The Toronto Stock Exchange (the "TSX") has published for comment proposed changes to its Company Manual which would require TSX listed issuers to obtain security holder approval where they propose to issue securities in connection with the purchase of a public company. It is proposed that security holder approval be required where the securities to be issued exceed 50% of the TSX listed acquiror's outstanding securities (on a non-diluted basis). Currently the TSX does not require listed issuers to obtain security holder approval where securities are being issued in connection with the acquisition of a public company.
The proposed amendments follow the recent decision of the Ontario Securities Commission (the "OSC") In the Matter of HudBay Minerals Inc. ("HudBay") where the OSC concluded that, in the particular circumstances, the fair treatment of shareholders and the public interest required HudBay shareholder approval for the issuance of HudBay shares in its proposed acquisition of Lundin Mining Corp. which would have resulted in the dilution of HudBay shareholders of over 100%. For further details of the HudBay decision, click here.
Most major stock exchanges require security holder approval in dilutive transactions, including the acquisition of a public company. The proposed changes seek to address this perceived gap in the regulatory landscape while at the same time balancing the unique nature of the Canadian marketplace. Comments on the proposed changes are due by May 4, 2009.