Securities Law & Instruments

Headnote

Application under Section 104(2)(c) of the Securities Act (Ontario) and Part 9 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions -- exemption from sections 93-99.1 of Securities Act (Ontario) and Part 2 of MI 61-101 -- take-over bid for foreign issuer that is not a reporting issuer in any Canadian jurisdiction -- offeror to acquire all outstanding ordinary shares of target that it does not already own -- target has 3 registered holders in Canada -- registered and beneficial holders in Canada hold less than 1.9% of the outstanding target securities -- as a result of bidder's management structure a Canadian entity is deemed to own the bidder's interest in the target resulting in foreign bid take-over bid exemption being technically unavailable -- offer subject to laws of Australia -- securityholders in Canada to receive same information and participate on same terms as all other holders of target securities.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 93-99, 104(2)(c).

OSC Rule 62-504 Take-over Bids and Issuer Bids.

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions.

November 20, 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 JURISDICTIONS AND IN THE MATTER OF BROOKFIELD INFRASTRUCTURE PARTNERS L.P. (the Filer) AND ASCIANO LIMITED

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer (and certain of its subsidiaries) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation):

A. for exemptive relief from the requirements of Sections 93 to 99.1 of the Securities Act (Ontario) (the Act) as they might otherwise apply to a proposed offer to acquire all of the ordinary shares (the Shares) of Asciano Limited (Asciano) not already owned by the Filer (the Offer) (the Formal Bid Exemption); and

B. for exemptive relief from Part 2 of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions (MI 61-101) as it might otherwise apply to the Offer (the 61-101 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 each of the provinces and territories of Canada other than Ontario.

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 Bermuda exempted limited partnership that was established on May 21, 2007.

2. Brookfield Infrastructure Partners Limited, which serves as the general partner of the Filer (the General Partner), holds the general partner interest in the Filer.

3. The affairs of the Filer are carried on by the General Partner. The General Partner is an indirect wholly-owned subsidiary of Brookfield Asset Management Inc. (Brookfield), a Canadian company, and therefore Brookfield is deemed to beneficially own the Filer's interest in Asciano under the Act. The Filer entered into a master services agreement with Brookfield related entities to provide the Filer and its subsidiary entities with management and other services.

4. The Filer is a reporting issuer or has equivalent status in all provinces and territories of Canada and is an SEC foreign issuer within the meaning of section 1.1 of National Instrument 71-102 -- Continuous Disclosure and Other Exemptions Relating to Foreign Issuers.

5. The limited partnership units of the Filer (the LP Units) are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbols "BIP" and "BIP.UN", respectively.

6. The Filer is not in default of any requirement of Canadian securities laws.

7. Asciano is the issuer of the Shares and has its registered addresses in Melbourne, Australia.

8. The Shares are listed on the Australian Securities Exchange (ASX) under the symbol "AIO".

9. To the best knowledge of the Filer, as of November 16, 2015, Asciano had an outstanding share capital of 975,385,664 Shares.

10. Asciano is not a reporting issuer in any province or territory of Canada and the Shares are not listed on any securities exchange in Canada.

11. The Filer beneficially owns 146,210,311 Shares representing 14.99% of the outstanding Shares (the BIP Securities), together with an economic interest in a further 4.3% of the Shares. In addition to the BIP Securities, other members of the Brookfield Consortium (as defined below) own Shares but those Shares are held behind information barriers and are therefore not treated as part of the Shares owned by the Brookfield Consortium.

12. On August 17, 2015, the Filer and Asciano announced that they entered into a binding agreement (the Implementation Deed) for the Filer, together with its institutional partners (the Brookfield Consortium), to acquire the entire issued capital of Asciano. The transaction received the unanimous support of the Asciano board of directors and was to be implemented by a scheme of arrangement (the Scheme) under Australian law, which would see Asciano shareholders receive, subject to the "mix-and-match" mechanism, for each Share held: A$6.94 in cash (reduced by the cash value of any special dividend paid); and 0.0387 CHESS depositary instruments representing a beneficial interest in the Filer's limited partnership units) (BIP CDIs) (the Standard Consideration).

13. At the time the Implementation Deed was entered into, the Filer did not own any Shares.

14. At the time of announcement of the entering into of the Implementation Deed, the implied value of the Standard Consideration (which is the consideration available under the Offer) was A$9.15076, a premium of 39% to the undisturbed three month VWAP. The "undisturbed three month VWAP" is A$6.58, being the volume weighted trading price of the Shares over the three months up to and including June 30, 2015, the date preceding the date on which Asciano publicly announced that it had received a non-binding indication of interest from the Filer. As at September 23, 2015, the last practicable trading day prior to the date of the Scheme booklet, the implied value of the Offer was approximately A$9.0732 per Asciano Share, representing a premium of over 37% over the undisturbed three month VWAP of the Shares.

15. The meeting of Asciano shareholders to vote on the Scheme was scheduled for November 10, 2015.

16. On October 30, 2015, Qube Holdings Limited (Qube), with the support of two co-investors Global Infrastructure Partners (GIP) and Canada Pension Plan Investment Board (CPPIB) (together, the Qube Consortium), announced that they acquired an aggregate interest representing 19.99% of the Shares and intended to vote against the Scheme. In public filings in Australia, the Qube Consortium have disclosed their interests in the Shares acquired by them. Based on that disclosure, it appears to the Filer that CPPIB has beneficial ownership of 1,547,348 Shares, representing approximately 0.16% of the Shares, and is otherwise participating as a financier in relation to the Competing Bid. The members of the Qube Consortium other than CPPIB are not Canadians. Except for the Shares beneficially owned by CPPIB, the Filer has not included the ownership of the Qube Consortium in calculating the number of Shares beneficially owned in Canada.

17. On November 10, 2015, the Qube Consortium submitted to Asciano a written proposal in relation to the acquisition of all the Shares (the Competing Bid) for cash and stock of Qube.

18. In response to the acquisition by the Qube Consortium of the Shares described above, on November 5, 2015, the Filer acquired the BIP Securities, together with an economic interest in a further 4.3% of the Shares, and announced its intention to make the Offer. The Filer also requested that Asciano defer the vote on the Scheme.

19. The Brookfield Consortium and Asciano agreed on November 9, 2015 to amend the Implementation Deed to contemplate the Offer.

20. The Offer price is the Standard Consideration under the existing Scheme, being A$6.94 cash (reduced by the cash value of any special dividend paid) and 0.0387 BIP CDIs. On November 9, 2015, the date on which the Filer and Asciano announced that the Implementation Deed had been amended, the implied value of the consideration under the Offer was A$9.21 a premium of 40% to the undisturbed three month VWAP.

21. If a Scheme meeting is held at a subsequent date, Asciano shareholders who have accepted the Offer will still be entitled to vote their Shares at that Scheme meeting. In the event that the Scheme is approved by the requisite majorities of Asciano shareholders, the Scheme will be implemented and the Offer will not proceed. The Offer is subject to the condition that tenders to the bid result in the Filer owning a minimum of 50.1% of the Shares.

22. A subsidiary of the Filer will, in a timely manner, mail an offer document, which will comply with all relevant Australian requirements, to all holders of Shares. The offer document will include a full description of the Offer, including relevant information as to (i) the Filer, (ii) Asciano, (iii) the background for the Offer, and (iv) the terms and conditions of the Offer. The Offer will be open for acceptance for a period of not less than one month following the mailing of the offer document to holders of Shares.

23. The Offer is governed by Australian law and is subject to all legal and regulatory requirements, including the Australian Corporations Act 2001, the ASX Listing Rules and any other legally binding requirements of the Australian Securities and Investment Commission (ASIC) and the ASX.

24. The Offer constitutes a "take-over bid" according to the definition of such term in the Legislation as there are holders of Shares that are resident in Canada. The Offer is therefore subject to the formal bid requirements set out in the Legislation (the Take-Over Bid Requirements) unless otherwise exempted.

25. An offeror may use the exemption prescribed by the Legislation (the Foreign Take-Over Bid Exemption) to be relieved from the Take-Over Bid Requirements. The Foreign Take-Over Bid Exemption is available 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.

26. A take-over bid that is subject to the Take-Over Bid Requirements and that is made by a person that has beneficial ownership of, or control or direction over, directly or indirectly, securities of the offeree issuer carrying more than 10% of the voting rights attached to all of the offeree issuer's outstanding voting securities is also subject to the requirements applicable to an "insider bid" pursuant to Part 2 of MI 61-101, including the requirement to obtain a formal valuation.

27. The Asciano register shows approximately 32,000 registered holders, of which only three (3) are in Canada (one in Ontario, one in Saskatchewan and one in British Columbia) and such holders hold only 856 Shares (or approximately 0.00009% of the Shares).

28. The Filer has also obtained from Asciano an analysis of its share register that includes the largest beneficial holders owning in aggregate approximately 89.45% of the issued and outstanding Shares.

29. The geographic analysis of institutional holders of Shares disclosed 701,794 Shares (2 holders) in British Columbia, 4,199,540 Shares (10 holders) in Ontario, 4,544,865 Shares (7 holders) in Quebec and 37,827 shares, (1 holder) in New Brunswick. In addition, one additional non-institutional beneficial holder in Alberta, holding 275,000 Shares (1 holder) is listed in the report. These holders in aggregate own approximately 1% of the Shares as at November 3, 2015.

30. The analysis of holders of Shares also included a list of beneficial holders and a list of investors by size. These lists are not organized by geography. However, based on the Filer's review of these lists, it appears that there are approximately 48 additional beneficial holders in Canada holding an aggregate of approximately 9,034,539 Shares, representing less than 1% of the Shares as at November 3, 2015. The Filer has not attempted to position these holders within Canada, as the information provided does not include an address in Canada.

31. Based on this information, to the best of the Filer's knowledge, other than the Canadian holders referred to in paragraphs 27, 29 and 30, there are no other registered or beneficial holders of Shares resident in Canada.

32. Based on this information, to the Filer's best knowledge, Canadian registered and beneficial holders of Shares, excluding the BIP Securities, hold in the aggregate, approximately 18,794,421 Shares representing approximately 1.9% of the Shares (or, including the BIP Securities, 165,004,732 Shares representing approximately 16.9% of the Shares), as at November 3, 2015.

33. To the Filer's knowledge, the only published market on which the Shares have traded during the last 12 months is the ASX. The Shares have not traded on a published market in Canada. As such, the published market on which the greatest dollar volume of trading in the Shares that occurred during the 12 months immediately preceding the commencement of the bid was not in Canada.

34. At the time the Implementation Deed was entered into with Asciano, the Filer did not own any Shares, and it was only in response to the Competing Bid that the Filer acquired Shares, concurrently with announcing an intention to make the Offer as an alternative to pursuing the Scheme.

Decisions

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 Australian Corporations Act 2001, the ASX Listing Rules and any other legally binding requirements of the ASIC and ASX;

(ii) the offer document and all other documentation made available to holders of Shares resident in Australia are concurrently sent by the Filer to all holders of Shares in Canada and filed by the Filer with the applicable securities regulatory authorities in Canada; and

(iii) Canadian holders of Shares are entitled to participate in the Offer at the same price and on the same terms and conditions that apply to the general body of holders of Shares.

"William Furlong"
Commissioner
Ontario Securities Commission
 
"Deborah Leckman"
Commissioner
Ontario Securities Commission

The further decision of the principal regulator under the Legislation is that the 61-101 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 Australian Corporations Act 2001, the ASX Listing Rules and any other legally binding requirements of the ASIC and ASX;

(ii) the offer document and all other documentation made available to holders of Shares resident in Australia are concurrently sent by the Filer to all holders of Shares in Canada and filed by the Filer with the applicable securities regulatory authorities in Canada; and

(iii) Canadian holders of Shares are entitled to participate in the Offer at the same price and on the same terms and conditions that apply to the general body of holders of Shares.

"Naizam Kanji"
Director, Office of Mergers & Acquisitions
Ontario Securities Commission