Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Takeover Bids – Identical consideration – Offeror requires relief from the requirement in subsection 2.23(1) of National Instrument 62-104 Take-Over-Bids and Issuer Bids that all holders of the same class of securities must be offered identical consideration – Under the bid, Canadian resident shareholders will receive shares; Non-resident shareholders will receive substantially the same value as Canadian shareholders in the form of cash paid to the non-resident shareholders based on the proceeds from the sale of their shares.
Applicable Legislative Provisions
Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids, s. 2.23(1).
Citation: Re Total Energy Services Inc., 2017 ABASC 47
March 21, 2017
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
TOTAL ENERGY SERVICES INC.
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) exempting the Filer from subsection 2.23(1) of National Instrument 62-104 Take-Over Bids and Issuer Bids (the Identical Consideration Requirement), which requires the Filer to offer identical consideration to all of the holders of the same class of securities that are subject to a take-over bid in connection with the Filer's offer to acquire all of the outstanding common shares (Savanna Shares) of Savanna Energy Services Corp. (Savanna) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that sub-section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Saskatchewan, Mani-toba, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Yukon, Northwest Territories and Nunavut; and
(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation existing under the Business Corporations Act (Alberta) (the ABCA). The head office of the Filer is located in Calgary, Alberta.
2. The Filer is a reporting issuer in Alberta, British Columbia, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Prince Edward Island and Newfoundland and Labrador. To its knowledge, the Filer is not in default of securities legislation in any jurisdiction of Canada.
3. The authorized capital of the Filer consists of an unlimited number of common shares (the Filer Shares) of which, as at February 16, 2017, there were 30,920,000 issued and outstanding.
4. The Filer Shares are listed on the Toronto Stock Exchange (the TSX).
5. On December 9, 2016, the Filer commenced an offer (the Offer) to purchase, on and subject to certain terms and conditions, all of the issued and outstanding common shares (the Savanna Shares) of Savanna Energy Services Corp. (Savanna), including any Savanna Shares that may become issued and outstanding (including upon the exercise, exchange or conversion of any convertible securities) before 11:59 p.m. (Pacific Time) on the expiry date of the Offer (currently March 24, 2017) and filed and mailed the Offer and related take-over bid circular (the Offer and Circular) to the registered securityholders of Savanna.
6. Savanna is a corporation existing under the ABCA. Savanna's head office is located in Calgary, Alberta.
7. Savanna is a reporting issuer in the provinces of Alberta, British Columbia, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador. To the knowledge of the Filer, Savanna is not in default of securities legislation in any jurisdiction of Canada.
8. To the knowledge of the Filer, the authorized capital of Savanna consists of an unlimited number of Savanna Shares, an unlimited number of first preferred shares, issuable in series and an unlimited number of second preferred shares, issuable in series. As at February 16, 2017, based upon public filings, there were 118,224,189 Savanna Shares issued and outstanding and no preferred shares outstanding.
9. To the knowledge of the Filer, as at February 16, 2017, Savanna had outstanding 4,232,695 options to acquire Savanna Shares, 876,655 performance common share unit awards and 7,000,000 common share purchase warrants.
10. The Savanna Shares are listed on the TSX.
11. Under the terms of the Offer, as amended and varied by the notice of change and notice of variation filed and mailed by the Filer to the registered holders of Savanna on March 1, 2017, and subject to any further variation or the withdrawal of the Offer, the Filer will distribute 0.1300 of a Filer Share (Share Consideration) and $0.20 cash (Cash Consideration) for each Savanna Share taken up under the Offer.
12. The Offer is not being made to any person in any jurisdiction in which such offer or solicitation is unlawful. The Offer is not being made or directed to, nor will deposits of Savanna Shares be accepted from or on behalf of, holders of Savanna Shares in any jurisdiction in which the making of or acceptance thereof would not be in compliance with the laws of such jurisdiction. To date, no such jurisdictions have been identified.
13. The Filer has filed a registration statement on Form F-80 (the Registration) with the SEC to register the Offer under the 1933 Act.
14. The Registration does not register the Offer, or provide an exemption from the securities laws of any state or territory of the United States of America (US). As a result, the securities laws of a number of US states could prohibit the distribution of the Filer Shares to holders of the Savanna Shares in the US (US Shareholders) without registration under US state securities laws of the Filer Shares to be issued to US Shareholders resident in such states unless such holders are otherwise eligible to be issued Filer Shares in transactions exempt from registration under the securities laws of such states.
15. Registration, under applicable US state securities laws or the securities laws of any other country, of the Filer Shares deliverable to certain holders of Savanna Shares in the US (who are not eligible to be issued Filer Shares in transactions exempt from registration under the securities laws of a number of US states) and elsewhere (the Ineligible Shareholders) under the Offer would be costly and burdensome to the Filer.
16. The Filer will deliver Filer Shares in any jurisdiction in (a) each jurisdiction of Canada; and (b) each foreign jurisdiction in which it is satisfied, in its sole discretion, acting reasonably, that the Filer Shares may be lawfully delivered in reliance upon available exemptions from the registration or similar requirements of the securities laws of such jurisdiction, on a basis reasonably determined to be acceptable to it.
17. The Filer proposes, with respect to each Ineligible Shareholder that would otherwise receive Filer Shares in exchange for Savanna Shares, to have such Filer Shares issued on behalf of the Ineligible Shareholder to a selling agent. The selling agent will, as agent for Ineligible Shareholders, as expeditiously as is commercially reasonable following the date on which the Filer takes up and pays for the Savanna Shares tendered by the Ineligible Shareholders, sell such Filer Shares on behalf of each such Ineligible Shareholder, through the facilities of the TSX and have the net proceeds of such sale, less any applicable brokerage commissions, other expenses and withholding taxes, delivered to each such Ineligible Shareholder (the Vendor Placement). Each Ineligible Shareholder for whom Filer Shares are sold by the selling agent will receive an amount equal to such holder's pro rata interest in the net proceeds of sales of all Filer Shares so sold by the selling agent. The Vendor Placement will be conducted in a manner intended to maximize the consideration to be received from the sale of Filer Shares on behalf of the Ineligible Shareholders and minimize any adverse impact of the sale on the market for the Filer Shares.
18. The Offer and Circular discloses the Filer’s intention with respect to the Vendor Placement and the procedure to be followed with respect to Ineligible Shareholders that deposit their Savanna Shares under the Offer.
19. The Offer to Ineligible Shareholders and the sale of Filer Shares for the benefit of Ineligible Shareholders under the Vendor Placement described in the preceding paragraphs will not constitute a violation of any US federal securities laws or any applicable laws in a state or territory of the US.
20. To the knowledge of the Filer, based on the jurisdiction of residence of registered shareholders of Savanna as disclosed in a registered list of shareholders delivered to the Filer by Savanna, as of February 16, 2017, there are 26,086 Savanna Shares (representing approximately 0.02% of the issued and outstanding Savanna Shares) held by registered shareholders of Savanna who are Ineligible Shareholders.
21. To the knowledge of the Filer, and based on the jurisdiction of residence of beneficial shareholders of Savanna as disclosed in a geographic analysis report delivered to the Filer by Savanna, the Filer's own inquiries and the inquiries of its information agent under the Offer and GMP Securities Inc., the Filer’s dealer manager in connection with the Offer, as of February 16, 2017 there are estimated to be not more than 6,688,223 Savanna Shares (representing not more than approximately 5.66% of the issued and outstanding Savanna Shares) beneficially held by shareholders of Savanna who are Ineligible Shareholders.
22. Based on the foregoing, to the knowledge of the Filer, it is estimated that not more than 6,714,309 Savanna Shares (representing not more than approximately 5.68% of the issued and out-standing Savanna Shares) are held, in aggregate, by registered and beneficial shareholders of Savanna that are Ineligible Shareholders.
23. There is currently a "liquid market" (as such term is defined in Section 1.2 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions) for the Filer Shares and the Filer's financial advisor has advised that, in its view, there will continue to be a "liquid market" for the Filer Shares following completion of the Offer, any related second-step transaction and the sale of the Filer Shares on behalf of Ineligible Shareholders.
24. Based on the exchange ratio of the Offer and the number of Savanna Shares outstanding that, to the knowledge of the Filer, are held by Ineligible Shareholders and assuming the Filer acquires 100% of the Savanna Shares (on a non-diluted basis), the Filer Shares to be sold would represent not more than approximately 1.87% of the outstanding Filer Shares immediately following completion of the Offer.
25. If the Filer increases the consideration offered pursuant to the Offer to holders of Savanna
Shares resident in Canada, the increase in consideration will also be offered to Ineligible Shareholders at the same time and on the same basis.
26. Except to the extent that relief from the Identical Consideration Requirement is granted, the Offer will comply with the requirements under the Legislation.
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 each Ineligible Shareholder who would otherwise receive a combination of Filer Shares and cash pursuant to the Offer instead receives the Cash Consideration together with, in lieu of the Share Consideration, the net cash proceeds from the sale of the Filer Shares in accordance with the procedures set out in paragraphs 17 and 18 above.
“Tom Graham, CA”
Director, Corporate Finance
Alberta Securities Commission