Securities Law & Instruments

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from prospectus requirements to allow U.S. parent company to spin-off shares of its U.S. subsidiary to investors -- distributions not covered by legislative exemptions -- U.S. parent company is a public company in the U.S. but is not a reporting issuer in Canada -- U.S. company has a de minimis presence in Canada -- following the spin-off, U.S. subsidiary will become an independent public company in the U.S. and will not be a reporting issuer in Canada -- no investment decision required from Canadian shareholders in order to receive distributions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5., as am., s. 53.

October 6, 2014

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 KIMBERLY-CLARK CORPORATION (the "Filer")

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 (the "Legislation") for an exemption (the "Exemption Sought") from the prospectus requirements contained in the Legislation in connection with the distribution (the "Spin-Off") by the Filer of the shares of common stock of Halyard Health, Inc. ("Halyard"), a direct wholly-owned subsidiary of the Filer, by way of a dividend in specie to holders ("Filer Shareholders") of shares of common stock of the Filer ("Filer Shares") resident in Canada ("Filer Canadian Shareholders").

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 Section 4.7(1) of Multilateral Instrument 11-102 -- Passport System ("MI 11-102") is intended to be relied upon in each of the other provinces and territories of Canada.

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

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

1. The Filer is a corporation incorporated in Delaware with principal executive offices in Dallas, Texas, U.S.A. The Filer is a global company currently focused on leading the world in essentials for a better life through product innovation and building its personal care, consumer tissue, K-C Professional and health care brands. The Filer is principally engaged in the manufacturing and marketing of a wide range of products mostly made from natural or synthetic fibers using advanced technologies in fibers, nonwovens and absorbency.

2. The Filer is not a reporting issuer under the securities laws of any province or territory of Canada and, currently, has no intention of becoming a reporting issuer under the securities laws of any province or territory of Canada.

3. The authorized capital of the Filer consists of 1.2 billion Filer Shares and 20 million shares of preferred stock. As of July 15, 2014, there were 373,922,073 Filer Shares issued and outstanding and no shares of preferred stock were issued and outstanding.

4. Filer Shares are listed on the New York Stock Exchange (the "NYSE") and trade under the symbol "KMB". Filer Shares are not listed on any Canadian stock exchange and, currently, the Filer has no intention of listing its shares on any Canadian stock exchange.

5. The Filer is subject to the The Securities Exchange Act of 1934 and the rules, regulations and orders promulgated thereunder.

6. Based on a spreadsheet that breaks down the Filer's record holders by domicile provided by Computershare Investor Services (the Filer's transfer agent), as of July 15, 2014, there were 156 registered Filer Canadian Shareholders, representing approximately 0.63% of the registered holders of the Filer worldwide, holding approximately 230,364 Filer Shares, representing approximately 0.06% of the outstanding Filer Shares as of such date. The Filer does not expect these numbers to have materially changed since that date.

7. Based on a "Geographic Analysis Report" of beneficial holders provided by Broadridge Financial Solutions, Inc. obtained by the Filer as of August 18, 2014, there were 20,792 beneficial Filer Canadian Shareholders, representing approximately 3.55% of the beneficial holders of Filer Shares worldwide, holding approximately 6,583,963 Filer Shares, representing approximately 1.76% of the outstanding Filer Shares. The Filer does not expect these numbers to have materially changed since that date.

8. Based on the information above, the number of registered and beneficial Filer Canadian Shareholders and the proportion of Filer Shares held by such shareholders is de minimis.

9. The Filer is proposing to spin-off its health care business into a newly formed independent company, Halyard, through a series of transactions. These transactions are expected to result in the Spin-Off by the Filer, pro rata to its shareholders of all of the shares in the common stock of Halyard (the "Halyard Shares"), which will be 100% of the Halyard Shares outstanding immediately prior to such distribution.

10. Halyard is a Delaware corporation with principal executive offices in Alpharetta, Georgia, U.S.A. It is currently a wholly-owned subsidiary of the Filer that, at the time of the Spin-Off, will hold the Filer's global health care business.

11. As of the date hereof, all of the issued and outstanding Halyard Shares are held by the Filer, and no other shares or classes of stock of Halyard are issued and outstanding.

12. Fractional shares of Halyard Shares will not be distributed in connection with the Spin-Off. The distribution agent will aggregate the amount of fractional shares that would otherwise have been distributed and will sell such shares into the public market at then prevailing market prices and distribute the cash proceeds in U.S. Dollars. The distribution agent will distribute such net proceeds ratably to each Filer Shareholder who would otherwise have been entitled to receive a fractional share of Halyard. The Filer will pay all brokers' fees and commissions in connection with the sale of such fractional interests.

13. Filer Shareholders will not be required to pay any consideration for the Halyard Shares, or to surrender or exchange Filer Shares or take any other action to be entitled to receive their Halyard Shares. The Spin-Off will occur automatically and without any investment decision on the part of Filer Shareholders.

14. Following the Spin-Off, Halyard will cease to be a subsidiary of the Filer.

15. Halyard will apply to have the Halyard Shares listed on the NYSE before the Spin-Off.

16. After the completion of the Spin-Off, the Filer will continue to be listed and traded on the NYSE.

17. Halyard is not a reporting issuer in any province or territory in Canada nor are its securities listed on any stock exchange in Canada. To the knowledge of the Filer, Halyard has no intention to become a reporting issuer in any province or territory in Canada or to list its securities on any stock exchange in Canada after the completion of the Spin-Off.

18. The Spin-Off will be effected under the laws of the State of Delaware.

19. Because the Spin-Off will be effected by way of a dividend of Halyard Shares to Filer Shareholders, no shareholder approval of the proposed transaction is required (or being sought) under Delaware law.

20. In connection with the Spin-Off, Halyard has filed with the SEC a registration statement on Form 10 (the "Registration Statement") under the Securities Act of 1933 detailing the proposed Spin-Off. Halyard initially filed the Registration Statement with the SEC on May 6, 2014 and subsequently filed amendments to the Registration Statement on June 26, 2014, August 4, 2014 and August 27, 2014.

21. After the SEC has completed its review of the Registration Statement, Filer Shareholders will receive a copy of an information statement (the "Information Statement") detailing the terms and conditions of the Spin-Off and forming part of the Registration Statement. All materials relating to the Spin-Off sent by or on behalf of the Filer and Halyard in the United States (including the Information Statement) will be sent concurrently to Filer Canadian Shareholders.

22. The Information Statement will contain prospectus level disclosure about Halyard.

23. Filer Canadian Shareholders who receive Halyard Shares pursuant to the Spin-Off will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Spin-Off that are available to Filer Shareholders resident in the United States.

24. Following the completion of the Spin-Off, Halyard will send concurrently to Halyard Shareholders resident in Canada the same disclosure materials required to be sent under applicable U.S. securities laws to Halyard Shareholders resident in the United States.

25. There will be no active trading market for the Halyard Shares in Canada following the Spin-Off and none is expected to develop. Consequently, it is expected that any resale of Halyard Shares distributed in connection with the Spin-Off will occur through the facilities of the NYSE.

26. The Spin-Off to Filer Canadian Shareholders would be exempt from the Prospectus Requirements pursuant to subsection 2.31(2) of NI 45-106 but for the fact that Halyard is not a reporting issuer under the securities legislation of any jurisdiction in Canada.

27. To the knowledge of the Filer, neither the Filer nor Halyard is in default of any securities legislation in any jurisdiction of 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 Exemption Sought is granted provided that the first trade in the Halyard Shares acquired pursuant to the Spin-Off will be deemed to be a distribution unless the conditions in Section 2.6 or subsection 2.14(1) of National Instrument 45-102 -- Resale of Securities are satisfied.

"Edward P. Kerwin"
Commissioner
Ontario Securities Commission
 
"Sarah B. Kavanagh"
Commissioner
Ontario Securities Commission