.

21. If the Filer is unable to effect a Compulsory Acquisition or to propose a Subsequent Acquisition Transaction involving Primaris, or if it proposes a Subsequent Acquisition Transaction but cannot promptly obtain any required approvals or exemptions, the Filer will evaluate its other alternatives. Such alternatives could include, to the extent permitted by applicable law, purchasing additional Units in the open market, in privately negotiated transactions, in another take-over bid or otherwise, or taking no further action.

22. The details of any Subsequent Acquisition Transaction may vary, and the Filer has reserved its ability to propose any other form of subsequent acquisition transaction in accordance with applicable law.

23. Neither the Filer nor, to the knowledge of the Filer, Primaris is in default of any requirement under applicable securities laws in any province or territory of Canada.

24. The Circular contains the disclosure required by MI 61-101 to be included in connection with the Take-Over Bid, including without limitation the take-over bid provisions and form requirements of the securities legislation in the Jurisdiction and the provisions of MI 61-101 relating to the disclosure required to be included in a take-over bid circular.

25. The Circular contains the text of the Written Resolution.

Decision

The Decision Maker 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 Maker under the Legislation is that the Requested Relief is granted provided that Minority Approval (as contemplated in Part 8 of MI 61-101) shall have been obtained by the Written Resolution.

"Naizam Kanji"
Deputy Director
Mergers & Acquisitions, Corporate Finance
Ontario Securities Commission