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Shanxi Donghui Coal Coking & Chemicals Group Co., Ltd and Inova Resources Limited
Headnote
Process for Exemptive Relief Application in Multiple Jurisdictions (passport application) -- relief from take-over bid requirements -- take-over bid for issuer not resident in Canada that is a reporting issuer in Ontario -- offeror to acquire all outstanding stock of target that it does not already own -- would be eligible for Foreign Take-over Bid Exemption but for shares held by a foreign company through a Canadian HoldCo -- offer subject to laws of Australia -- security holders in Canada to receive the same information and participate on terms at least as favourable as the terms that apply to all other holders of target securities
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 104(2)(c).
August 27, 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
SHANXI DONGHUI COAL COKING &
CHEMICALS GROUP CO., LTD
(the Filer) and
INOVA RESOURCES LIMITED
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for exemptive relief from the requirements of Sections 93 to 99.1 of the Securities Act (Ontario) (the Ontario Act) (the Take Over Bid Requirements) as they would otherwise apply to an intended cash offer (the Offer) announced on August 21, 2013 by the Filer by way of a press release to acquire all of the issued and to be issued ordinary share capital of Inova Resources Limited (the Target) not already owned by the Filer and its subsidiaries (the Formal Bid Exemption).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(i) the Ontario Securities Commission is the principal regulator for this application; and
(ii) 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 British Columbia.
Interpretation
The terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a private corporation incorporated in China.
2. The Filer is not a reporting issuer in any province or territory of Canada.
3. The shares of the Filer are not listed on any public exchange.
4. The Filer is not in default of any requirement of securities laws in British Columbia or Ontario.
5. The Target is an Australian incorporated company having its registered address in Melbourne, Australia.
6. The ordinary shares of the Target (the Target Shares) are listed on the official list of ASX Limited (ASX) and the Toronto Stock Exchange (TSX) under the symbol "IVA".
7. As at August 21, 2013, the Target had an outstanding share capital of 728,201,911 Target Shares.
8. The Target is a reporting issuer in the province Ontario.
9. To the best of the Filer's knowledge, the Target is not in default of any requirement of securities laws in British Columbia or Ontario.
10. The Offer was announced by press release on August 21, 2013.
11. Under the terms of the Offer, shareholders of the Target will receive AUD$0.22 in cash for each Target Share that they tender to the Offer. The offer price represents a premium of 29% over the closing price of AUD$0.17 per Target Share on ASX on August 20, 2013, the last trading day before the announcement of the Offer.
12. The Filer intends to publish and mail a Bidder's Statement (the Bidder's Statement) to all holders of Target Shares as soon as possible. The Bidder's Statement will be completed and mailed and the Offer will be made in compliance with the laws of Australia, including the rules and regulations of the Australian Securities and Investments Commission, ASX and the Australian Corporations Act 2001 (Cth) which will include a full description of the Offer, including relevant information as to (i) the Filer, (ii) the Target, (iii) the background and reasons for the Offer, and (iv) the terms and conditions of the Offer.
13. The Offer is subject to a number of conditions, including regulatory approvals and a 51% minimum acceptance condition (Minimum Acceptance Condition) of Target Shares.
14. The Offer will be open for acceptance for a period of not less than one month following the mailing of the Bidder's Statement to shareholders of the Target.
15. The Offer will be governed by Australian law and will be subject to the jurisdiction of the Australian courts. The Offer will be subject to legal and regulatory requirements, including the rules and regulations of the Australian Securities and Investments Commission, ASX and the Australian Corporations Act 2001 (Cth).
16. The Offer constitutes a "take-over bid" under the definition of such term in Section 89(1) of the Ontario Act and Multilateral Instrument 62-104 -- Take-Over Bids and Issuer Bids (MI 62-104) as certain holders of Target Shares are resident in Canada. The Offer is therefore subject to the formal bid requirements set out in the Take Over Bid Requirements, unless otherwise exempted.
17. An offeror may use the exemption prescribed by section 100.3 of the Ontario Act and Section 4.4 of MI 62-104 (collectively, the Foreign Take-Over Bid Exemption) to be relieved from the Take Over Bid Requirements upon satisfaction of certain conditions, including that security holders whose last address as shown on the books of the offeree issuer is in Canada hold less than 10% of the outstanding securities of the class subject to the bid at the commencement of the bid and the Offeror reasonably believes that security holders in Canada beneficially own less than 10% of the securities of the class subject to the bid at the commencement of the bid.
18. IAL Holdings Singapore Pte Ltd. (IAL) is the largest shareholder of Target Shares holding approximately 56.2% of the issued and outstanding Target Shares.
19. IAL is a Singapore incorporated private company.
20. IAL is not a reporting issuer in any province or territory of Canada.
21. The shares of IAL are not listed on any public exchange.
22. To the best of the Filer's knowledge, IAL is not in default of any requirement of securities law in British Columbia or Ontario.
23. Turquoise Hill Resources Limited (Turquoise) is the sole shareholder of the shares of IAL.
24. Section 1(4) of the Securities Act (British Columbia) deems Turquoise to be the beneficial holder of the Target Shares held by IAL.
25. Turquoise is a company incorporated under the laws of the Yukon Territory and having its registered address in Vancouver, Canada.
26. The common shares of Turquoise are listed on TSX, the New York Stock Exchange and NASDAQ under the symbol "TRQ".
27. Turquoise is a reporting issuer in each of the provinces and territories.
28. To the best of the Filer's knowledge, Turquoise is not in default of any requirement of Canadian securities law.
29. Turquoise is an international mining company focused on copper, gold and coal mines in the Asia Pacific region. Turquoise's primary operation is its 66% interest in the Oyu Tolgoi copper-gold-silver mine in southern Mongolia. Other than its indirect shareholding in the Target, Turquoise owns a 58% interest in Mongolian coal miner SouthGobi Resources and a 50% interest in Altynalmas Gold, a private company developing the Kyzyl Gold Project in Kazakhstan.
30. Rio Tinto plc (Rio Tinto) is the indirect (through wholly-owned subsidiaries) holder of 50.81% of the outstanding shares of Turquoise.
31. Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and New York Stock Exchange listed company, and Rio Tinto Limited, which is listed on ASX.
32. Rio Tinto's business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, thermal and metallurgical coal, uranium, gold, industrial minerals (borax, titanium dioxide and salt) and iron ore. Activities span the world and are strongly represented in Australia and North America with significant businesses in Asia, Europe, Africa and South America.
33. Rio Tinto is not a reporting issuer in any province or territory.
34. To the best of the Filer's knowledge, Rio Tinto is not in default of any requirement of Canadian securities law.
35. In response to a request made by the Filer on August 21, 2013, the Target advised the Filer that the current report from Computershare Investor Services Inc., the transfer agent for the Target, disclosed that shareholders resident in Canada, excluding IAL, beneficially own approximately 0.06% of the issued and outstanding Target Shares and represent approximately 2% of the total number of beneficial holders and 2.1% of the total number of registered holders of Target Shares.
36. To Filer's knowledge, relying upon the statements of the Target, there are no other registered or beneficial holders of Target Shares resident in Canada.
37. The Target Shares are thinly traded on TSX with an average monthly trading volume of approximately 30,500 Target Shares on TSX over the past six month period ended on July 31, 2013.
38. During the 12 months to March, 2013, approximately 209,027 Target Shares were traded on the TSX, representing approximately 0.03% of the outstanding Target Shares and 0.21% of the total shares traded over the same period on the ASX.
39. The greatest dollar volume of trading of Target Shares in the twelve month period prior to the application was on the ASX and the Target Shares had an average monthly trading volume of approximately 13,289,096 on ASX in that period.
40. Turquoise has entered into a pre-bid acceptance deed (the PBAD) with the Filer with respect to Target Shares representing 14.9% of the issued and outstanding Target Shares (Sale Shares). Under the PBAD, Turquoise has undertaken to procure that IAL irrevocably accepts the Offer in respect of the Sale Shares not later than five business days after the day on which the Filer declares or announces that (except for the Minimum Acceptance Condition) all of the conditions to the Offer have been satisfied or waived.
41. The Offer and any amendments to the Offer will be made in compliance with the laws of Australia, including the rules and regulations of the Australian Securities and Investments Commission, ASX and the Australian Corporations Act 2001 (Cth).
42. Canadian holders of Target Shares will be entitled to participate in the Offer on terms at least as favourable as the terms that apply to the general body of holders of Target Shares.
43. At the same time as the Bidder's Statement and other material relating to the bid is sent by or on behalf of the Filer to holders of Target Shares resident in Australia, the material will be filed and sent to holders of Target Shares whose last address as shown on the books of the Target is in Canada.
Decision
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 Formal Bid Exemption is granted provided that:
(i) the Offer and any amendments to the Offer are made in compliance with the laws of Australia, including the rules and regulations of the Australian Securities and Investments Commission, ASX and the Australian Corporations Act 2001 (Cth); and
(ii) Canadian holders of Target Shares are entitled to participate in the Offer on terms at least as favourable as the terms that apply to the general body of holders of Target Shares; and
(iii) at the same time as the Bidder's Statement and other material relating to the bid is sent by or on behalf of the Filer to holders of Target Shares resident in Australia, the material is filed and sent to holders of Target Shares whose last address as shown on the books of the Target is in Canada.
"Christopher Portner"
Commissioner
Ontario Securities Commission
"James Turner"
Vice-Chair
Ontario Securities Commission