On July 4 2012 the Ontario Securities Commission (OSC) issued a cease-trade order in connection with Thirdcoast Limited's shareholder rights plan, or poison pill. The rights plan was adopted in response to an all-cash bid made by Parrish & Heimbecker Limited.
The OSC also dismissed a cross-application by Thirdcoast seeking to void lock-up agreements entered into by Parrish & Heimbecker in connection with the bid.
The reasons supporting the OSC's decision will be released at a later date. However, the order(1) refered to the following facts:
- The rights plan had not been approved by Thirdcoast shareholders and such approval would have been unlikely, given the lock-up agreements.
- The rights plan had been tactical, adopted in response to the Parrish & Heimbecker bid.
- The bid had been outstanding for 35 days; 122 days had elapsed since the bid was announced and 135 days had elapsed since Thirdcoast was informed of Parrish & Heimbecker's intention to make the bid.
- There was no evidence that the bid had been coercive.
- There was no evidence that allowing the rights plan to stay in place for the requested additional 30 days would have served to enhance shareholder value.
The OSC's detailed reasons will be released at a later date. Any guidance provided by the OSC in respect of the defensive tactics and other issues raised at the hearing may be of particular interest.
Meanwhile, it is clear that the OSC has affirmed the fundamental policy that, in Canada, it is shareholders which should decide on the outcome of a bid, and a rights plan will be permitted only as a temporary measure to enhance shareholder value.
For further information on this topic please contact David Surat at Borden Ladner Gervais LLP by telephone (+1 416 367 6000), fax (+1 416 367 6749) or email (dsurat@blg.com).
Endnotes
(1) Available at osc.gov.on.ca/documents/en/Proceedings-RAD/rad_20120704_thirdcoast-ph.pdf.
