Securities Law & Instruments

Headnote

Clause 104(2)(c) -- Issuer bid -- relief from the formal issuer bid requirements in sections 93 to 99.1 of the Act -- Issuer proposes to purchase up to an agreed number of its subordinate voting shares from a full service foreign bank branch under the Bank Act (Canada) pursuant to one or more program share repurchases -- Issuer is currently engaged in the conduct of a normal course issuer bid through the facilities of the TSX in accordance with the TSX's normal course issuer bid rules found in sections 628 to 629.3 of Part VI of the TSX Company Manual -- Issuer is unable to conduct the program share repurchase with the consent of the TSX in reliance upon the issuer bid exemption that is available pursuant to section 101.2(1) of the Act -- no adverse economic impact on or prejudice to issuer or public shareholders -- proposed purchases exempt from issuer bid requirements in sections 93 to 99.1 of the Act, subject to a number of conditions, including conditions that purchases by the bank comply with the normal course issuer bid rules.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 93 to 99.1, 104(2)(c).

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, CHAPTER S.5, AS AMENDED (the Act)

AND

IN THE MATTER OF CELESTICA INC.

ORDER (Section 104(2)(c))

UPON the application (the Application) of Celestica Inc. (the Applicant) to the Ontario Securities Commission (the OSC or Commission) for an order pursuant to section 104(2)(c) of the Act exempting the Applicant from the formal bid requirements of sections 93 to 99.1 of the Act (the Issuer Bid Requirements) in respect of the proposed purchase or purchases by the Applicant, each of up to an agreed number of subordinate voting shares of the Applicant (the Subordinate Voting Shares), from Citibank, N.A., a full service foreign bank branch under the Bank Act (Canada) (Canada Branch), pursuant to one or more program share repurchases (each, a PSR);

AND UPON the request of the Applicant that this Order and all materials related to the Application (collectively, the Confidential Material) be kept confidential and not be made public until the earlier of:

(a) the date on which the Applicant issues the press release described in paragraph 17 below;

(b) the date the Applicant advises the Commission that there is no longer any need for the Confidential Material to remain confidential; and

(c) the date that is 90 days from the date of this Order (the Confidentiality Relief);

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Applicant (and Canada Branch in respect of paragraphs 6, 7, 19, 20, 21, 24, 37, 38 and 39 as they relate to Canada Branch) having represented to the Commission that:

1. The Applicant is a corporation incorporated under the laws of Ontario;

2. The head office of the Applicant is located in Toronto, Ontario;

3. The Applicant is authorized to issue an unlimited number of Subordinate Voting Shares which entitle the holder to one vote per Subordinate Voting Share, an unlimited number of multiple voting shares (the Multiple Voting Shares), which entitle the holder to 25 votes per Multiple Voting Share, and an unlimited number of preferred shares, issuable in series. As at January 21, 2014, 161,529,274 Subordinate Voting Shares, 18,946,368 Multiple Voting Shares and no preferred shares were issued and outstanding.

4. The Applicant is a reporting issuer in all provinces and territories of Canada (the Jurisdictions) and the Subordinate Voting Shares are listed for trading on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE) under the symbol "CLS". The Applicant is not in default of any requirement of the securities legislation of the Jurisdictions.

5. To the best of the Applicant's knowledge, the "public float" (calculated in accordance with the TSX Rules (as defined below)) for its Subordinate Voting Shares as at January 21, 2014 consisted of approximately 117,919,811 Subordinate Voting Shares and the Subordinate Voting Shares are "highly liquid securities", as that term is defined in section 1.1 of OSC Rule 48-501 Trading During Distributions, Formal Bids and Share Exchange Transactions and section 1.1 of the Universal Market Integrity Rules.

6. Canada Branch is a full service foreign bank branch of Citibank, N.A. (CBNA) under the Bank Act (Canada). Canada Branch has its principal office located in Toronto, Ontario.

7. CBNA is a national banking association, chartered and existing under the laws of the United States. It is an authorized foreign bank under Part XII.I of the Bank Act (Canada) that is listed in Schedule III to the Bank Act (Canada). CBNA's head office is located in New York, N.Y.

8. The Applicant is currently engaged in the conduct of a normal course issuer bid (the 2013 NCIB) for its Subordinate Voting Shares through the facilities of the TSX in accordance with the TSX's normal course issuer bid rules found in sections 628 to 629.3 of Part VI of the TSX Company Manual (the TSX Rules).

9. Pursuant to the TSX Rules, the Applicant has appointed a broker to make purchases on its behalf for purposes of its 2013 NCIB (the Responsible Broker).

10. The maximum number of Subordinate Voting Shares that the Applicant is permitted to repurchase under the 2013 NCIB will be reduced by the number of Subordinate Voting Shares purchased by any non-independent purchasing agent (a Plan Trustee) from time to time to fulfill requirements for the delivery of Subordinate Voting Shares under the Applicant's security-based compensation plans (Plan Trustee Purchases).

11. The 2013 NCIB is being conducted in reliance upon an exemption from the Issuer Bid Requirements that is available pursuant to section 101.2(1) of the Act and its equivalent in the securities legislation of the other Jurisdictions. Section 101.2(1) provides that an issuer bid that is made in the normal course through the facilities of a designated exchange is exempt from the formal bid requirements if the bid is made in accordance with the by-laws, rules, regulations and policies of that exchange. The OSC has recognized the TSX for purposes of section 101.2(1) of the Act.

12. The 2013 NCIB is also being conducted in the normal course on the NYSE and other permitted published markets (collectively with the NYSE, the Other Published Markets) in reliance upon an exemption from the Issuer Bid Requirements that is available pursuant to section 101.2(2) of the Act and its equivalent in the securities legislation of the other Jurisdictions (the Other Published Markets Bid Requirements). The Other Published Markets Bid Requirements (collectively with the TSX Rules, the NCIB Rules) provide that an issuer bid that is made in the normal course on a published market, other than a designated exchange, is exempt from the issuer bid requirements of the Jurisdictions if the bid is, among other requirements, for not more than 5% of the outstanding securities of a class of securities of the issuer and the aggregate number of securities acquired in reliance upon the exemption by the issuer and any person or company acting jointly or in concert with the issuer within any period of 12 months does not exceed 5% of the outstanding securities of that class at the beginning of the 12-month period.

13. In connection with implementing the 2013 NCIB, the Applicant filed a Notice of Intention to Make a Normal Course Issuer Bid (the Notice) with the TSX (which was accepted by the TSX) and issued a press release (the Press Release) describing the 2013 NCIB, in accordance with the TSX Rules. The Press Release also contained disclosure in connection with the Other Published Markets Bid Requirements including that the Applicant's purchases under the 2013 NCIB are expected to be made through the facilities of the NYSE and the TSX, or such other permitted means (including through further Other Published Markets), at prevailing market prices or as otherwise permitted.

14. Pursuant to the TSX Rules, the Applicant did not acquire any Subordinate Voting Shares on the TSX during the two day period following the later of the acceptance of the Notice by the TSX and the issuance of the Press Release and, pursuant to the Other Published Markets Bid Requirements, the Applicant did not acquire any Subordinate Voting Shares on the NYSE or any further Other Published Market during the five day period following the issuance of the Press Release.

15. The Applicant proposes to participate in one or more PSRs during its 2013 NCIB which will be governed by, and conducted in accordance with, the terms and conditions of Program Share Repurchase Agreements (each, a PSR Agreement) that will be entered into between the Applicant and Canada Branch prior to the commencement of each PSR and copies of which will be delivered by the Applicant to the OSC.

16. The Applicant is of the view that it will be able to purchase the Purchased Shares (as defined below) at a lower price than the price at which it would be able to purchase an equivalent quantity of Subordinate Voting Shares under the 2013 NCIB through the facilities of the TSX and on Other Published Markets and the Applicant is of the view that the purchase of the Purchased Shares pursuant to each PSR is in the best interests of the Applicant and constitutes a desirable use of the Applicant's funds.

17. Prior to the beginning of the first PSR under the 2013 NCIB, the Applicant will file a draft amended Notice (the Amended Notice) and a draft press release with the TSX that will describe the material features of PSRs and disclose the Applicant's intention to participate in one or more PSRs during the 2013 NCIB. Once the draft Amended Notice and press release are in a form that is acceptable to the TSX, they will be filed with the TSX and the press release will be issued, by the Applicant, respectively, at least two clear trading days prior to the commencement of the first PSR under the 2013 NCIB.

18. Pursuant to each PSR Agreement, the Applicant will initiate a PSR by providing Canada Branch with an amount of money that is to be negotiated and agreed upon by the Applicant and Canada Branch (the Program Amount), and Canada Branch will then acquire Subordinate Voting Shares for its own account.

19. Canada Branch will retain the services of ITG Canada Corp. (ITG Canada) to acquire Subordinate Voting Shares on its behalf through the facilities of both the TSX and on the Other Published Markets. All Subordinate Voting Shares that are acquired on the Other Published Markets in the U.S. will be acquired by ITG Canada through ITG Inc. (ITG), which will act as agent for ITG Canada in respect of all such trading activity.

20. ITG Canada is registered as an investment dealer under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia and New Brunswick. It is also registered as a futures commission merchant under the Commodity Futures Act (Ontario), as a derivatives dealer under the Derivatives Act (Québec) and as dealer (futures commission merchant) under The Commodity Futures Act (Manitoba). ITG Canada is a member of the Investment Industry Regulatory Organization of Canada and it is a participating organization or member of the TSX, TSX Venture Exchange and Canadian Securities Exchange. Its head office is located in Toronto, Ontario.

21. ITG is an affiliate of ITG Canada and an indirect wholly-owned subsidiary of the ultimate parent of ITG Canada. ITG carries on the business of a broker-dealer in the United States. It is registered as a broker-dealer with the United States Securities and Exchange Commission and it is a member of the Financial Industry Regulatory Authority. Its head office is located in New York, NY.

22. Each PSR Agreement will provide that all Subordinate Voting Shares of the Applicant that are acquired by, or on behalf of, Canada Branch pursuant to the applicable PSR, including in connection with any hedging activities of Canada Branch, must be acquired by it, or on its behalf, in accordance with the NCIB Rules that are applicable to the 2013 NCIB, including TSX Staff Notice 2012-030 dated June 8, 2012, provided that:

(a) the aggregate gross number of Subordinate Voting Shares that may be acquired by, or on behalf of, Canada Branch pursuant to the applicable PSR, including in connection with any hedging activities of Canada Branch, shall not be bound by the maximum annual aggregate limits that are imposed upon the 2013 NCIB in accordance with the NCIB Rules (including, for greater certainty, in accordance with the TSX Rules, as well as the Other Published Markets Bid Requirements); and

(b) the aggregate gross number of Subordinate Voting Shares that may be acquired on the TSX and all Other Published Markets on any trading day by, or on behalf of, Canada Branch pursuant to the applicable PSR, including in connection with any hedging activities of Canada Branch, may not exceed the maximum daily limit that is imposed upon the 2013 NCIB pursuant to the TSX Rules determined with reference to an average daily trading volume that is based on the trading volume on the TSX and all Other Published Markets in Canada rather than being limited to the trading volume on the TSX only, provided that Canada Branch may rely on the block purchase exception to the maximum daily limit which is contemplated by the TSX Rules (the Modified Maximum Daily Limit).

23. Each PSR Agreement will provide that the aggregate gross number of Subordinate Voting Shares that may be sold on the TSX and all Other Published Markets on any trading day by, or on behalf of, Canada Branch pursuant to the applicable PSR, including in connection with any hedging activities of Canada Branch, may not exceed the Modified Maximum Daily Limit.

24. All Subordinate Voting Shares of the Applicant acquired by, or on behalf of, Canada Branch pursuant to the applicable PSR will not be voted on any matters pursuant to which a holder of a Subordinate Voting Share is entitled to vote.

25. Each PSR Agreement will prohibit Canada Branch from delivering a number of Purchased Shares (as defined below) purchased by or on behalf of Canada Branch on the Other Published Markets which exceeds a predetermined quantity of Subordinate Voting Shares, which quantity will be equal to or less than, the lesser of (a) the number of Subordinate Voting Shares remaining eligible for purchase pursuant to the Other Published Markets Bid Requirements, calculated as at the date of the PSR Agreement and (b) the Maximum Number of Shares (as defined below).

26. Each PSR Agreement will (a) prohibit the Applicant from purchasing any Subordinate Voting Shares, (b) require the Applicant to prohibit the Responsible Broker from acquiring any Subordinate Voting Shares on behalf of the Applicant, and (c) require the Applicant to prohibit the Plan Trustee from undertaking any Plan Trustee Purchases, in each case, during the conduct of the applicable PSR by Canada Branch and ITG Canada.

27. Each PSR will have a term that will be negotiated and agreed upon by the Applicant and Canada Branch (the PSR Term) in the applicable PSR Agreement.

28. Pursuant to the applicable PSR Agreement, upon the completion of a PSR, Canada Branch will be required to deliver a number of Subordinate Voting Shares to the Applicant that is equal to the least of the following:

(a) a number of Subordinate Voting Shares (the Program Number of Shares) that is equal to the Program Amount divided by the arithmetic average of the daily volume-weighted average price (VWAP) of the Subordinate Voting Shares during the PSR less a discount (the Discounted VWAP) to be negotiated and agreed upon by the Applicant and Canada Branch;

(b) a predetermined quantity of Subordinate Voting Shares (the Maximum Number of Shares) which will be equal to, or less than, the maximum number of Subordinate Voting Shares that the Applicant is entitled to acquire prior to the completion of the 2013 NCIB in accordance with the NCIB Rules, calculated as at the date of the commencement of the PSR Term; and

(c) the number of Subordinate Voting Shares that have actually been acquired by Canada Branch (the Acquired Number of Shares) upon the occurrence of an early termination event or an event of default pursuant to the PSR Agreement.

29. Each PSR will conclude upon the first to occur of one of the following events:

(a) delivery by Canada Branch of the lesser of the Program Number of Shares and the Maximum Number of Shares at the end of the PSR Term;

(b) delivery by Canada Branch of the lesser of the Program Number of Shares and the Maximum Number of Shares, following notification to the Applicant of its intention to effect such delivery and terminate the PSR prior to the end of the PSR Term; or

(c) delivery by Canada Branch of the lesser of the Acquired Number of Shares and the Maximum Number of Shares, upon the occurrence of an early termination event or an event of default pursuant to the applicable PSR Agreement.

30. The purchase price that will be payable by the Applicant for either the Program Number of Shares or the Maximum Number of Shares that are delivered by Canada Branch in the manner contemplated by subparagraphs 29(a) and 29(b) hereof will be the Discounted VWAP per Subordinate Voting Share.

31. The purchase price that will be payable by the Applicant for either the Acquired Number of Shares or the Maximum Number of Shares that are delivered by Canada Branch in the manner contemplated by subparagraph 29(c) hereof will be the VWAP per Subordinate Voting Share.

32. Pursuant to each PSR Agreement, if there is any Program Amount remaining following the delivery of the Maximum Number of Shares or the Acquired Number of Shares from Canada Branch to the Applicant (the Remaining Program Amount), Canada Branch will deliver the Remaining Program Amount to the Applicant.

33. Immediately following the completion of a PSR, the Applicant will report its purchase of the Program Number of Shares, Maximum Number of Shares or Acquired Number of Shares (in any event, the Purchased Shares), as the case may be, to the TSX and it will also issue a press release disclosing, among other things, the number of Purchased Shares acquired by it pursuant to the PSR and the purchase price paid for the Purchased Shares.

34. Each Purchased Share will be cancelled upon delivery to the Applicant.

35. Although it would be possible for the transfer of the Purchased Shares to the Applicant to be conducted as a block trade pursuant to the 2013 NCIB if the Discounted VWAP or VWAP, as the case may be, for the Purchased Shares is between the 'bid' and 'ask' prices for the Subordinate Voting Shares at the time the Purchased Shares are delivered to the Applicant by Canada Branch following the completion of a PSR, this outcome is uncertain at the time that the PSR begins. In any event, because the Applicant's acquisition of the Purchased Shares is funded by the Applicant's advance of the Program Amount to Canada Branch prior to the commencement of the PSR, the transfer of the Purchased Shares to the Applicant by Canada Branch will not be conducted with reference to the then-current market price of the Subordinate Voting Shares and will not be representative of market forces.

36. The entering into of each PSR Agreement, the purchase of the Purchased Shares by Canada Branch and the delivery of the Purchased Shares to the Applicant will not adversely affect the Applicant or the rights of any of the Applicant's securityholders and it will not affect materially the control of the Applicant.

37. Canada Branch is at arm's length to the Applicant and it has advised the Applicant that CBNA does not beneficially own, either directly or indirectly, any Subordinate Voting Shares.

38. At the time that the Applicant and Canada Branch enter into each PSR Agreement, each of them will be required to represent to the other, pursuant to the PSR Agreement, that it has no knowledge of a "material fact" or "material change", as such terms are defined in the Act, with respect to the Applicant or the Subordinate Voting Shares that has not been generally disclosed (Undisclosed Information).

39. Canada Branch has advised the Applicant that it will establish policies and procedures that will be designed to ensure conduct of each PSR in accordance with, among other things, the applicable PSR Agreement and to preclude those persons responsible for administering each PSR from acquiring any Undisclosed Information during the PSR and Canada Branch will enter into a related agreement with ITG Canada (the ITG Agreement) requiring ITG Canada to, among other things, establish similar policies and procedures to ensure compliance with this Order when acquiring Subordinate Voting Shares on behalf of Canada Branch during a PSR.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to section 104(2)(c) of the Act that the Applicant be exempt from the Issuer Bid Requirements in respect of the entering into of each PSR Agreement and the delivery of the Purchased Shares by Canada Branch to the Applicant pursuant to each PSR conducted during the 2013 NCIB provided that:

(a) the Applicant may not participate in multiple PSRs at the same time;

(b) at least two clear trading days prior to the commencement of the first PSR under the 2013 NCIB, the Applicant will file an Amended Notice in a form acceptable to the TSX that will discuss, among other things, the material features of PSRs and disclose the Applicant's intention to participate in one or more PSRs during the 2013 NCIB and it will issue a related press release;

(c) each PSR Agreement and the ITG Agreement will require Canada Branch and ITG Canada, respectively, to abide by the NCIB Rules applicable to the 2013 NCIB, including TSX Staff Notice 2012-030 dated June 8, 2012, when acquiring Subordinate Voting Shares for, and on behalf of, Canada Branch pursuant to the applicable PSR, including in connection with any hedging activities subject to paragraph 22 hereof;

(d) each PSR Agreement will provide that the aggregate gross number of Subordinate Voting Shares that may be sold on the TSX and all Other Published Markets on any trading day by, or on behalf of, Canada Branch pursuant to the applicable PSR, including in connection with any hedging activities, may not exceed the Modified Maximum Daily Limit;

(e) each PSR Agreement and the ITG Agreement will require Canada Branch and ITG Canada, respectively, to maintain records of all purchases and sales of Subordinate Voting Shares that are made by, or on behalf of, Canada Branch pursuant to each PSR, including purchases and sales made in connection with any hedging activities, that will be available to the Commission and the Investment Industry Regulatory Organization of Canada upon request;

(f) the Purchased Shares will be taken into account by the Applicant when calculating the maximum annual aggregate limits that are imposed upon the 2013 NCIB in accordance with the TSX Rules and those Purchased Shares that were purchased by or on behalf of Canada Branch on the Other Published Markets will be taken into account by the Applicant when calculating the maximum aggregate limits that are imposed upon the Applicant in accordance with the Other Published Markets Bid Requirements;

(g) each PSR Agreement will (i) prohibit the Applicant from purchasing any Subordinate Voting Shares, (ii) require the Applicant to prohibit the Responsible Broker from acquiring any Subordinate Voting Shares on behalf of the Applicant, and (iii) require the Applicant to prohibit the Plan Trustee from undertaking any Plan Trustee Purchases, in each case, during the conduct of the PSR by Canada Branch and ITG Canada;

(h) the Applicant will refrain from conducting a block trade in accordance with the TSX Rules during the calendar week it completes each acquisition of Purchased Shares and may not make any further purchases pursuant to the 2013 NCIB for the remainder of the calendar day on which it completes an acquisition of Purchased Shares;

(i) each purchase made by or on behalf of Canada Branch through the facilities of the TSX or on an Other Published Market in Canada, pursuant to each PSR, shall be marked with such designation as would be required by the applicable marketplace and UMIR for a trade made by an agent on behalf the Applicant;

(j) at the time each PSR Agreement is entered into by the Applicant and Canada Branch, the Subordinate Voting Shares are "highly liquid securities", as that term is defined in section 1.1 of OSC Rule 48-501 Trading During Distributions, Formal Bids and Share Exchange Transactions and section 1.1 of the Universal Market Integrity Rules.

(k) at the time each PSR Agreement is entered into by the Applicant and Canada Branch, neither the Applicant nor Canada Branch will have knowledge of any Undisclosed Information; and

(l) immediately following its receipt of the Purchased Shares from Canada Branch following the completion of each PSR, the Applicant will report same to the TSX and issue a press release disclosing, among other things, the number of Purchased Shares acquired pursuant to the PSR and purchase price paid for the Purchased Shares.

IT IS FURTHER ORDERED that the Confidentiality Relief is granted.

February 11, 2014

"James Turner"
Vice-Chair
Ontario Securities Commission
 
"Judith Robertson"
Commissioner
Ontario Securities Commission