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Telus Corporation – s. 6.1 of NI 62-104 Take-Over Bids and Issuer Bids
Section 6.1 of NI 62-104 – Issuer bid – relief from the requirements applicable to issuer bids in Part 2 of NI 62-104 – Issuer proposes to purchase, at a discounted purchase price, up to 1,000,000 of its common shares from one 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 accordance with the TSX rules governing normal course issuer bids, in reliance on the issuer bid exemption in subsection 4.8(2) of NI 62-104 – the selling shareholder did not purchase the subject shares in anticipation or contemplation of resale to the Issuer and no common shares have been purchased by the selling shareholder 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 the selling shareholder to the Issuer – no adverse economic impact on, or prejudice to, the Issuer or other security holders – proposed purchases exempt from the requirements applicable to issuer bids in Part 2 of NI 62-104, 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 the selling shareholder that between the date of the order and the date on which the proposed purchase is completed, the selling shareholder has not purchased, had purchased on its behalf, or otherwise accumulated, any common shares of the Issuer to re-establish its holdings of common shares which will have been reduced as a result of the sale of the subject shares pursuant to the proposed purchases.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
AND
IN THE MATTER OF
TELUS CORPORATION
ORDER
(Section 6.1 of National Instrument 62-104)
UPON the application (the “Application”) of TELUS Corporation (the “Issuer”) to the Ontario Securities Commission (the “Commission”) for an order pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (“NI 62-104”) exempting the Issuer from the requirements applicable to issuer bids in Part 2 of NI 62-104 (the “Issuer Bid Requirements”) in respect of the proposed purchases by the Issuer of up to an aggregate of 1,000,000 Common Shares (as defined below) of the Issuer (collectively, the “Subject Shares”) in one or more trades with National Bank of Canada (the “Selling Shareholder”);
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Issuer (and the Selling Shareholder in respect of paragraphs 5, 6, 7, 8, 11, 22, 23, 24 and 28 as they relate to the Selling Shareholder) having represented to the Commission that:
1. The Issuer is a corporation governed by the Business Corporations Act (British Columbia).
2. The head, registered and executive office of the Issuer is located at 510 West Georgia Street, Vancouver, British Columbia.
3. The Issuer is a reporting issuer in each of the provinces of Canada and the common shares of the Issuer (the “Common Shares”) are listed for trading on the Toronto Stock Exchange (the “TSX”) and the New York Stock Exchange (the “NYSE”) under the symbols “T” and “TU”, respectively. 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 authorized share capital of the Issuer consists of 4,000,000,000 shares, divided into: (i) 2,000,000,000 Common Shares without par value; (ii) 1,000,000,000 first preferred shares without par value (“First Preferred Shares”); and (iii) 1,000,000,000 second preferred shares without par value (“Second Preferred Shares”). As at November 25, 2016, 591,387,525 Common Shares, no First Preferred Shares and no Second Preferred Shares were issued and outstanding.
5. All of the Subject Shares are held by the Selling Shareholder in the Province of Ontario. The negotiation, execution and delivery of each Agreement (as defined below) and the execution and settlement of the trades contemplated thereunder will be undertaken by members of the Global Equity and Commodity Group of the Selling Shareholder who are in the Province of Ontario.
6. The Selling Shareholder does not directly or indirectly own more than 5% of the issued and outstanding Common Shares.
7. The Selling Shareholder is the beneficial owner of at least 1,000,000 Common Shares. None of the Subject Shares were acquired by, or on behalf of, the Selling Shareholder in anticipation or contemplation of resale to the Issuer.
8. The Selling Shareholder is at arm’s length to the Issuer and is not an “insider” of the Issuer or an “associate” of an “insider” of the Issuer, or an “associate” or “affiliate” of the Issuer, as such terms are defined in the Securities Act (Ontario) (the “Act”). The Selling Shareholder is an “accredited investor” within the meaning of National Instrument 45-106 Prospectus Exemptions.
9. Pursuant to a “Notice of Intention to Make a Normal Course Issuer Bid” (the “Notice”) that was submitted to, and accepted by the TSX, effective September 30, 2016, the Issuer is permitted to make a normal course issuer bid (the “Normal Course Issuer Bid”) during the period from September 30, 2016 to September 29, 2017 to purchase up to 8,000,000 Common Shares, representing 1.35% of the Issuer’s public float of Common Shares as of the date specified in the Notice, subject to a maximum aggregate purchase price consideration of $250.0 million excluding brokerage costs and commission. In accordance with the Notice, the Normal Course Issuer Bid is being, and will be conducted through the facilities of the TSX, the NYSE or alternative Canadian trading platforms, or 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 been advised of the Issuer’s intention to enter into the Proposed Purchases and has confirmed that it does not object to the Proposed Purchases.
10. The Issuer entered into an automatic repurchase plan (the “ARP”) on October 1, 2016 with a designated broker (the “ARP Broker”) providing for automatic purchases of Common Shares, to be conducted by the broker on the TSX or alternative Canadian trading platforms within pre-determined parameters as part of the 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”). Under the ARP, at times it is not subject to blackout restrictions, the Issuer may, but is not required to, instruct the ARP Broker to make purchases under its Normal Course Issuer Bid in accordance with the terms of the ARP. Such purchases under the ARP will be determined by the ARP Broker in its sole discretion based on parameters established by the Issuer prior to the applicable Blackout Period in accordance with TSX rules, applicable securities laws, this Order and the terms of the agreement between the ARP Broker and the Issuer. The ARP was approved by the TSX and is in compliance with the TSX NCIB Rules, applicable securities law and this Order. The Issuer will instruct the ARP Broker not to conduct a block purchase (a “Block Purchase”) in reliance on the block purchase exception in clause 629(l)7 of the TSX NCIB Rules during the calendar week in which either (a) the Issuer completes a Proposed Purchase (as defined below), or (b) a Blackout Period ends and a new trading window of the Issuer opens. No Subject Shares will be acquired under the ARP or otherwise during Blackout Periods.
11. The Issuer and the Selling Shareholder intend to enter into one or more agreements of purchase and sale (each, an “Agreement”) pursuant to which the Issuer will agree to acquire some or all of the Subject Shares from the Selling Shareholder by one or more purchases each occurring before December 31, 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 Selling Shareholder. The Purchase Price, in each case, will be at a discount to the prevailing market price of the Common Shares on the TSX and below the prevailing bid-ask price for the Common Shares on the TSX at the time of the applicable Proposed Purchase.
12. 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.
13. 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.
14. 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 the Selling Shareholder in reliance upon the exemption from the Issuer Bid Requirements in subsection 4.8(2) of NI 62-104.
15. 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 in reliance on the exemption from the Issuer Bid Requirements in subsection 4.8(2) of NI 62-104.
16. The sale of any of the Subject Shares to the Issuer will not be a “distribution” (as defined in the Act).
17. For each Proposed Purchase, the Issuer will be able to acquire the applicable Subject Shares from the Selling Shareholder without the Issuer being subject to the dealer registration requirements of the Act.
18. 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 it 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 in subsection 4.8(2) of NI 62-104; and (b) the Proposed Purchases are an appropriate use of the Issuer’s funds.
19. 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.
20. To the best of the Issuer’s knowledge, as of November 25, 2016, the “public float” of the Common Shares represented more than 99.87% of all issued and outstanding Common Shares for the purposes of the TSX NCIB Rules.
21. 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.
22. Other than the Purchase Price, no fee or other consideration will be paid in connection with the Proposed Purchases.
23. The Subject Shares are held by the Selling Shareholder in connection with hedging client transactions in respect of the Common Shares. Between the date of this Order and the date on which a Proposed Purchase is to be completed, the Selling Shareholder will not purchase, have purchased on its behalf, or otherwise accumulate, any Common Shares to re-establish its holdings of Common Shares which will have been reduced as a result of the sale of Subject Shares pursuant to the Proposed Purchases.
24. At the time that each Agreement is negotiated or entered into by the Issuer and the Selling Shareholder and at the time of each Proposed Purchase, neither the Issuer, nor any member of the Global Equity and Commodity Group of the Selling Shareholder, nor any personnel of the Selling Shareholder that negotiated the Agreement or made, participated in the making of, or provided 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 the Selling Shareholder that, between the date of this Order and the date on which a Proposed Purchase is to be completed, the Selling Shareholder has not purchased, had purchased on its behalf, or otherwise accumulated, any Common Shares to re-establish its 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 British Columbia Securities Commission granted an employee benefit plan trust established by the Issuer for the benefit of employees of the Issuer and its subsidiaries (the “Trust”) an order on November 9, 2016 pursuant to section 6.1 of NI 62-104 exempting the Trust from the requirements applicable to issuer bids in connection with the proposed purchases by the Trust of up to 2,000,000 Common Shares (the “Trust Order”). Pursuant to the terms of the Trust Order, Common Shares purchased by the Trust are required to be taken into account by the Issuer when calculating the maximum annual aggregate limit that is imposed upon the Normal Course Issuer Bid in accordance with the TSX NCIB Rules and the maximum aggregate limit that is imposed upon the Issuer in accordance with the exemption from the Issuer Bid Requirements set out in subsection 4.8(3) of NI 62-104.
27. The Issuer will not purchase, pursuant to Off-Exchange Block Purchases, in the 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 2,666,666 Common Shares as of the date of this Order.
28. No Common Shares were purchased by, or on behalf of, the Selling Shareholder on or after November 6, 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 the Selling Shareholder to the Issuer.
29. No Agreement will be negotiated or entered into during a Blackout Period. If a Blackout Period is in effect, the Issuer will not purchase Subject Shares pursuant to the Proposed Purchases until the later of (a) the end of such Blackout Period, and (b) the passage of two clear trading days from the date of the dissemination to the public of the Issuer’s financial results and/or any and all “material changes” or any “material facts” (each as defined in the Act) in respect of the Issuer or the Common Shares relating to such Blackout Period.
30. As of November 25, 2016, the Issuer has acquired an aggregate of 238,140 Common Shares pursuant to the Normal Course Issuer Bid, with no Common Shares having been acquired in reliance on the exemption from the Issuer Bid Requirements in section 4.8 of NI 62-104 and 238,140 Common Shares having been purchased under the Trust Order.
31. Assuming completion of the purchase of the maximum number of Subject Shares, being 1,000,000 Common Shares, the Issuer will have purchased under the Normal Course Issuer Bid an aggregate of 1,000,000 Common Shares pursuant to Off-Exchange Block Purchases, representing approximately 12.5% of the maximum of 8,000,000 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 section 6.1 of NI 62-104 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 the Selling Shareholder, the Issuer will report the purchase of such Subject Shares to the TSX;
f) at the time that each Agreement is negotiated or entered into by the Issuer and the Selling Shareholder and at the time of each Proposed Purchase, neither the Issuer, nor any member of the Global Equity and Commodity Group of the Selling Shareholder, nor any personnel of, the Selling Shareholder that negotiated the Agreement or made, participated in the making of, or provided 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 the completion of such Proposed 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, 2,666,666 Common Shares; and
j) the Issuer will not make any Proposed Purchase unless it has first obtained confirmation in writing from the Selling Shareholder that, between the date of this Order and the date on which a Proposed Purchase is to be completed, the Selling Shareholder has not purchased, had purchased on its behalf, or otherwise accumulated, any Common Shares to re-establish its 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 16th day of December, 2016.
“Naizam Kanji”
Director, Office of Mergers & Acquisitions
Ontario Securities Commission