March 22, 2018
On March 15, 2018, securities regulators issued the reasons for their decision in the Aurora Cannabis Inc./CanniMed Therapeutics Inc. merger, the first poison pill ruling since the new takeover regime came into effect in May 2016. In an article in the Financial Post, business writer Barry Critchley examines those reasons and the impact the decision may have on poison pills – formally known as shareholders rights plans – going forward. To better understand the implications of the ruling, Critchley consults Jeremy Fraiberg, a partner in Osler’s Corporate Department and Co-Chair of the firm’s Mergers and Acquisitions Group. According to the article, Jeremy refers to three key parts of the reasons when assessing the ruling and concludes that the “biggest takeaway from the decision” is that “[t]he ability to use a plan to prevent creeping 5 per cent and hard lock-ups could be imperiled.”
The first part is the regulators’ assertion that arrangements in which “tactical shareholder rights plans could … operate to prevent lock-ups and permitted market purchases” could make the takeover bid regime “far less predictable and the planning and implementation of shareholder value-enhancing transactions more difficult.” The second part is the claim that some tactical plans “can be confusing to investors and market participants.” The third part is the regulators’ conclusion in the reasons that the rights plan is an “impermissible defensive tactic.”
This ruling highlights the lack of direction in the new takeover rules when it comes to shareholders rights plans. As Jeremy concludes, “Under the old regime, participants had confidence that rights plans would prevent a 5 per cent creep and hard lock-ups; now there is some uncertainty. If this interpretation is correct, the irony is that the new regime potentially provides less board protection” than previously.
The timeline of the Aurora/CanniMed case and the principal issues at play were outlined in detail in an Osler Update from January 2018. The reasons for the decision were discussed at length in a subsequent Osler Update in March 2018. Read Barry Critchley’s full article “Aurora-CanniMed decision raises poison pill concerns” in the March 22, 2018 edition of the Financial Post.