TSX Adopts Changes to Provide Flexibility to Issuers Pursuing Dilutive Public Company Acquisitions

November 8, 2018

As we discussed in a July 2018 post, the Toronto Stock Exchange (TSX) recently proposed allowing issuers to issue additional shares beyond the amount for which they have already obtained shareholder approval for use as consideration for the acquisition of a public company.

On August 28, 2018, the TSX issued Staff Notice 2018-005 approving the changes as originally proposed. Under the adopted changes, where shareholder approval has been obtained to issue shares beyond the dilution threshold for the acquisition of a public company, no further shareholder approval will be required for an issuance of up to an additional 25% of the number of shares originally approved. The change is intended to provide issuers with the flexibility to increase an unsolicited bid without requiring that they return to shareholders for further approval and, thus, signal their strategic intentions.

As we discussed in our previous post, issuers will have to include specific language in the materials provided to shareholders stating that the TSX will generally not require further shareholder approval for the issuance of the additional shares.

In response to commenters suggesting that the changes be extended to any acquisition where shareholder approval has been obtained, including closely-held public company acquisitions, private company acquisitions and asset acquisitions, the TSX stated that it will consider whether to issue a separate consultation paper on the issue in the future.

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