Contested Take-over Bids - Offensive Strategies

September 18, 2007

The prevalence of hostile take-over bids and other forms of contested M&A transactions continued a theme in the Canadian M&A markets in 2006 and the first part of 2007. The number and profile of these types of transactions have continued to grow. despite the record number of transactions in the previous year.

Some of the more notable transactions include Alcoa Inc.’s hostile bid for Alcan Inc. and Saskatchewan Wheat Pool’s bid for Agricore United (which was then topped by James Richardson International Limited, and then amended again once Saskatchewan Wheat Pool entered into an arrangement with James Richardson International to split up certain of Agricore United’s assets). Other recent transactions include Harbinger Capital Partner’s successful bid for Calpine Power Income Fund, Genzyme Corporation’s successful bid for AnorMED Inc. and Avion Group hf’s successful bid for Atlas Cold Storage Income Fund.

In addition, there have been an increasing number of topping bids in Canada, both in the context of an additional bidder making a hostile bid (such as Millenium Pharmaceutical’s bid for AnorMED Inc. and James Richardson International’s bid for Agricore United), and new bidders attempting to break up friendly supported transactions (such as Oxbow Carbon and Minerals Holding’s successful attempt to acquire Great Lakes Carbon Income Fund following its friendly deal with Rain Commodities and Open Text Corporation’s successful bid for Hummingbird Ltd. following its proposed transaction with Symphony Technology).

As well, we are now seeing aggressive suitors in Canada being able to impact the process that target companies employ through bear hug letters and public statements regarding the intentions of these potential bidders. One high profile example of this is the public disclosure made by Ontario Teachers Pension Plan Board regarding its change in investment intent relating to its holdings of shares of BCE Inc. which contributed to the review of strategic alternatives now underway by the board of BCE Inc.

This article focuses on the relevant strategic options and legal responsibilities of bidders. While my comments are based on Ontario securities legislation and regulation, the securities regimes of other provinces are quite similar in most respects. Indeed, our Canadian securities regulators have recently issued a proposed multilateral instrument, which when implemented will further harmonize the various provincial take-over bid rules.

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