National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Offeror granted exemption from Part 2 of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids and Part XX of the Securities Act (Ontario) in connection with the offer's bid for the outstanding securities of a non-reporting issuer -- Offeror cannot rely on the "not a reporting issuer" exemption because it has 52 beneficial security holders, excluding employees and former employees -- Security holders of the Offeror include directors, officers, employees, independent contractors, accredited investors, and people that have close relationships with its employees, officers and directors.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 104(2)(c).
Citation: Pipeworx Ltd., Re, 2013 ABASC 138
April 8, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
PIPEWORX LTD. (Pipeworx) AND
PLH CANADA HOLDINGS INC. (Buyer)
(collectively, the Filers)
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Buyer from the take-over bid requirements contained in the Legislation in connection with a take-over bid proposed to be made by the Buyer to acquire all of the issued and outstanding common shares of Pipeworx (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filers have provided notice that Subsection 4.7(1) of Multilateral Instrument 11 Passport System (MI 11-102) is intended to be relied upon in British Columbia and Saskatchewan; and
(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions, MI 11-102 or Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids (MI 62-104) have the same meanings if used in this decision, unless otherwise defined herein.
The decision is based on the following facts represented by the Filers:
1. Pipeworx is a corporation subsisting under the laws of Alberta pursuant to the Business Corporations Act (Alberta).
2. The Buyer is a private investment and holding company incorporated under the laws of British Columbia.
3. The principal and head office of Pipeworx is located in Acheson, Alberta.
4. Pipeworx is engaged directly and through its subsidiaries in the oil and gas services industry in Canada, specifically the pipeline, well-site and related facility construction sectors. The assets and employees of Pipeworx are located in British Columbia and Alberta and the revenues of Pipeworx are generated from British Columbia, Alberta and Saskatchewan.
5. Pipeworx is not a "reporting issuer" for the purposes of securities legislation in any jurisdiction in Canada and there is no published market in respect of the common shares of Pipeworx (the Shares).
6. The Buyer is currently contemplating an offer to acquire all of the issued and outstanding Shares (the Bid). The proposed Bid would constitute a "take-over bid" as that term is defined in MI 62-104.
7. According to Pipeworx's securities register, there are currently 66 registered security holders, of whom:
(a) 42 reside in Alberta, holding 977,200 Shares or 84.475% of the issued and outstanding Shares;
(b) 14 reside in British Columbia, holding 168,721 Shares or 14.585% of the issued and outstanding Shares;
(c) 2 reside in Saskatchewan, holding 8,594 Shares or 0.743% of the issued and outstanding Shares;
(d) 1 resides in Ontario, holding 2,273 Shares or 0.196% of the issued and outstanding Shares.
8. However, based on information supplied by and on behalf of Pipeworx management, and after eliminating double-counting of registered holders, there are currently 64 beneficial security holders, of whom:
(a) 46 reside in Alberta, holding 982,502 Shares or 84.934% of the issued and outstanding Shares;
(b) 17 reside in British Columbia, holding 168,721 Shares or 14.585% of the issued and outstanding Shares;
(c) 1 reside in Saskatchewan, holding 5,495 Shares or 0.475% of the issued and outstanding Shares;
(d) none reside in Ontario.
9. Of the 64 beneficial security holders, based on the information supplied by and on behalf of Pipeworx management:
(a) 5 security holders are current employees of Pipeworx;
(b) 4 security holders are former employees of Pipeworx or former employees of an entity that was an affiliate of Pipeworx at the time of that employment, and who while in that employment were, and have continued after that employment to be, security holders of Pipeworx;
(c) 2 security holders are holding companies wholly owned by employees; and
(d) 1 security holder is an investment account in trust for an employee.
10. Accordingly, Pipeworx has 52 beneficial security holders, excluding employees and former employees.
11. Section 4.3 of MI 62-104 (the NRI Exemption), which exempts certain transactions from the formal take-over bid requirements, is available if:
(a) the offeree issuer is not a reporting issuer;
(b) there is no published market for the securities that are the subject of the bid; and
(c) the number of security holders of the offeree issuer is less than 50, excluding employees and former employees of the target issuer and its "affiliates" (as that term is defined in MI 62-104).
12. The Buyer cannot rely on the NRI Exemption because the number of security holders of Pipeworx slightly exceeds the 50 security holder limit. However, Pipeworx is fundamentally a closely held private business and most of its security holders are directors, officers, employees, contractors, accredited investors, and people that have close relationships with its employees, officers and directors.
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.
For the Commission:
"William Rice, QC"Chair"Stephen Murison"Vice-Chair