“On August 9th, 2013, New Gold Inc. acquired approximately 97.5% of the outstanding shares of Rainy River Resources through a friendly take-over bid. Subsequently on October 16th, 2013, New Gold acquired the remaining 2.5% of the outstanding shares of Rainy River by way of compulsory acquisition under the Business Corporations Act (British Columbia).”
A “compulsory acquisition” is a type of second step transaction that follows a take-over bid that does not result in 100% of the target shares being tendered to the bid. A compulsory acquisition is a method of achieving 100% ownership of a company, if within 120 days of the launch of the take-over bid the bidder obtained at least 90% of the target shares that it did not already own. If a bidder finds itself holding less than 100% but has otherwise achieved this 90% threshold, the bidder may invoke the compulsory acquisition provisions under federal and provincial corporate statutes and ‘force’ the remaining shareholders in the target to sell their shares to the bidder at the offer price by sending written notice to the non-tendering shareholders within a short period of time following the end of the bid or the 120 day period referred to above. A bidder that invokes this right by sending notice is required to make payment to the non-tendering shareholders. However, shareholders are entitled to dissent to the price to be paid and require a court to fix the fair value of their shares.