Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 -- Passport System and National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Takeover Bids -- Identical consideration -- Issuer needs relief from the requirement in section 2.23 of Multilateral Instrument 62-104 Take-Over-Bids and Issuer Bids and subsection 97(1) of the Securities Act (Ontario) that all holders of the same class of securities must be offered identical consideration -- Under the bid, Canadian resident unitholders will receive shares, cash or a combination thereof; unitholders resident in the U.S. or otherwise outside of Canada who are ineligible to receive shares will receive substantially the same value as Canadian shareholders in the form of cash paid based on the proceeds from the sale of their shares.

Applicable Legislative Provisions

Multilateral Instrument 62-104 -- Take-over Bids and Issuer Bids, s. 2.23(1).

Securities Act (Ontario), R.S.O. 1990, c. S.5, s. 97(1).

May 8, 2013


IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
PLAZACORP RETAIL PROPERTIES LTD.
(the Filer)

DECISION



Background

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) exempting the Filer from subsection 2.23(1) of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids (MI 62-104) and subsection 97(1) of theSecurities Act (Ontario) (the Identical Consideration Requirement), which require the Filer to offer identical consideration to all of the holders of the same classes of securities that are subject to a take-over bid in connection with the Filer's offer (the Offer) to acquire all of the issued and outstanding trust units (the Units) of KEYreit (KEYreit) (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 Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Nunavut, the Northwest Territories and Yukon.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

1. The Filer is a corporation existing under the Business Corporations Act (New Brunswick). The registered and head office of the Filer is located in Fredericton, New Brunswick.

2. The Filer is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, New Brunswick, Newfoundland & Labrador and Prince Edward Island. The Filer is not in default of any requirement of securities legislation applicable to it.

3. The authorized share capital of the Filer consists of an unlimited number of common shares (the Filer Shares) and an unlimited number of preferred shares, issuable in series. As of April 11, 2013, there were 64,344,854 Filer Shares issued and outstanding and no preferred shares issued and outstanding.

4. The Filer Shares are listed and posted for trading on the TSX Venture Exchange (the TSX-V).

5. KEYreit is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario pursuant to an amended and restated declaration of trust dated July 9, 2012. The registered and head office of KEYreit is located in Toronto, Ontario. KEYreit is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, New Brunswick, Newfoundland & Labrador and Prince Edward Island. The Units are listed and posted for trading on the Toronto Stock Exchange.

6. The authorized capital of KEYreit consists of an unlimited number of Units and an unlimited number of special voting units. As at March 24, 2013 (the date preceding the date on which the Filer and KEYreit entered into the Original Support Agreement referred to below), there were 14,885,879 Units outstanding and no special voting units outstanding. KEYreit also has three series of convertible debentures outstanding (the KEYreit Debentures). As at March 24, 2013, there were an aggregate of $53,200,000 in principal amount of KEYreit Debentures outstanding. The KEYreit Debentures are convertible into 6,470,895 Units.

7. On March 25, 2013, the Filer and KEYreit entered into a support agreement (the Original Support Agreement) pursuant to which KEYreit agreed to support the Filer's original offer to acquire all of the outstanding Units for consideration equal to $8.00 per Unit on a basis which would allow holders of Units to receive cash and/or Filer Shares. On April 4, 2013, the Filer and KEYreit entered into an amended and restated support agreement (the Support Agreement) pursuant to which KEYreit agreed to support the Filer's amended offer to acquire all of the outstanding Units for consideration equal to $8.35 per Unit on a basis which would allow holders of Units to receive cash and/or Filer Shares.

8. On April 10, 2013, the Filer mailed an offer to purchase and circular to registered holders of Units (the Unitholders) and holders of the KEYreit Debentures and filed the same with the Canadian securities regulatory authorities, thereby officially commencing the Take-Over Bid.

9. As consideration for each Unit, the Filer has offered pursuant to the Take-Over Bid, at the option of the holders of Units, either (i) $8.35 cash, (ii) 1.7401 Filer Shares, or (iii) any combination thereof, subject in each case to proration. The maximum amount of cash payable by the Filer and the maximum number of Filer Shares issuable pursuant to the Take-Over Bid are both capped at 50% of the total consideration offered.

10. The Take-Over Bid is scheduled to expire at 8:00 p.m. (Toronto time) on May 16, 2013.

11. The Filer Shares issuable under the Take-Over Bid have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the 1933 Act) or any state securities (or blue sky) laws in the United States. Although, as discussed below, the Filer Shares issuable under the Take-Over Bid will be exempt from the registration requirements of the 1933 Act, the issuance of Filer Shares to certain classes of holders of Units in the United States (Ineligible U.S. Unitholders){1} under the Take-Over Bid will not be exempt from the registration requirements of a substantial number of U.S. state securities laws. Because the Filer Shares will not be registered under any U.S. state securities laws, the offer or sale of Filer Shares under the Take-Over Bid to Ineligible U.S. Unitholders would violate certain U.S. state securities laws.

12. Rule 802 under the 1933 Act (Rule 802) provides an exemption from the registration requirements of the 1933 Act for offers and sales in any exchange offer for a class of securities of a "foreign private issuer" (as defined in Rule 405 of Regulation C under the 1933 Act) or in any exchange of securities for the securities of a foreign private issuer in any business combination if the holders of the foreign subject company resident in the U.S. hold no more than 10% of the securities that are the subject of the exchange offer or business combination and the other conditions of Rule 802 are satisfied. Rule 802 and the related rules provide that, for the purposes of this calculation, securities held by the offeror are to be excluded.

13. To the knowledge of the Filer, KEYreit is a "foreign private issuer" within the meaning of Rule 405 of Regulation C under the 1933 Act.

14. To the knowledge of the Filer, after review of a news release filed by First Eagle Investment Management, LLC, an entity identified as having a U.S. mailing address, and the list of "non-objecting beneficial owners" provided to the Filer by KEYreit on April 5, 2012, approximately 6.60% of the Units were held by U.S. holders as defined in Rule 802 (U.S. Unitholders) as of April 1, 2013. The Filer plans to satisfy the other requirements of Rule 802. Accordingly, the offer and sale of the Filer Shares in the Take-Over Bid will be exempt from the registration requirements of the 1933 Act..

15. In order for the exemption provided in Rule 802 to apply, holders resident in the U.S. must be permitted to participate in the exchange offer or business combination on terms at least as favourable to those offered to the other holders of the subject securities, subject to an exception which allows the offeror to offer cash consideration (in lieu of the offered securities) to securityholders resident in states of the U.S. that require registration or qualification of the offered securities under applicable state or local securities laws.

16. There is no general exemption from U.S. state "blue sky" laws that coordinates with Rule 802. As a result, the securities laws of a significant number of U.S. states would prohibit delivery of the Filer Shares to U.S. Unitholders without registration of the Filer Shares to be issued to U.S. Unitholders resident in such states unless such holders are otherwise exempt investors under the laws of such states.

17. Registration under applicable state securities laws of the Filer Shares deliverable to Ineligible U.S. Unitholders would be costly and burdensome to the Filer.

18. The Filer proposes, with respect to Ineligible U.S. Unitholders and Unitholders in other jurisdictions where local laws do not permit Unitholders to receive Filer Shares that would otherwise receive Filer Shares in exchange for their Units, to, at the sole discretion of the Filer, have such Filer Shares issued on their behalf to a selling agent, which shall, as agent for such Unitholders, as expeditiously as is commercially reasonable thereafter, sell such Filer Shares on their behalf through the facilities of the TSX-V and have the net proceeds of such sale, less any applicable brokerage commissions, other expenses and withholding taxes, delivered to such Unitholders. Each Unitholder for whom Filer Shares are sold by the selling agent will receive an amount equal to such Unitholder's pro rata interest in the net proceeds of sales of all Filer Shares so sold by the selling agent.

19. Any sale of the Filer Shares described above will be done in a manner intended to maximize the consideration to be received from the sale and minimize any adverse impact of the sale on the market for the Filer Shares.

20. The take-over bid circular prepared and mailed to holders of Units in connection with the Take-Over Bid discloses the procedure to be followed with respect to Ineligible U.S. Unitholders that deposit their Units under the Take-Over Bid.

21. There is currently a "liquid market" (as such term is defined in Section 1.2 of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions) for the Filer Shares and the Filer's financial advisor has advised that in its view there will continue to be such a "liquid market" for the Filer Shares following completion of the Take-Over Bid, any related second-step transaction and the sale of the Filer Shares on behalf of Ineligible U.S. Unitholders and Unitholders in other jurisdictions where local laws do not permit Unitholders to receive Filer Shares as described in paragraph 18 above.

22. If the Filer increases the consideration offered to holders of Units resident in Canada, the increase in consideration will also be offered to holders of Units resident outside of Canada, including Ineligible U.S. Unitholders, at the same time and on the same basis.

23. Except to the extent that the relief requested herein is granted, the Take-Over Bid will otherwise be made in compliance with the requirements governing take-over bids under MI 62-104, the OSA and OSC Rule 62-504 -- Take-Over Bids and Issuer Bids.

Decision

The Decision Maker is satisfied that the decision meets the tests 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 Exemption Sought is granted so that the Filer is exempt from the Identical Consideration Requirement, provided that Ineligible U.S. Unitholders and Unitholders in other jurisdictions where local laws do not permit Unitholders to receive Filer Shares that would otherwise receive Filer Shares under the Offer instead receive cash proceeds from the sale of those Filer Shares in accordance with the procedure set out in paragraph 18 above.

DATED this 8th day of May, 2013.

"James D. Carnwath"
Commissioner
Ontario Securities Comission
 
"Christopher Portner"
Commissioner
Ontario Securities Commission

{1} For purposes of the Take-Over Bid, the term "Ineligible U.S. Unitholders" includes any U.S. Unitholder who does not qualify as an exempt "institutional investor" within the meaning of the securities laws and regulations of such U.S. Unitholder's U.S. jurisdiction.