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 up to 5,000,000 of its common shares from a holding company controlled by a former director and officer of the Issuer – the voting shares of the holding company are held by the former director and officer of the Issuer – the non-voting shares of the holding company are held by the former director and officer, the former director and officer's family and another employee of the Issuer – if the Issuer purchased the subject shares directly from the former director and officer, such purchase would be exempt from the issuer bid requirements in reliance on the employee, executive officer, director and consultant exemption set out in section 4.7 of NI 62-104 – the independent directors of the Issuer determined that the purchase of subject shares was in the best interests of the Issuer and its shareholders and have no actual knowledge that the purchase of subject shares will be prejudicial to the interests of any of the Issuer's shareholders – proposed purchases of subject shares exempt from the issuer bid requirements in Part 2 of NI 62-104, subject to conditions, including that the subject shares purchased under the order, when aggregated with all other common shares acquired by the Issuer in reliance on the exemption set out in section 4.7 of NI 62-104 within any period of 12 months, will not exceed 5% of the issued and outstanding common shares at the beginning of such 12 month period, the purchase price per subject share paid in connection with purchases made pursuant to the order will not exceed the market price of the common voting shares on the date of such purchase, and the Issuer will report information relating to such purchase on SEDAR the day following such purchase.
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
IN THE MATTER OF
(Section 6.1 of National Instrument 62-104)
UPON the application (the “Application”) of Sprott Inc. (the “Issuer”) to the Ontario Securities Commission (the “Commission”) for an order (the “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 purchase by the Issuer from 2176423 Ontario Ltd. (“2176423”), a holding company controlled by a former director and former officer of the Issuer, of up to 5,000,000 common shares of the Issuer (the “Subject Shares”);
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Issuer (and 2176423 in respect of paragraphs 6, 7, 9 and 10 as they relate to 2176423) having represented to the Commission that:
1. The Issuer is a corporation existing under the Business Corporations Act (Ontario) (the “OBCA”) with its registered and head office located at Suite 2700, 200 Bay Street, Royal Bank Plaza, South Tower, Toronto, Ontario, M5J 2J1.
2. The Issuer is a reporting issuer in each of the provinces and territories of Canada (the “Jurisdictions”) and is not in default of any requirement of the securities legislation in any of the Jurisdictions
3. The authorized share capital of the Corporation consists of an unlimited number of common shares (“Common Shares”), of which 248,762,875 Common Shares are issued and outstanding as of June 21, 2017.
4. The Common Shares are listed on the Toronto Stock Exchange under the symbol “SII”.
5. To the knowledge of the Issuer, as at June 21, 2017, the only person who beneficially owns, directly or indirectly, more than 10% of the outstanding Common Shares is Eric S. Sprott, who holds directly and indirectly, an aggregate of 61,598,078 Common Shares (the “Sprott Shares”) representing approximately 24.76% of the issued and outstanding Common Shares.
6. The Sprott Shares include 61,498,078 Common Shares, representing approximately 24.72% of the issued and outstanding Common Shares, which are held indirectly by Mr. Sprott through 2176423. Mr. Sprott formerly served as the Chair of the board of directors, as a director and as an officer of the Issuer.
7. 2176423 is a holding company that neither carries on any active business nor owns any material assets other than cash, Common Shares (being substantially all of the Sprott Shares) and securities of other public and private issuers. Mr. Sprott beneficially owns, directly, approximately 83.33% of the issued and outstanding voting shares of 2176423 (representing approximately 99.8% of the outstanding voting rights). The remaining approximately 16.67% of the issued and outstanding voting shares of 2176423 (representing approximately 0.2% of the outstanding voting rights) are beneficially owned, directly, by Mr. Sprott, as trustee of The Eric Sprott Family Trust, the beneficiaries of which are Mr. Sprott and his wife, subject to certain contingencies. The non-voting shares of 2176423 are directly held by Mr. Sprott, The Eric Sprott Family Trust and another family trust (the beneficiaries of which are Mr. Sprott, his wife, his children and present and future grandchildren, subject to certain contingencies) and by Peter Grosskopf, a director and an officer of the Issuer.
8. The Issuer has filed a preliminary short form prospectus for the secondary offering of 18,000,000 Common hares by 2176423 (the “Offering”) and obtained a receipt therefor from the Commission on June 8, 2017. Such prospectus discloses, among other things, that the Issuer proposes to make the Purchase (as defined below). The Issuer issued a press release on June 8, 2017 disclosing, among other things, the Offering and the Purchase. In its final short form prospectus dated June 21, 2017 relating to the Offering, the Issuer disclosed its intention to make the Purchase, the anticipated timing of the Purchase, and the anticipated pricing of the Purchase.
9. The Issuer proposes to enter into a share purchase agreement with 2176423 (the “Purchase Agreement”) pursuant to which, conditional upon receipt of this Order, the Issuer intends to purchase the Subject Shares, repre-senting approximately 2.01% of the issued and outstanding Common Shares (the “Purchase”). The purchase price per Common Share (the “Purchase Price”) payable for the Subject Shares will equal the Offering price, provided that the Offering price does not exceed the market price of the Common Shares at the date of the Purchase, determined in accordance with section 1.11 of NI 62-104 (the “Market Price”). If the Offering price exceeds the Market Price, then the Purchase Price will be adjusted such that it is not greater than the Market Price.
10. Other than the Purchase Price, no additional fee or other consideration will be paid by the Issuer in connection with the Purchase.
11. The Purchase by the Issuer will constitute an “issuer bid” for the purposes of NI 62-104, to which the applicable Issuer Bid Requirements would apply. The Purchase cannot be made in reliance upon exemptions from the Issuer Bid Requirements contained in Part 4 of NI 62-104.
12. If the Subject Shares were held directly by Mr. Sprott and purchased by the Issuer from Mr. Sprott, such purchase would be exempt from the Issuer Bid Requirements in reliance on section 4.7 of NI 62-104 since Mr. Sprott is a former director and former officer of the Issuer.
13. For the purposes of the Purchase, all of the directors of the Issuer other than Peter Grosskopf (the “Independent Directors”) are independent directors within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions. The Independent Directors have determined that the Purchase is in the best interests of the Issuer and its shareholders and is a prudent use of the Issuer’s surplus cash given its current circumstances. In making this determination, the Independent Directors considered, among other things:
(a) the Issuer’s planned capital expenditures and anticipated future cash requirements;
(b) the impact of the Purchase, including the reduction of concentration of ownership of the Issuer currently held directly and indirectly by Mr. Sprott; and
(c) that after the Purchase, the Issuer will be in compliance with the solvency require-ments set forth in section 30(2) of the OBCA, being that there are no reasonable grounds for believing that the Issuer is, or would after payment of the Purchase Price be, unable to pay its liabilities as they become due, or after payment of the Purchase Price, the realizable value of the Issuer’s assets would be less than the aggregate of its liabilities and its stated capital of all classes.
14. The Independent Directors have no actual knowledge that the Purchase will be prejudicial to the interests of any of the Issuer’s shareholders.
AND UPON the Commission being satisfied 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 Purchase, provided that:
(a) the Issuer will report information regarding the Purchase, including the number Subject Shares purchased and the aggregate Purchase Price, on the System for Electronic Document Analysis and Retrieval (SEDAR) before 5:00 p.m. (Toronto time) on the business day following the completion of the Purchase;
(b) the number of Subject Shares purchased from 2176423 pursuant to this Order, when aggregated with all other Common Shares acquired by the Issuer within any period of 12 months in reliance on the employee, executive officer, director and consultant exemption set out in section 4.7 of NI 62-104, shall not exceed 5% of the issued and outstanding Common Shares at the beginning of such 12 month period;
(c) the Purchase Price per Subject Share paid in connection with the Purchase will not exceed the market price of the Common Shares at the date of the Purchase, determined in accordance with section 1.11 of NI 62-104; and
(d) at the time the Purchase Agreement is entered into, and at the time of the Purchase, neither the Issuer, Mr. Sprott nor 2176423 will be aware of any “material change” or “material fact” (each as defined in the Securities Act (Ontario)) in respect of the Issuer or the Common Shares that has not been generally disclosed.
DATED at Toronto, Ontario this 28th day of June, 2017.
Director, Office of Mergers & Acquisitions
Ontario Securities Commission