National Instrument 62-104 Take-Over Bids and Issuer Bid – Exemption from the formal issuer bid requirements – An issuer requires an exemption from all issuer bid requirements in order to purchase its common shares under an odd-lot purchase program – The issuer will only offer the program to shareholders holding less than 100 common shares; all odd-lot holders will be given the same information and will be treated identically; if successful, the repurchase program will reduce the administrative burden on the issuer; the repurchase price will be determined by a formula based on the market price for the shares.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids.
Securities Act, R.S.O. 1990, c. S.5, as am.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
Citation: Re Advantage Oil & Gas Ltd., 2018 ABASC 21
February 7, 2018
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
ADVANTAGE OIL & GAS LTD.
The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application (the Application) from the Filer for a decision (the Exemption Sought) under the securities legislation of the Jurisdictions (the Legislation) that the Filer is exempt from the formal issuer bid requirements in Part 2 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) with respect to the Filer’s offer to purchase the Filer’s common shares (Common Shares) from the Filer’s shareholders (Shareholders) who own fewer than 100 Common Shares (Odd Lot Holders) under an odd lot program (the Proposed Odd Lot Program).
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 British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Yukon Territory, North-west Territories, and Nunavut; and
(c) the 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 exists under the laws of Alberta and has a head office in Calgary, Alberta.
2. The Filer’s authorized capital consists of an unlimited number of Common Shares, an un-limited number of non-voting common shares, an unlimited number of preferred shares, issuable in series, and an unlimited number of exchangeable shares, issuable in series. As of December 19, 2017, the Filer had 185,963,186 Common Shares outstanding.
3. The Filer is a reporting issuer in each of the provinces of Canada.
4. The Filer’s Common Shares are listed and posted for trading on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).
5. The Filer is not in default of securities legislation in any jurisdiction of Canada.
6. As of November 21, 2017, the Filer had 5,894 registered and unregistered Odd Lot Holders representing 0.1% of the Filer’s issued and outstanding Common Shares. On average, each Odd Lot Holder held 43 Common Shares.
7. The Filer proposes to offer to purchase all of the Common Shares from Odd Lot Holders who are resident in Canada or the United States under the Proposed Odd Lot Program up to a maximum of $4,000,000 which amount may be increased at the discretion of the Filer’s board of directors. The Filer will cancel any Common Shares that it purchases under the Proposed Odd Lot Program. The Proposed Odd Lot Program will be conducted through the Filer’s transfer agent and announced by way of a widely disseminated press release.
8. After announcing the Proposed Odd Lot Program, the Filer will send both registered and unregis-tered Odd Lot Holders an information package containing a letter outlining the Proposed Odd Lot Program and a letter of transmittal/response card to be completed by any Odd Lot Holders that wish to tender their Common Shares under the Proposed Odd Lot Program.
9. The Proposed Odd Lot Program will be open for six weeks, with an option, at the discretion of the Filer’s board of directors, to extend it for an additional six weeks.
10. Under the Proposed Odd Lot Program, the Filer will pay tendering Odd Lot Holders the following:
(a) Canadian Odd Lot Holders will receive a price per share equal to the five day volume weighted average price (5 day VWAP) of the Common Shares on the TSX for the week (i.e., calculated on the Friday) immediately prior to the week in which the Odd Lot Holder tenders their Common Shares; and
(b) United States Odd Lot Holders will receive a price per share equal to the 5 day VWAP of the Common Shares on the NYSE for the week (i.e., calculated on the Friday) immediately prior to the week in which the Odd Lot Holder tenders their Common Shares.
As such, participating Odd Lot Holders will not receive a premium on their Common Shares. Instead, they will be afforded the same liquidity and access to capital markets as Shareholders with board lot holdings.
11. The Filer believes that:
(a) the Proposed Odd Lot Program would be beneficial to the Odd Lot Holders as it is a voluntary program allowing them to dispose of their shares without incurring prohibitive brokerage and other fees; and
(b) if the Proposed Odd Lot Program is successful in significantly reducing the number of Odd Lot Holders, both the Filer and all of its securityholders would benefit from the potential cost-savings respecting annual mailings and other securityholder communications as a result of a reduced number of Shareholders.
12. Under Rule 13e-4(h)(5) of the 1934 Act, the Proposed Odd Lot Program will be exempt from the “tender offer” rules under U.S. federal securities law. However, there is no similar applicable exemption from the issuer bid requirements under NI 62-104.
13. The Proposed Odd Lot Program will be conducted in accordance with U.S. federal securities laws, Canadian securities laws, and the policies of the NYSE and TSX. The Filer has advised the NYSE and the TSX of its intention to conduct the Proposed Odd Lot Program and the terms of the Proposed Odd Lot Program and neither the NYSE nor the TSX has objected to the Proposed Odd Lot Program.
14. All Odd Lot Holders will be treated identically under the Proposed Odd Lot Program.
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.
Alberta Securities Commission