Regulators move to harmonize, strength rules in hostile takeover bids

Among major changes, bids would have to remain open for at least 120 days, up from 35.

TORONTO — Canadian securities regulators are moving to harmonize rules governing hostile takeovers, including increasing the time target companies have to find alternatives and tightening rules involving shareholder approval.

The Canadian Securities Administrators and Quebec’s Autorite des marche financiers have published separate notices of the proposed regulations governing takeover bids in all provinces and territories.

Among the major changes, bids would have to remain open for a minimum of 120 days. The current requirement is 35 days, although in practice target companies in hostile battles are able to extend that period to between 60 and 65 days by adopting so-called poison-pill defensive measures.

The new rules would allow the board of a target company in a friendly takeover to reduce it to no less than 35 days “in certain circumstances and on certain conditions.”

Meanwhile, the proposed changes would make hostile bids subject to a mandatory minimum tender condition of more than 50% of the outstanding shares of the target company, excluding those held by the bidder or its partners. Bidders would also no longer be able to waive minimum tender conditions as they are currently allowed.

And the new rules would also require a bidder to extend its offer an additional 10 days once the mandatory minimum tender condition has been met and it has announced its intention to acquire the shares deposited under the bid.

The CSA and the AMF said the proposals are aimed at addressing concerns raised with the defensive tactics currently available to boards of directors of target issuers facing unsolicited or hostile takeover bids.

“We have worked to develop a harmonized takeover bid regime for all Canadian jurisdictions and have been successful in achieving national agreement,” said Bill Rice, chairman of the CSA and chairman and CEO of the Alberta Securities Commission.

“The proposed amendments are designed to provide target boards with additional time to respond to hostile bids while reserving for shareholders the ability to make voluntary, informed and co-ordinated tender decisions.

The CSA said it intends to publish complete details of the proposed amendments for comment during the first quarter of 2015.

© 2014 The Canadian Press

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