Celestica Inc.

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from the extension take-up requirements in subsection 98.3(4) of the Securities Act (Ontario) -- an issuer conducting an issuer bid under a modified Dutch auction procedure requires relief from the requirement not to extend its issuer bid if all terms and conditions are met unless the issuer first takes-up all securities validly deposited and not withdrawn under the issuer bid -- the issuer will comply with the U.S. regime in connection with the issuer bid -- requested relief granted, subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 98.3(4), 104(2)(c).

May 8, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTION AND IN THE MATTER OF CELESTICA INC. (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 of the principal regulator (the Legislation) that, in connection with the proposed purchase by the Filer of a portion of its outstanding subordinate voting shares (the Subordinate Voting Shares) pursuant to an issuer bid (the Offer), the Filer be exempt from the requirement in the Legislation that the Offer not be extended if all the terms and conditions of the Offer have been complied with or waived unless the Filer first takes up all Subordinate Voting Shares validly deposited under the Offer and not withdrawn (the Exemption Sought).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 Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Manitoba, Saskatchewan, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, the Northwest Territories, Nunavut and the Yukon Territory (together with Ontario, the Reporting Issuer Jurisdictions).

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 existing under the Business Corporations Act (Ontario) and a reporting issuer in each of the Reporting Issuer Jurisdictions. The Filer's head office is located in the Province of Ontario. The Filer is not in default of any requirement of the securities legislation in the Reporting Issuer Jurisdictions.

2. The authorized share capital of the Filer consists of an unlimited number of Subordinate Voting Shares, an unlimited number of multiple voting shares (the Multiple Voting Shares) and an unlimited number of preferred shares (the Preferred Shares). Each Multiple Voting Share is convertible at any time at the option of its holder into one Subordinate Voting Share. As of April 24, 2015, 150,238,432 Subordinate Voting Shares, 18,946,368 Multiple Voting Shares and no Preferred Shares were issued and outstanding.

3. The Subordinate Voting Shares are listed and posted for trading on the Toronto Stock Exchange (the TSX) and the New York Stock Exchange (the NYSE) under the symbol "CLS".

4. On April 20, 2015, the last full trading day prior to the date of the announcement of the approval by the board of directors of the Filer for the Filer to conduct the Offer, the closing price of the Subordinate Voting Shares was C$14.07 per Subordinate Voting Share on the TSX and US$11.50 per Subordinate Voting Share on the NYSE.

5. On April 27, 2015, the Filer made the Offer by way of a modified Dutch auction procedure as follows:

a. the issuer bid circular prepared and filed by the Filer in connection with Offer (the Circular) specifies that the maximum aggregate purchase price of the Subordinate Voting Shares the Filer will purchase under the Offer is US$350,000,000 (the Specified Dollar Amount);

b. the Circular specifies that the Filer is prepared to purchase the Subordinate Voting Shares at a price per Subordinate Voting Share not less than US$11.70 and not more than US$13.30 (the Price Range) and in increments of US$0.10 within the Price Range;

c. the Filer will fund the purchase of Subordinate Voting Shares for cancellation pursuant to the Offer, together with the fees and expenses of the Offer, from a combination of: (i) the net proceeds of a new secured non-revolving term loan, which the Filer expects to consummate on or prior to the expiry of the Offer; (ii) cash drawn on the Filer's existing revolving credit facility; and (iii) available cash on hand;

d. each holder of Subordinate Voting Shares (collectively, the Shareholders) wishing to tender to the Offer has the right either to:

i. specify the lowest price within the Price Range (an Auction Price) at which that Shareholder is willing to sell its tendered Subordinate Voting Shares (an Auction Tender), or

ii. elect to have tendered Subordinate Voting Shares purchased by the Filer at the purchase price (Purchase Price) within the Price Range determined by the Filer (a Purchase Price Tender);

e. Shareholders may make multiple Auction Tenders but not in respect of the same Subordinate Voting Shares (i.e. Shareholders may tender different Subordinate Voting Shares at different prices but cannot tender the same Subordinate Voting Shares at more than one price);

f. Shareholders may make both an Auction Tender and a Purchase Price Tender; however, they may not be in respect of the same Subordinate Voting Shares;

g. Shareholders who desire to tender Subordinate Voting Shares under an Auction Tender at different prices or who desire to tender certain Subordinate Voting Shares under an Auction Tender and other Subordinate Voting Shares under a Purchase Price Tender must complete a separate Letter of Transmittal for each tendered lot of Subordinate Voting Shares;

h. in both the case of Auction Tenders and Purchase Price Tenders, Shareholders may tender less than all of their Subordinate Voting Shares;

i. Shareholders who tender Subordinate Voting Shares without making a valid Auction Tender or Purchase Price Tender will be deemed to have made a Purchase Price Tender;

j. any Shareholder who beneficially owns fewer than 100 Subordinate Voting Shares and tenders all of such Subordinate Voting Shares pursuant to an Auction Tender at a price at or below the Purchase Price, or pursuant to a Purchase Price Tender, will be considered to have made an "Odd-Lot Tender";

k. for the purposes of determining the Purchase Price, Subordinate Voting Shares tendered pursuant to a Purchase Price Tender will be considered to have been tendered at the lowest price in the Price Range;

l. the Purchase Price will be the lowest price per Subordinate Voting Share within the Price Range that enables the Filer to purchase the maximum number of Subordinate Voting Shares validly tendered and not validly withdrawn pursuant to the Offer having an aggregate purchase price not exceeding the Specified Dollar Amount;

m. the Purchase Price and the aggregate number of Subordinate Voting Shares that the Filer will purchase under the Offer will not be determined until after the Offer expires, provided that the aggregate amount that the Filer will pay for Subordinate Voting Shares under the Offer will not exceed the Specified Dollar Amount;

n. Subordinate Voting Shares tendered by a Shareholder pursuant to an Auction Tender will not be purchased by the Filer if the price specified by the Shareholder is greater than the Purchase Price;

o. if the aggregate purchase price for Subordinate Voting Shares validly tendered and not validly withdrawn pursuant to Purchase Price Tenders and Auction Tenders at a price equal to or less than the Purchase Price is greater than the Specified Dollar Amount, the Filer will purchase such tendered Subordinate Voting Shares on a pro rata basis according to the number of Subordinate Voting Shares tendered by the tendering Shareholders, except that Subordinate Voting Shares tendered pursuant to Odd-Lot Tenders will not be subject to proration;

p. all Subordinate Voting Shares purchased by the Filer pursuant to the Offer (including Subordinate Voting Shares tendered at Auction Prices at or below the Purchase Price) will be purchased at the Purchase Price; Shareholders will receive the Purchase Price in cash; all Auction Tenders and Purchase Price Tenders will be subject to adjustment to avoid the purchase of fractional Subordinate Voting Shares; all payments to Shareholders will be subject to the deduction of applicable withholding taxes and will be made without interest; and

q. certificates for all Subordinate Voting Shares not purchased under the Offer (including Subordinate Voting Shares tendered pursuant to an Auction Tender at prices greater than the Purchase Price and Subordinate Voting Shares not purchased because of proration), or for Subordinate Voting Shares validly withdrawn before the expiry of the Offer, will be returned (in the case of certificates representing Subordinate Voting Shares all of which are not purchased) or replaced with new certificates representing the balance of Subordinate Voting Shares not purchased (in the case of certificates representing Subordinate Voting Shares of which less than all are purchased), promptly after the expiry of the Offer or the date of withdrawal of the Subordinate Voting Shares, without expense to the Shareholder.

6. The Offer is subject to Rule 13e-4 (Rule 13e-4) adopted under the United States Securities Exchange Act of 1934, as amended (the Exchange Act). A majority of the Filer's Subordinate Voting Shares are owned of record by residents of the United States. Pursuant to Rule 13e-4, the Filer has filed with the United States Securities Exchange Commission a Tender Offer Statement on Schedule TO.

7. Assuming the Offer is fully subscribed:

a. if the Purchase Price is determined to be US$11.70 (being the minimum Purchase Price under the Offer), the maximum number of Subordinate Voting Shares that may be purchased by the Filer is 29,914,529, representing approximately 19.91% of the Filer's outstanding Subordinate Voting Shares as at April 24, 2015, and

b. if the Purchase Price is determined to be US$13.30 (being the maximum Purchase Price under the Offer), the maximum number of Subordinate Voting Shares that may be purchased by the Filer is 26,315,789, representing approximately 17.52% of the Filer's outstanding Subordinate Voting Shares as at April 24, 2015.

8. Each of Gerald W. Schwartz (who beneficially owns, directly or indirectly, approximately 651,064 Subordinate Voting Shares and 18,946,368 Multiple Voting Shares for a total beneficial ownership of approximately 11.452% of the Filer's outstanding Subordinate Voting Shares (assuming the full conversion of the Multiple Voting Shares)), Mackenzie Financial Corporation (which beneficially owns, directly or indirectly, 18,772,767 Subordinate Voting Shares for a total beneficial ownership of approximately 10.970% of the Filer's outstanding Subordinate Voting Shares) and Letko, Brosseau & Associates Inc. (which beneficially owns, directly or indirectly, 18,882,928 Subordinate Voting Shares for a total beneficial ownership of approximately 11.035% of the Filer's outstanding Subordinate Voting Shares) is a significant shareholder of the Filer's Subordinate Voting Shares. Gerald W. Schwartz has advised the Filer that he does not intend to convert Multiple Voting Shares into Subordinate Voting Shares to tender pursuant to the Offer or tender existing Subordinate Voting Shares beneficially owned by him pursuant to the Offer. Both of Mackenzie Financial Corporation and Letko, Brosseau & Associates Inc. have advised the Filer that they have not yet made a final decision regarding whether or not to tender Subordinate Voting Shares pursuant to the Offer.

9. All information about the number of Subordinate Voting Shares tendered and the prices at which the Subordinate Voting Shares are tendered will be kept confidential by the depositary and the Filer until the Purchase Price has been determined after the expiry of the Offer.

10. Shareholders who do not tender to the Offer will continue to hold the number of Subordinate Voting Shares held by them before the Offer and their proportionate Subordinate Voting Share ownership will increase following completion of the Offer, subject to the Filer's right to issue additional Subordinate Voting Shares and other equity securities in the future.

11. The Filer may elect to extend the Offer in circumstances where the Offer is undersubscribed. Under the Legislation, an issuer may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the issuer first takes up all the securities validly deposited and not withdrawn under the issuer bid (the Extension Take Up Requirement). Rule 13e-4 requires an issuer to permit withdrawal rights throughout the offer, including any extension periods, and, as a consequence, prohibits an issuer from taking up securities prior to the expiry of an issuer bid, including all extension periods.

12. The Filer intends to rely on the exemption from the formal valuation requirements applicable to issuer bids under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) set out in subsection 3.4(b) of MI 61-101 (the Liquid Market Exemption).

13. The Filer has determined that there will be a liquid market in the Subordinate Voting Shares because:

a. there is a published market for the Subordinate Voting Shares, namely the TSX and the NYSE;

b. during the 12-month period before the date the Offer was announced:

i. the number of issued and outstanding Subordinate Voting Shares was at all times at least 5,000,000, excluding Subordinate Voting Shares beneficially owned, directly or indirectly, or over which control or direction was exercised, by related parties and Subordinate Voting Shares that were not freely tradeable;

ii. the aggregate trading volume of the Subordinate Voting Shares on the TSX, being the published market on which the Subordinate Voting Shares are principally traded, was at least 1,000,000 Subordinate Voting Shares;

iii. there were at least 1,000 trades in Subordinate Voting Shares on the TSX;

iv. the aggregate value of the trades in Subordinate Voting Shares on the TSX was at least C$15,000,000; and

c. the market value of the Subordinate Voting Shares on the TSX, as determined in accordance with applicable rules, was at least C$75,000,000 for March 2015, being the calendar month preceding the calendar month in which the Offer was publicly announced.

14. Based on the facts set forth in paragraph 13 and the maximum number of Subordinate Voting Shares that may be purchased under the Offer, assuming an aggregate purchase price equal to the Specified Dollar Amount, the Filer has determined that there is a liquid market for the Subordinate Voting Shares and that it is reasonable to conclude that, following the completion of the Offer, there will be a market for holders of Subordinate Voting Shares who do not tender to the Offer that is not materially less liquid than the market that existed at the time the Offer was announced.

15. The Circular:

a. discloses the mechanics for the take-up of and payment for Subordinate Voting Shares as described in paragraph 5 above;

b. explains that, by tendering Subordinate Voting Shares at the lowest price in the Price Range under an Auction Tender or by tendering Subordinate Voting Shares under a Purchase Price Tender, a Shareholder can reasonably expect that the Subordinate Voting Shares so tendered will be purchased at the Purchase Price, subject to proration and other terms of the Offer as specified in paragraph 5 above;

c. discloses that the Filer has filed for an exemption from the Extension Take Up Requirement;

d. discloses the facts supporting the Filer's reliance on the Liquid Market Exemption; and

e. except to the extent exemptive relief is granted pursuant to this decision, contains the disclosure prescribed by the Legislation for issuer bids.

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:

(a) Subordinate Voting Shares validly deposited under the Offer and not withdrawn are taken up and paid for, or dealt with, in the manner described in paragraph 5 above;

(b) the Filer is eligible to rely on the Liquid Market Exemption and complies with the representations in paragraph 13 above; and

(c) the Filer complies with the requirements of Rule 13e-4 in respect of the conduct of the Offer.

"Edward P. Kerwin"

Commissioner

Ontario Securities Commission

 

"Sarah B. Kavanagh"

Commissioner

Ontario Securities Commission