Securities Law & Instruments

Headnote

Subsection 104(2)(c) of the Act -- Issuer bid -- relief from issuer bid requirements in sections 94 to 94.8 and 97 to 98.7 of the Act -- Issuer proposes to purchase, at a discounted purchase price, up to 2,045,000 of its common shares from two of its shareholders -- due to the discounted purchase price, proposed purchases cannot be made through the TSX trading system -- but for the fact that the proposed purchases cannot be made through the TSX trading system, the Issuer could otherwise acquire the subject shares in reliance upon the issuer bid exemption available under section 101.2 of the Act and in accordance with the TSX rules governing normal course issuer bid purchases -- the selling shareholders did not purchase the subject shares in anticipation or contemplation of resale to the Issuer and no common shares have been purchased by either of them for a minimum of 30 days prior to the date of the application seeking the requested relief in anticipation or contemplation of a sale of common shares by either of them to the Issuer -- no adverse economic impact on, or prejudice to, the Issuer or other security holders -- proposed purchases exempt from the issuer bid requirements in sections 94 to 94.8 and 97 to 98.7 of the Act, subject to conditions, including that the Issuer not purchase, in the aggregate, more than one-third of the maximum number of shares to be purchased under its normal course issuer bid by way of off-exchange block purchases, and that the Issuer not make any proposed purchase unless it has first obtained written confirmation from each selling shareholder that between the date of the order and the date on which the proposed purchase is completed, neither selling shareholder has purchased, had purchased on its behalf, or otherwise accumulated, any common shares of the Issuer to re-establish its, or the other selling shareholder's, holdings of common shares which will have been reduced as a result of the sale of the subject shares pursuant to the proposed purchases.

Statutes Cited

Securities Act, R.S.O. 1990, c.S.5, as amended, ss. 94 to 94.8, 97 to 98.7 and 104(2)(c).

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c.S.5, AS AMENDED AND IN THE MATTER OF LOBLAW COMPANIES LIMITED

ORDER (Clause 104(2)(c))

UPON the application (the "Application") of Loblaw Companies Limited (the "Issuer") to the Ontario Securities Commission (the "Commission") for an order of the Commission pursuant to clause 104(2)(c) of the Securities Act (Ontario) (the "Act") exempting the Issuer from the requirements of sections 94 to 94.8, inclusive, and sections 97 to 98.7, inclusive, of the Act (the "Issuer Bid Requirements") in respect of the proposed purchases by the Issuer of up to 2,045,000 of the Issuer's common shares (collectively, the "Subject Shares") in one or more trades with Bank of Montreal and/or BMO Nesbitt Burns Inc. (each, a "Selling Shareholder" and together, the "Selling Shareholders");

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

AND UPON the Issuer (and each Selling Shareholder in respect of paragraphs 5, 6, 7, 8, 9, 10, 12, 23 and 24 as they relate to such Selling Shareholder) having represented to the Commission that:

1. The Issuer is a corporation governed by the Canada Business Corporations Act.

2. The registered office of the Issuer is located at 22 St. Clair Avenue East, Toronto, Ontario M4T 2S7 and its national head office is located at 1 President's Choice Circle, Brampton, Ontario L6Y 5S5.

3. The Issuer is a reporting issuer in each of the provinces and territories of Canada and the common shares of the Issuer (the "Common Shares") are listed for trading on the Toronto Stock Exchange (the "TSX") under the symbol "L". The Issuer is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.

4. The Issuer's authorized share capital consists of an unlimited number of Common Shares, 1,000,000 First Preferred Shares, issuable in series, and an unlimited number of Second Preferred Shares, issuable in series, of which 410,138,499 Common Shares, no First Preferred Shares and 9,000,000 Second Preferred Shares, Series B were issued and outstanding as of February 9, 2016.

5. The corporate headquarters of each Selling Shareholder is located in the Province of Ontario. The Selling Shareholders are affiliates of each other.

6. Neither Selling Shareholder, directly or indirectly, owns more than 5% of the issued and outstanding Common Shares.

7. The Bank of Montreal is the beneficial owner of at least 370,000 Common Shares and BMO Nesbitt Burns Inc. is the beneficial owner of at least 1,675,000 Common Shares. None of the Subject Shares were acquired by, or on behalf of, either of the Selling Shareholders in anticipation or contemplation of resale by either of them to the Issuer.

8. The Subject Shares are held by the Selling Shareholders in connection with arrangements to hedge client transactions in respect of the Common Shares. Between the date of this Order and the date on which a Proposed Purchase (as defined below) is to be completed, neither Selling Shareholder will purchase, have purchased on its behalf, or otherwise accumulate, any Common Shares to re-establish its, or the other Selling Shareholder's, holdings of Common Shares which will have been reduced as a result of the sale of the Subject Shares pursuant to the Proposed Purchases.

9. No Common Shares were purchased by, or on behalf of, either of the Selling Shareholders on or after January 19, 2016, being the date that was 30 days prior to the date of the Application, in anticipation or contemplation of a sale of Common Shares by either of the Selling Shareholders to the Issuer.

10. Each Selling Shareholder is at arm's length to the Issuer and is not an "insider" of the Issuer, an "associate" of an "insider" of the Issuer, or an "associate" or "affiliate" of the Issuer, as such terms are defined in the Act. In addition, each Selling Shareholder is an "accredited investor" within the meaning of National Instrument 45-106 Prospectus Exemptions.

11. Pursuant to a "Notice of Intention to Make a Normal Course Issuer Bid" filed with, and accepted by, the TSX, dated April 23, 2015 (the "Notice"), the Issuer is permitted to make purchases pursuant to a normal course issuer bid (the "Normal Course Issuer Bid") during the 12-month period beginning on April 28, 2015 and ending on April 27, 2016 to a maximum of 21,931,288 Common Shares, representing approximately 10% of the public float, calculated in accordance with the rules of the TSX, as at the date specified in the Notice. The Issuer may make purchases under the Normal Course Issuer Bid through the facilities of the TSX or through alternative trading systems, if eligible, or by such other means as may be permitted by the TSX or a securities regulatory authority, in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the "TSX NCIB Rules"), including by private agreements under issuer bid exemption orders issued by a securities regulatory authority (each, an "Off-Exchange Block Purchase"). The TSX has (a) indicated that it will not object to Off-Exchange Block Purchases being completed pursuant to the Normal Course Issuer Bid, and (b) reviewed the Application and has confirmed that it does not object to the Proposed Purchases.

12. The Issuer intends to enter into one or more agreements of purchase and sale with each Selling Shareholder (each, an "Agreement"), pursuant to which the Issuer will agree to acquire some or all of the Subject Shares from the applicable Selling Shareholder by way of one or more purchases, each occurring before April 27, 2016 (each such purchase, a "Proposed Purchase") for a purchase price (each such price, a "Purchase Price" in respect of such Proposed Purchase) that will be negotiated at arm's length between the Issuer and the applicable Selling Shareholder. The Purchase Price, in each case, will be at a discount to the prevailing market price and below the prevailing bid-ask price for the Common Shares on the TSX at the time of the applicable Proposed Purchase.

13. The Subject Shares acquired under each Proposed Purchase will constitute a "block" as that term is defined in section 628 of the TSX NCIB Rules.

14. The purchase of any of the Subject Shares by the Issuer pursuant to an Agreement will constitute an "issuer bid" for the purposes of the Act to which the Issuer Bid Requirements would apply.

15. Because the Purchase Price will, in each case, be at a discount to the prevailing market price and below the prevailing bid-ask price for the Common Shares on the TSX at the time of the applicable Proposed Purchase, none of the Proposed Purchases can be made through the TSX trading system and therefore, will not occur "through the facilities" of the TSX. As a result, the Issuer will be unable to acquire Subject Shares from either Selling Shareholder in reliance upon the exemption from the Issuer Bid Requirements that is available pursuant to subsection 101.2(1) of the Act.

16. But for the fact that the Purchase Price will be at a discount to the prevailing market price and below the prevailing bid-ask price for the Common Shares on the TSX at the time of the applicable Proposed Purchase, the Issuer could otherwise acquire the applicable Subject Shares through the facilities of the TSX as a "block purchase" (a "Block Purchase") in accordance with the block purchase exception in clause 629(l)7 of the TSX NCIB Rules and the exemption from the Issuer Bid Requirements that is available pursuant to subsection 101.2(1) of the Act.

17. The sale of any of the Subject Shares to the Issuer will not be a "distribution" (as defined in the Act).

18. For each Proposed Purchase, the Issuer will be able to acquire the applicable Subject Shares from the applicable Selling Shareholder without the Issuer being subject to the dealer registration requirements of the Act.

19. Management of the Issuer is of the view that: (a) through the Proposed Purchases, the Issuer will be able to purchase the Subject Shares at a lower price than the price at which the Issuer would otherwise be able to purchase Common Shares under the Normal Course Issuer Bid in accordance with the TSX NCIB Rules and the exemption from the Issuer Bid Requirements available pursuant to subsection 101.2(1) of the Act; and (b) the Proposed Purchases are an appropriate use of the Issuer's funds.

20. The purchase of Subject Shares will not adversely affect the Issuer or the rights of any of the Issuer's security holders and it will not materially affect control of the Issuer. To the knowledge of the Issuer, the Proposed Purchases will not prejudice the ability of other security holders of the Issuer to otherwise sell Common Shares in the open market at the then-prevailing market price. The Proposed Purchases will be carried out at minimal cost to the Issuer.

21. To the best of the Issuer's knowledge, as of February 9, 2016, the "public float" for the Common Shares represented approximately 53% of all issued and outstanding Common Shares for the purposes of the TSX NCIB Rules.

22. The Common Shares are "highly-liquid securities" within the meaning of 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.

23. Other than the Purchase Price, no fee or other consideration will be paid in connection with the Proposed Purchases.

24. At the time that each Agreement is entered into by the Issuer and the applicable Selling Shareholder and at the time of each Proposed Purchase, neither the Issuer, nor any member of the Trading Products Group of either Selling Shareholder, nor any personnel of the Selling Shareholders that negotiated the Agreement or made, participated in the making of, or provided any advice in connection with, the decision to enter into the Agreement and sell the Subject Shares, will be aware of any "material change" or "material fact" (each as defined in the Act) in respect of the Issuer that has not been generally disclosed.

25. The Issuer will not make any Proposed Purchase unless it has first obtained confirmation in writing from each Selling Shareholder that, between the date of this Order and the date on which a Proposed Purchase is to be completed, neither Selling Shareholder has purchased, had purchased on its behalf, or otherwise accumulated, any Common Shares to re-establish its, or the other Selling Shareholder's, holdings of Common Shares which will have been reduced as a result of the sale of Subject Shares pursuant to the Proposed Purchases.

26. The Commission granted the Issuer two orders on November 20, 2015 pursuant to clause 104(2)(c) of the Act exempting the Issuer from the Issuer Bid Requirements in connection with purchases by the Issuer pursuant to private agreements of up to 1,700,000 Common Shares from The Bank of Nova Scotia (the "BNS Order") and 2,937,000 Common Shares from Canadian Imperial Bank of Commerce (the "CIBC Order" and together with the BNS Order, the "Existing Orders"). As of March 1, 2016, the Issuer has acquired 4,882,230 Common Shares pursuant to the Normal Course Issuer Bid, including 1,700,000 Common Shares under the BNS Order and 1,220,000 Common Shares under the CIBC Order.

27. The Issuer will not purchase, pursuant to Off-Exchange Block Purchases, in aggregate, more than one-third of the maximum number of Common Shares that the Issuer can purchase under its Normal Course Issuer Bid, such one-third being equal to 7,310,429 Common Shares as of the date of this Order, taking into account, for greater certainty, the Subject Shares and the Common Shares which are the subject of the Existing Orders.

28. In accordance with the Notice, the Issuer may implement an automatic share repurchase plan (a "Plan") that would permit the Issuer to make purchases under its Normal Course Issuer Bid during internal trading blackout periods, including regularly scheduled quarterly blackout periods, when the Issuer would not otherwise be permitted to trade in its Common Shares (each such time, a "Blackout Period"). There is no Plan in place as of the date of this Order. The form of any Plan will be preapproved by the TSX and comply with the TSX NCIB Rules, applicable securities laws and this Order. If the Issuer implements a Plan, the terms of such Plan will provide that, at times it is not subject to blackout restrictions, the Issuer may, but will not be required to, instruct its designated broker to make purchases under the Normal Course Issuer Bid in accordance with the terms of the Plan. Such purchases under the Plan will be determined by the designated broker in its sole discretion based on parameters established by the Issuer prior to any Blackout Period in accordance with the TSX NCIB Rules, applicable securities laws (including this Order) and the terms of the agreement between the designated broker and the Issuer. In the event the Issuer implements a Plan prior to completing the Proposed Purchases, the Issuer will ensure that such Plan contains provisions restricting the Issuer from conducting any Block Purchases during any calendar week in which the Issuer completes a Proposed Purchase.

29. The Issuer will not purchase Subject Shares, under a Plan or otherwise, pursuant to the Proposed Purchases during designated Blackout Periods administered in accordance with the Issuer's corporate policies and no Agreement will be negotiated or entered into during a Blackout Period.

30. Assuming completion of the purchase of the maximum number of Subject Shares, being 2,045,000 Common Shares, and the maximum number of Common Shares that are the subject of the Existing Orders, being 4,637,000 Common Shares, the Issuer will have purchased under the Normal Course Issuer Bid an aggregate of 6,682,000 Common Shares pursuant to Off-Exchange Block Purchases, representing approximately 30% of the maximum of 21,931,288 Common Shares authorized to be purchased under the Normal Course Issuer Bid.

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

IT IS ORDERED pursuant to clause 104(2)(c) of the Act that the Issuer be exempt from the Issuer Bid Requirements in connection with the Proposed Purchases, provided that:

(a) the Proposed Purchases will be taken into account by the Issuer when calculating the maximum annual aggregate limit that is imposed upon the Issuer's Normal Course Issuer Bid in accordance with the TSX NCIB Rules;

(b) the Issuer will refrain from conducting either a Block Purchase in accordance with the TSX NCIB Rules, or another Off-Exchange Block Purchase, during the calendar week in which it completes a Proposed Purchase and will not make any further purchases under the Normal Course Issuer Bid for the remainder of the calendar day on which it completes a Proposed Purchase;

(c) the Purchase Price in respect of each Proposed Purchase will be at a discount to the last "independent trade" (as that term is used in paragraph 629(l)1 of the TSX NCIB Rules) of a board lot of Common Shares immediately prior to the execution of such Proposed Purchase;

(d) the Issuer will otherwise acquire any additional Common Shares pursuant to the Normal Course Issuer Bid in accordance with the Notice and the TSX NCIB Rules, including by means of open market transactions and by such other means as may be permitted by the TSX, and, subject to condition (i) below, by Off-Exchange Block Purchases;

(e) immediately following each Proposed Purchase of Subject Shares from a Selling Shareholder, the Issuer will report the purchase of such Subject Shares to the TSX;

(f) at the time that each Agreement is entered into by the Issuer and the applicable Selling Shareholder and at the time of each Proposed Purchase, neither the Issuer, nor any member of the Trading Products Group of either Selling Shareholder, nor any personnel of the Selling Shareholders that negotiated the Agreement or made, participated in the making of, or provided any advice in connection with, the decision to enter into the Agreement and sell the Subject Shares, will be aware of any "material change" or "material fact" (each as defined in the Act) in respect of the Issuer that has not been generally disclosed;

(g) in advance of the first Proposed Purchase, the Issuer will issue a press release disclosing (i) its intention to make the Proposed Purchases, and (ii) that information regarding each Proposed Purchase, including the number of Subject Shares purchased and the aggregate Purchase Price, will be available on the System for Electronic Document Analysis and Retrieval ("SEDAR") following the completion of each such Proposed Purchase;

(h) the Issuer will report information regarding each Proposed Purchase, including the number of Subject Shares purchased and the aggregate Purchase Price, on SEDAR before 5:00 p.m. (Toronto time) on the business day following such purchase;

(i) the Issuer does not purchase, pursuant to Off-Exchange Block Purchases, in the aggregate, more than one-third of the maximum number of Common Shares the Issuer can purchase under the Normal Course Issuer Bid, such one-third being equal to, as of the date of this Order, 7,310,429 Common Shares; and

(j) the Issuer will not make any Proposed Purchase unless it has first obtained confirmation in writing from each Selling Shareholder that, between the date of this Order and the date on which a Proposed Purchase is to be completed, neither Selling Shareholder has purchased, had purchased on its behalf, or otherwise accumulated, any Common Shares to re-establish its, or the other Selling Shareholder's, holdings of Common Shares which will have been reduced as a result of the sale of Subject Shares pursuant to the Proposed Purchases.

DATED at Toronto this 4th day of March, 2016.

"Janet Leiper"
Commissioner
Ontario Securities Commission
 
"William J. Furlong"
Commissioner
Ontario Securities Commission