Securities Law & Instruments

 

Headnote

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, pursuant to a repurchase program and at a discounted purchase price, up to a specified number of its common shares under its normal course issuer bid from a third party – the third party will abide by the requirements governing normal course issuer bids as though it was the issuer, subject to certain modifications, including that the third party will not make any purchases under the program pursuant to a pre-arranged trade – common shares delivered to the issuer for cancellation will be common shares from the third party's existing inventory – the third party will purchase common shares under the program on the same basis as if the issuer had conducted the bid in reliance on the normal course issuer bid exemptions set out in securities legislation – no adverse economic impact on, or prejudice to, the issuer or its security holders – acquisition of securities exempt from the requirements applicable to issuer bids in Part 2 of NI 62-104 subject to conditions, including that the number of common shares transferred by the third party from its existing inventory to the issuer for purchase under the program be equivalent to the number of common shares that the third party has purchased, or had purchased on its behalf, on Canadian markets. 

Statutes Cited

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
DOLLARAMA INC. AND
BMO NESBITT BURNS INC.

ORDER
(Section 6.1 of National Instrument 62-104)

UPON the application (the “Application”) of Dollarama Inc. (the “Issuer”) and BMO Nesbitt Burns Inc. (“BNBI”, and together with the Issuer, the “Filers”) 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 658,000 (the “Program Maximum”) of its common shares (the “Common Shares”) from BNBI pursuant to a share repurchase program (the “Program”);

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

AND UPON the Issuer having represented to the Commission the matters set out in paragraphs 1 to 4, inclusive, 9 to 20, inclusive, 22 to 29, inclusive, 34, 36, 38 to 40, inclusive, 42 and 43 as they relate to the Issuer;

AND UPON BNBI and Bank of Montreal (“BMO”, and together with BNBI, the “BMO Entities”) having represented to the Commission the matters set out in paragraphs 5 to 8, inclusive, 19 to 22, inclusive, 24, 28, 30 to 35, inclusive, 37, 41, 43 and 44 as they relate to the BMO Entities;

1.             The Issuer is a corporation governed by the Canada Business Corporations Act (the “CBCA”).

2.             The registered and head office of the Issuer is located at 5805 Royalmount Avenue, Montreal, Québec, Canada, H4P 0A1.

3.             The Issuer is a reporting issuer in each of the provinces and territories of Canada and the Common Shares are listed for trading on the Toronto Stock Exchange (the “TSX”) under the symbol “DOL”.  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 an unlimited number of Common Shares and an unlimited number of preferred shares issuable in series, of which 114,259,109 Common Shares and no preferred shares were issued and outstanding as of March 27, 2017.

5.             BNBI is a corporation governed by the CBCA.  BMO is a Schedule I bank governed by the Bank Act (Canada).  The corporate headquarters of each of the BMO Entities are located in Toronto, Ontario.  BNBI is registered as an investment dealer under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Yukon, the Northwest Territories and Nunavut.  It is also registered as: (a) a futures commission merchant under the Commodity Futures Act (Ontario); (b) a derivatives dealer under the Derivatives Act (Québec); and (c) a dealer (futures commission merchant) under The Commodity Futures Act (Manitoba).  BNBI is a member of the Investment Industry Regulatory Organization of Canada (“IIROC”) and the Canadian Investor Protection Fund, a participating organization or member of the TSX, TSX Venture Exchange and Canadian Securities Exchange, and an approved participant of the Bourse de Montréal.

6.             BNBI does not own, directly or indirectly, more than 5% of the issued and outstanding Common Shares.

7.             BNBI is the beneficial owner of 658,000 Common Shares, none of which were acquired by, or on behalf of, BNBI in anticipation or contemplation of resale to the Issuer (such Common Shares over which BNBI has beneficial ownership, the “Inventory Shares”).  All of the Inventory Shares are held by BNBI in the Province of Ontario.  No Common Shares were purchased by, or on behalf of, BNBI on or after February 21, 2017 being a date more than 30 days prior to the date of the Application, in anticipation or contemplation of a sale of Common Shares by BNBI to the Issuer.

8.             BNBI 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”).  BNBI is an “accredited investor” within the meaning of National Instrument 45-106 Prospectus Exemptions.

9.             On June 8, 2016, the Issuer announced the renewal of its normal course issuer bid (the “Normal Course Issuer Bid”) to purchase for cancellation, during the 12-month period beginning on June 17, 2016 and ending on June 16, 2017, up to 5,975,854 issued and outstanding Common Shares, representing approximately 5.0% of the issued and outstanding Common Shares as of the date specified in the Notice of Intention to Make a Normal Course Issuer Bid (the “Notice”), which was submitted to, and accepted by, the TSX.  The Notice specified that purchases made under the Normal Course Issuer Bid are to be conducted through the facilities of the TSX or alternative trading systems, if eligible, or by such other means as may be permitted by the TSX in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the “TSX NCIB Rules”) or a securities regulatory authority, including under automatic trading plans, and by private agreements under issuer bid exemption orders issued by securities regulatory authorities.  On April 7, 2017, the TSX accepted an amendment to the Notice to specify that the Issuer may acquire Common Shares under share repurchase programs pursuant to issuer bid exemption orders issued by securities regulatory authorities.

10.          The Normal Course Issuer Bid is being conducted in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(2) of NI 62-104 (the “Designated Exchange Exemption”).

11.          The Normal Course Issuer Bid is also being conducted in the normal course on published markets other than the TSX (such other published markets, collectively, the “Other Published Markets”) in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(3) of NI 62-104 (the “Other Published Markets Exemption”, and together with the Designated Exchange Exemption, the “Exemptions”).

12.          Pursuant to the TSX NCIB Rules, the Issuer has appointed RBC Dominion Securities Inc. as its designated broker in respect of the Normal Course Issuer Bid (the “Responsible Broker”).

13.          On June 8, 2016, the Issuer also announced the renewal of its automatic share purchase plan (“ASPP”) to permit the Issuer to make purchases under the Normal Course Issuer Bid at such times when the Issuer would not be permitted to trade in the Common Shares, including during regularly scheduled quarterly blackout periods and other internal blackout periods (each such time, a “Blackout Period”).  The ASPP was pre-cleared by the TSX and complies with the TSX NCIB Rules and applicable securities laws.  The ASPP will not be in effect during the Program Term.

14.          To the best of the Issuer’s knowledge, as of March 27, 2017, the “public float” for the Common Shares represented approximately 92% of all the issued and outstanding Common Shares for purposes of the TSX NCIB Rules.  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 (“OSC Rule 48-501”) and section 1.1 of the Universal Market Integrity Rules (“UMIR”).

15.          The Commission granted an order on December 23, 2016 pursuant to section 6.1 of NI 62-104 exempting the Issuer from the Issuer Bid Requirements in connection with proposed purchases by the Issuer of up to 150,000 Common Shares from The Bank of Nova Scotia pursuant to one or more private agreements (the “BNS Order”).  The Issuer completed the purchase of 150,000 Common Shares under the BNS Order on January 4, 2017.

16.          The Autorité des marchés financiers granted an order on December 28, 2016 pursuant to section 6.1 of NI 62-104 and section 263 of the Securities Act (Québec) exempting the Issuer from the Issuer Bid Requirements in connection with proposed purchases by the Issuer of up to 150,000 Common Shares from National Bank of Canada pursuant to one or more private agreements (the “NBC Order”, and together with the BNS Order, the “Off-Exchange Block Purchases”).  The Issuer completed the purchase of 150,000 Common Shares under the NBC Order on January 3, 2017.

17.          The Commission granted an order on January 10, 2017 pursuant to section 6.1 of NI 62-104 exempting the Issuer from the Issuer Bid Requirements in connection with proposed purchases by the Issuer of up to 1,123,000 Common Shares from the Canadian Imperial Bank of Commerce (the “CIBC Order”) pursuant to a share repurchase program.  The Issuer completed the purchase of 1,120,040 Common Shares under the CIBC Order on March 13, 2017, and such program was terminated on that date.

18.          As at the close of business on April 5, 2017, the Issuer had repurchased for cancellation a total of 5,080,162 Common Shares under the Normal Course Issuer Bid, including 300,000 Common Shares pursuant to Off-Exchange Block Purchases and 1,120,040 Common Shares pursuant to the CIBC Order.

19.          Concurrently with the Application, the Issuer has filed an additional application with the Commission for exemptive relief from the Issuer Bid Requirements in connection with the proposed purchase by the Issuer of up to 237,000 Common Shares from BMO pursuant to a share repurchase program (the “BMO Program”).  The BMO Program will begin on the Trading Day (as defined below) following completion or termination of the Program and will terminate on the earlier of April 27, 2017 and the date on which the Issuer will have purchased 237,000 Common Shares from BMO under the BMO Program.

20.          The Filers wish to participate in the Program during, and as part of, the Normal Course Issuer Bid to enable the Issuer to purchase from BNBI, and for BNBI to sell to the Issuer, that number of Common Shares equal to the Program Maximum.

21.          Pursuant to the terms of the Program Agreement (as defined below), BNBI has been retained by BMO to acquire Common Shares through the facilities of the TSX and on Other Published Markets in Canada (each, a “Canadian Other Published Market” and collectively with the TSX, the “Canadian Markets”) under the Program.  No Common Shares will be acquired under the Program on any Other Published Markets other than Canadian Other Published Markets.

22.          The Program will be governed by, and conducted in accordance with, the terms and conditions of a Repurchase Program Agreement that was entered into on March 21, 2017 among the Filers and BMO, as amended by an amended and restated Repurchase Program Agreement dated April 7, 2017 (the “Program Agreement”).  A copy of the Program Agreement has been provided by the Filers to the Commission.

23.          The TSX has: (a) been advised of the Issuer’s intention to enter into the Program; (b) been provided with a copy of the Program Agreement and a draft of the Press Release (as defined below); and (c) confirmed that it has no objection to the Issuer conducting the Program as part of the Normal Course Issuer Bid.

24.          The Program will begin at least two clear Trading Days (as defined below) after the issuance of the Press Release (as defined below) and will terminate on the earlier of April 27, 2017 and the date on which the Issuer will have purchased the Program Maximum under the Program (the “Program Term”). Neither the Issuer nor any of the BMO Entities may unilaterally terminate the Program Agreement during the Program Term, except in the case of an event of default by a party thereunder.

25.          The Issuer will issue a press release that has been pre-cleared by the TSX that describes the material features of the Program and discloses the Issuer’s intention to participate in the Program during the Normal Course Issuer Bid (the “Press Release”).

26.          The Program Maximum, together with the maximum number of Common Shares that will be purchased pursuant to the BMO Program, is less than the number of Common Shares remaining that the Issuer is entitled to acquire under the Normal Course Issuer Bid.

27.          The Program Term will not include a Blackout Period.  In the event that a Blackout Period should arise during the Program Term, purchasing under the Program will cease immediately and will not recommence until following the expiration of the Blackout Period.

28.          During the Program Term, BNBI will purchase Common Shares on the applicable Trading Day (as defined below) in accordance with instructions received by BNBI from the Issuer prior to the opening of trading on such day, which instructions will be the same instructions that the Issuer would have given to the Responsible Broker if the Issuer was conducting the Normal Course Issuer Bid in reliance on the Exemptions.

29.          The Issuer will not give purchase instructions in respect of the Program to BNBI at any time that the Issuer is aware of Undisclosed Information (as defined below).

30.          All Common Shares acquired for the purposes of the Program by BNBI on a day during the Program Term on which Canadian Markets are open for trading (each, a “Trading Day”) must be acquired on Canadian Markets in accordance with the TSX NCIB Rules and any by-laws, rules, regulations or policies of any Canadian Markets upon which purchases are carried out (collectively, the “NCIB Rules”) that would be applicable to the Issuer in connection with the Normal Course Issuer Bid, provided that:

(a)           the aggregate number of Common Shares to be acquired on Canadian Markets by BNBI on each Trading Day shall not exceed the maximum daily limit that is imposed upon the Normal Course Issuer Bid pursuant to the TSX NCIB Rules, determined with reference to an average daily trading volume that is based on the trading volume of the Common Shares on all Canadian Markets (being 185,000 Common Shares) rather than being limited to the trading volume on the TSX only (the “Modified Maximum Daily Limit”), it being understood that the aggregate number of Common Shares to be acquired on the TSX by BNBI on any given Trading Day shall not exceed the maximum daily limit that is imposed on the Normal Course Issuer Bid pursuant to the TSX NCIB Rules (being 119,304 Common Shares); and

(b)           notwithstanding the block purchase exception provided for in the TSX NCIB Rules, no purchases will be made by BNBI on any Canadian Markets pursuant to a pre-arranged trade.

31.          The aggregate number of Common Shares acquired by BNBI in connection with the Program:

(a)           shall not exceed the Program Maximum; and

(b)           on Canadian Other Published Markets, shall not exceed that number of Common Shares remaining eligible for purchase by the Issuer pursuant to the Other Published Markets Exemption, calculated as at the date of the Program Agreement.

32.          On every Trading Day, BNBI will purchase the Number of Common Shares.  The “Number of Common Shares” will be no greater than the least of:

(a)           the maximum number of Common Shares established in the instructions received by BNBI from the Issuer prior to the opening of trading on such day;

(b)           the Program Maximum less the aggregate number of Common Shares previously purchased by BNBI under the Program;

(c)           the number of Common Shares actually acquired up to the time that trading on the TSX in respect of a Trading Day has been suspended or any other event occurs that would impair BNBI’s ability to acquire Common Shares on Canadian Markets (a “Market Disruption Event”); and

(d)           the Modified Maximum Daily Limit.

33.          The “Discounted Price” per Common Share will be equal to (i) the volume weighted average price of the Common Shares on the Canadian Markets on the Trading Day on which purchases were made for the period starting at 9:31 a.m. ending prior to 3:30 p.m. (Toronto time) (excluding blocks of 10,000 or more shares and any trade above the maximum price established in the instructions received by BNBI from the Issuer prior to the opening of trading on such day) less an agreed upon discount, or (ii) upon the occurrence of a Market Disruption Event, the volume weighted average price of the Common Shares on the TSX from 9:31 a.m. (Toronto time) up to the time the Market Disruption Event occurred (subject to the same exclusions) less an agreed upon discount.

34.          BNBI will deliver to the Issuer that number of Inventory Shares equal to the number of Common Shares purchased by BNBI on a Trading Day under the Program on the Trading Day immediately thereafter (or such other Trading Day as agreed to between the parties to the Program Agreement), and the Issuer will pay BNBI a purchase price equal to the Discounted Price for each such Inventory Share.  Each Inventory Share purchased by the Issuer under the Program will be cancelled upon delivery to the Issuer.

35.          BNBI will not sell any Inventory Shares to the Issuer unless BNBI has purchased the equivalent number of Common Shares on Canadian Markets under the Program.  The number of Common Shares that are purchased by BNBI on Canadian Markets under the Program on a Trading Day will be equal to the Number of Common Shares for such Trading Day.  BNBI will provide the Issuer with a daily written report of BNBI’s purchases, which report will indicate, inter alia, the purchase price and settlement date for the sale by BNBI to the Issuer of the corresponding Inventory Shares, the aggregate number of Common Shares acquired under the Program, the Canadian Market on which such Common Shares were acquired, and the Modified Maximum Daily Limit.

36.          During the Program Term, the Issuer will: (a) not purchase, directly or indirectly, any Common Shares (other than Inventory Shares purchased under the Program); (b) prohibit the Responsible Broker from acquiring any Common Shares on its behalf; and (c) prohibit the designated broker under the ASPP from acquiring any Common Shares on its behalf.

37.          All purchases of Common Shares under the Program will be made by BNBI and neither of the BMO Entities will engage in any hedging activity in connection with the conduct of the Program.

38.          The Issuer will report its purchases of Common Shares under the Program to the TSX in accordance with the TSX NCIB Rules.  In addition, immediately following the completion of the Program, the Issuer will: (a) report the total number of Common Shares acquired under the Program to the TSX and the Commission; and (b) file a notice on the System for Electronic Document Analysis and Retrieval (“SEDAR”) disclosing the number of Common Shares acquired under the Program and the aggregate dollar amount paid for such Common Shares.

39.          The Issuer is of the view that: (a) it will be able to purchase Common Shares from BNBI at a lower price than the price at which it would be able to purchase an equivalent quantity of Common Shares under the Normal Course Issuer Bid in reliance on the Exemptions; and (b) the purchase of Common Shares pursuant to the Program is in the best interests of the Issuer and constitutes an appropriate use of the Issuer’s funds.

40.          The entering into of the Program Agreement has not adversely affected, and the purchase of Common Shares by BNBI in connection with the Program and the sale of Inventory Shares by BNBI to the Issuer will not adversely affect, the Issuer or the rights of any of the Issuer’s security holders and will not materially affect control of the Issuer.

41.          The sale of Inventory Shares to the Issuer by BNBI will not be a “distribution” (as defined in the Act).

42.          The Issuer will be able to acquire the Inventory Shares from BNBI without the Issuer being subject to the dealer registration requirements of the Act.

43.          At the time that the Issuer and the BMO Entities entered into the Program Agreement, neither the Issuer, nor any member of the Trading Products Group of BNBI, nor any personnel of either of the BMO Entities that negotiated the Program Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Program Agreement and sell the Common Shares, were aware of any “material change” or any “material fact” (each as defined in the Act) with respect to the Issuer or the Common Shares that had not been generally disclosed (the “Undisclosed Information”).

44.          Each of the BMO Entities:

(a)           has policies and procedures in place to ensure that the Program will be conducted in accordance with, among other things, the Program Agreement and this Order, and to preclude those persons responsible for administering the Program from acquiring any Undisclosed Information during the conduct of the Program; and

(b)           has (i) ensured that its systems are capable of adhering to, and performing in accordance with, the requirements of the Program, the Program Agreement and this Order, and (ii) provided all necessary training and taken all necessary actions to ensure that the persons administering and executing the purchases under the Program are aware of, and understand the terms of, the Program Agreement and this Order.

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 respect of the purchase of Inventory Shares from BNBI pursuant to the Program, provided that:

(a)           at least two clear Trading Days prior to the commencement of the Program, the Issuer issues the Press Release;

(b)           all purchases of Common Shares under the Program are made on Canadian Markets by BNBI, and are:

(i)            made in accordance with the NCIB Rules applicable to the Normal Course Issuer Bid, as modified by paragraph 30 of this Order;

(ii)           taken into account by the Issuer when calculating the maximum annual aggregate limits that are imposed upon the Normal Course Issuer Bid in accordance with the TSX NCIB Rules, with those Common Shares purchased on Canadian Other Published Markets being taken into account by the Issuer when calculating the maximum aggregate limits that are imposed upon the Issuer in accordance with the Other Published Markets Exemption;

(iii)          marked with such designation as would be required by the applicable marketplace and UMIR for trades made by an agent of the Issuer; and

(iv)          monitored by the BMO Entities on a continual basis for the purposes of ensuring compliance with the terms of this Order, NCIB Rules, and applicable securities law;

(c)           during the Program Term, (i) the Issuer does not purchase, directly or indirectly, any Common Shares (other than Inventory Shares purchased under the Program), (ii) no Common Shares are purchased on behalf of the Issuer by the Responsible Broker, and (iii) no Common Shares are acquired on behalf of the Issuer by the designated broker under the ASPP;

(d)           the number of Inventory Shares transferred by BNBI to the Issuer for purchase under the Program in respect of a particular Trading Day is equal to the number of Common Shares purchased by BNBI on Canadian Markets under the Program in respect of the Trading Day;

(e)           no hedging activity is engaged in by the BMO Entities in connection with the conduct of the Program;

(f)            at the time that the Filers and BMO entered into the Program Agreement:

(i)            the Common Shares were “highly liquid securities”, as that term is defined in section 1.1 of OSC Rule 48-501 and section 1.1 of UMIR; and

(ii)           none of the Issuer, any member of the Trading Products Group of BNBI, or any personnel of either of the BMO Entities that negotiated the Program Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Program Agreement and sell the Common Shares, were aware of any Undisclosed Information;

(g)           no purchase instructions in respect of the Program are given by the Issuer to BNBI at any time that the Issuer is aware of Undisclosed Information;

(h)           no purchases of Common Shares under the Program will occur during a Blackout Period;

(i)            the BMO Entities maintain records of all purchases of Common Shares that are made by BNBI pursuant to the Program, which will be available to the Commission and IIROC upon request; and

(j)            in addition to reporting its purchases of Common Shares under the Program to the TSX in accordance with the TSX NCIB Rules, immediately following the completion of the Program, the Issuer will: (i) report the total number of Common Shares acquired under the Program to the TSX and the Commission; and (ii) file a notice on SEDAR disclosing the number of Common Shares acquired under the Program and the aggregate dollar amount paid for such Common Shares.

DATED at Toronto, Ontario, this 10th day of April, 2017.

“Naizam Kanji”
Director, Office of Mergers & Acquisitions
Ontario Securities Commission