OSC’s Decision Concerning HudBay Minerals Contains Several New and Significant Points for M&A Transactions
The Ontario Securities Commission released on April 28, 2009 the reasons for its previously issued decision to require the proposed acquisition of Lundin Mining Corporation by HudBay Minerals Inc. to be submitted for approval to the shareholders of HudBay. The decision is significant because it reverses the Toronto Stock Exchange’s long-standing position not to require shareholder approval where two public companies are merging in a share-for-share exchange and there will be substantial dilution suffered by shareholders of the acquiror. The Exchange had determined that no such vote should be required by the HudBay shareholders, which is consistent with the Exchange’s position on earlier similar transactions such as the acquisition of Glamis Gold Ltd. by Goldcorp Inc. in 2006 and the purchase of Allstream Inc. by Manitoba Telecom Services Inc. in 2004.
The reasons contain several other new and important pronouncements by the OSC. One, which could have wide-ranging consequences, is that a fairness opinion prepared by a financial adviser who is being paid a success fee does not assist a board of directors (or its special committee) in demonstrating they have taken due care in approving the transaction. Another is that it is manifestly unfair for the directors of a corporation to set the date of a meeting requisitioned by shareholders at a time that effectively frustrates the purpose of such meeting.