Securities Law & Instruments

2.1.8       Alcoa Inc.

 

Headnote

 

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Application for relief from the prospectus requirements for a spin-off transaction by a U.S. publicly traded company to investors by issuing shares of spun-off entity – Distribution not covered by legislative exemptions – There is no market for the securities of the issuer in Canada – SpinCo will become a U.S. publicly traded company – The number of Canadian participants and their share ownership are de minimis – Relief granted, subject to conditions.

 

Applicable Legislative Provisions

 

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).

National Instrument 45-106 Prospectus Exemptions, s. 2.31.

National Instrument 45-102 Resale of Securities, s. 2.6 and 2.14.

 

TRANSLATION

 

September 23, 2016

 

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the “Jurisdictions”)

 

AND

 

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

 

AND

 

IN THE MATTER OF

ALCOA INC.

(the “Filer”)

 

DECISION

 

Background

 

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 an exemption (the “Exemption Sought”) from the prospectus requirements contained in the Legislation in connection with the proposed distribution (the “Spin-Off”) by the Filer of the shares of common stock of a newly formed company to be renamed “Alcoa Corporation” (“SpinCo”), a direct wholly-owned subsidiary of the Filer, by way of a distribution 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 dual application):

 

(a)           the Autorité des marchés financiers is the principal regulator for this application (the “Principal Regulator”);

 

(b)           the Filer has provided notice that section 4.7(1) of Regulation respecting Passport System (Regulation 11-102) is intended to be relied upon in each of the other jurisdictions of Canada, other than Ontario; and

 

(c)           the decision is the decision of the Prin-cipal Regulator and evidences the deci-sion of the securities regulatory authority in Ontario.

 

Interpretation

 

Terms defined in Regulation 14-101 respecting Definitions, Regulation 45-106 respecting Prospectus Exemptions (“Regulation 45-106”) and Regulation 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 Penn-sylvania with principal executive offices in New York, New York, U.S.A. The Filer is a global company specializing in the engineering and manufacturing of lightweight metals including bauxite, alumina and aluminum, and the produc-tion of value-added cast and rolled products.

 

2.             The Filer is not a reporting issuer and, currently, has no intention of becoming a reporting issuer under the securities legislation of any jurisdiction of Canada.

 

3.             The authorized capital of the Filer consists of 660,000 shares of Serial Preferred Stock (par value U.S.$100 per share), 10 million shares of Class B Serial Preferred Stock (par value U.S.$1 per share), and 1.8 billion Filer Shares (par value U.S.$1 per share). As of August 3, 2016, there were 546,024 shares of Serial Preferred Stock, 2,500,000 shares of Class B Serial Preferred Stock and 1,315,379,801 Filer Shares out-standing. The Filer currently expects to hold a special meeting of shareholders prior to the Spin-Off to seek approval of a reverse stock split of the Filer Shares at a ratio of one-for-three and a pro-portionate reduction in the number of authorized Filer Shares to 600 million. The proportionate equity interests or voting rights of Filer Shares will not change as a result thereof, subject to cash payments being made in lieu of fractional shares.


4.             Filer Shares are listed on the New York Stock Exchange (the “NYSE”) and trade under the symbol “AA”; Depositary Shares representing a 1/10th ownership interest in a share of Class B Serial Preferred Stock are listed on the NYSE and trade under the symbol “AA.PRB”; $3.75 Cumu-lative Preferred Stock (being a series of the Serial Preferred Stock) are listed on the NYSE MKT under the symbol “AA-P”; and Chess Depositary Interests representing Filer Shares are listed on the Australian Securities Exchange (“ASX”) under the symbol “AAI.” Other than the foregoing listings on the NYSE, NYSE MKT and ASX, no securities of the Filer are listed or posted for trading on any exchange or market in Canada or outside of Canada. The Filer has no present intention of listing its securities on any Canadian stock exchange.

 

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

 

6.             Based on a report provided by Computershare Investor Services LLC (the Filer’s transfer agent), as of August 3, 2016, there were 74 registered Filer Canadian Shareholders holding 33,151 Filer Shares, representing approximately 0.395% of the registered shareholders of the Filer worldwide and holdings of approximately 0.0025% of the outstanding Filer Shares. The Filer does not expect these numbers to have materially changed since that date.

 

7.             Based on a “Geographic Survey” of beneficial shareholders prepared for the Filer by Broadridge Financial Services, Inc., as of August 3, 2016, there were 15,697 beneficial Filer Canadian Shareholders, representing approximately 3.220% of the beneficial holders of Filer Shares worldwide, holding approximately 37,816,486 Filer Shares, representing approximately 2.875% 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 Share-holders and the proportion of Filer Shares held by such shareholders are de minimis.

 

9.             The Filer is proposing to spin off its global upstream businesses, including its global primary products (bauxite, alumina, aluminum, cast pro-ducts and energy) business units as well as certain rolling business operations (the “SpinCo Business”) into a newly formed independent company, SpinCo, through a series of trans-actions. These transactions are expected to result in the Spin-Off by the Filer, pro rata to its shareholders, of at least 80.1% of the outstanding common stock of SpinCo (“SpinCo Shares”).

 

10.          SpinCo is a Delaware corporation with principal executive offices in New York, New York, U.SA. It is currently a direct wholly-owned subsidiary of the Filer and, at the time of the Spin-Off, will hold the Filer’s SpinCo Business.

 

11.          SpinCo’s authorized capital stock currently consists of 1,000 shares of common stock, $1.00 par value. SpinCo will increase its authorized capital stock to enable the Filer to facilitate the Spin-Off. As of the date hereof, all of the issued and outstanding SpinCo Shares, being 1,000 SpinCo Shares, are held directly by the Filer, and no other shares or classes of stock of SpinCo are issued and outstanding.

 

12.          Fractional shares of SpinCo 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 into whole shares, sell such whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and commissions) pro rata to each Filer Shareholder who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares, if any, will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

 

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

 

14.          Subject to the satisfaction of certain conditions, it is currently anticipated that the Spin-Off will become effective in this second half of 2016.

 

15.          Following the Spin-Off, SpinCo will cease to be a subsidiary of the Filer (but the Filer may retain up to 19.9% of the outstanding SpinCo Shares)

 

16.          SpinCo will apply to have the SpinCo Shares listed on the NYSE prior to the Spin-Off.

 

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

 

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

 

19.          The Spin-Off will be made in accordance with the laws of the State of Pennsylvania.


20.          Because the Spin-Off will be effected by way of a distribution of SpinCo Shares to Filer Share-holders, no shareholder approval of the proposed transaction is required (or being sought) under Pennsylvania law

 

21.          In connection with the Spin-Off, SpinCo has filed with the SEC a registration statement on Form 10 under the 1934 Act, detailing the proposed Spin-Off. SpinCo initially filed the registration statement with the SEC on June 29, 2016 and filed Amendment No. 1 to the Form 10 on August 12, 2016, Amendment No. 2 to the Form 10 on September 1, 2016, and it will file further amend-ment(s) to the registration statement (the “Regis-tration Statement”) closer to the date of the Spin-Off.

 

22.          After the SEC has completed its review of the Registration Statement, Filer Shareholders will receive a copy (or a notice of internet availability) 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 SpinCo in the United States (including the Information State-ment) will be sent concurrently to Filer Canadian Shareholders.

 

23.          The Information Statement will contain prospectus level disclosure about SpinCo.

 

24.          Filer Canadian Shareholders who receive SpinCo 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.

 

25.          Following the completion of the Spin-Off, SpinCo will be subject to the requirements of the 1934 Act and, if listed for trading on the NYSE, its rules and regulations. SpinCo will send concurrently to holders of SpinCo Shares resident in Canada the same disclosure materials required to be sent under applicable U.S. federal securities law to holders of SpinCo Shares resident in the United States.

 

26.          There will be no active trading market for the SpinCo Shares in Canada following the Spin-Off and none is expected to develop. Consequently, it is expected that any resale of SpinCo Shares distributed in connection with the Spin-Off will occur through the facilities of the NYSE or any other exchange or market outside of Canada on which the SpinCo Shares may be quoted or listed at the time that the trade occurs or to a person or company outside of Canada.

 

27.          The Filer intends to dispose of any SpinCo Shares that it retains after the Spin-Off, which may include dispositions through one or more subsequent ex-changes for debt or equity or a sale of its shares for cash, within the 18-month period following the Spin-Off, subject to market conditions. Any SpinCo Shares not disposed of by the Filer during such 18-month period will be sold or otherwise disposed consistent with the business reasons for the retention of those shares, but in no event later than five years after the Spin-Off.

 

28.          The Spin-Off to Filer Canadian Shareholders would be exempt from the prospectus require-ments pursuant to subsection 2.31(2) of Regu-lation 45-106 but for the fact that SpinCo will not be a reporting issuer at the time of the distribution under the securities legislation of any jurisdiction of Canada.

 

29.          Neither the Filer nor SpinCo is in default of any securities legislation in any jurisdiction of Canada.

 

Decision

 

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 provided that the first trade in the SpinCo 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 Regulation 45-102 respecting Resale of Securities are satisfied.

 

“Lucie J. Roy”

Senior Director, Corporate Finance