Securities Law & Instruments


Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 2.2 and 6.1 – Issuer wants relief from the prohibition on entering into an agreement to acquire or sell target securities during a bid – The Filer announced a take-over bid to acquire all of the issued and outstanding shares of the target issuer; after announcement of the bid, the target issuer announced a private placement; Filer has a pre-existing right to participate in any equity offering of target issuer shares; the take-over bid rule prohibits the Filer, as an offeror, from participating in the private placement; Filer has applied to the Commission to cease trade the private placement; it is a condition of Filer’s offer that if the private placement proceeds, Filer’s take-over bid will terminate; Filer seeks relief so that it can participate in the private placement and maintain its ownership position in the target issuer, in the event the private placement goes ahead.

Applicable Legislative Provisions

National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 2.2, 6.1.

July 12, 2016

IN THE MATTER OF
BRITISH COLUMBIA AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
HECLA CANADA LTD.
(the Filer)

DECISION

Background

1              The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief from the prohibition set out in section 2.2 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) so that the Filer can potentially participate in a private placement of securities (the Private Placement) of Dolly Varden Silver Corporation (Dolly Varden) announced by Dolly Varden on July 5, 2016 (the Exemption Sought). 

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a)           the British Columbia Securities Commission is the principal regulator for this application,

(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 Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Yukon Territory, the Northwest Territories and Nunavut, and

(c)           the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

2              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

3              This decision is based on the following facts represented by the Filer:

1.             the Filer is a wholly owned direct subsidiary of Hecla Mining Company (Hecla) and is the sole shareholder of 1080980 B.C. Ltd. (the Offeror);

2.             Hecla is a corporation incorporated under the laws of the State of Delaware and is a reporting issuer in all of the provinces and territories of Canada;

3.             on June 27, 2016, the Offeror announced a take-over bid (the Offer) under which the Offeror seeks to acquire all of the issued and outstanding common shares of Dolly Varden that are not already owned by the Filer for $0.69 per common share;

4.             on July 8, 2016, the Offeror formally commenced the Offer;

5.             one of the conditions to the Offer is that the Private Placement not be completed; if the Private Placement is completed, the Offer will terminate;

6.             under an ancillary rights agreement between Hecla and Dolly Varden entered into on September 4, 2012 (the ARA) in connection with a financing transaction with Dolly Varden, the Filer was granted a pre-emptive right to participate in any future proposed equity offering of Dolly Varden in order to maintain its pro rata interest;

7.             under the terms of the ARA, the Filer must exercise its pre-emptive right to participate in the Private Placement by July 12, 2016;

8.             section 2.2 of NI 62-104 provides that an offeror (which includes any of the Offeror, the Filer or Hecla) must not offer to acquire or make or enter into an agreement, commitment or understanding to acquire beneficial ownership of any securities of the class that are subject to a take-over bid or securities convertible into securities of that class otherwise than under the bid on and from the day of the announcement of the offeror’s intention to make the bid until the expiry of the bid;

9.             accordingly, because the Filer announced its intention to make the Offer on June 27, 2016, it is prevented under NI 62-104 from exercising its pre-existing right under the ARA to acquire Dolly Varden shares under the Private Placement; and

10.          because of the prohibition in section 2.2 of NI 62-104, the Filer can only acquire Dolly Varden shares through the Offer; however, if the Private Placement is completed the Offer will terminate.

Decision

4              Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.

“Nigel P. Cave”
Vice-Chair
British Columbia Securities Commission