15.2: Securities Legislation and Takeovers Flashcards
What are some concerns regarding takeovers?
- Concerns related to national security.
- Concerns about “sensitive” industries that are seen as critical to the nation.
- Anti-trust concerns in situations where an amalgamation of two or more businesses would create an entity that would too narrowly restrict competition.
What is the Ontario Securities Act and what does it regulate?
The Ontario Securities Act regulates the exchange of shares by the target company’s shareholders and protects their right to receive full value for their shares.
What are the critical shareholder percentages in securities legislation?
- 10 percent: early warning
- 20 percent: takeover bid
- 50.1 percent: control
- 66.7 percent: amalgamation
- 90 percent: minority squeeze-out
What is a tender?
To sign an authorization accepting a takeover bid made to target company shareholders.
What is a takeover circular?
A document describing the bid, financing, and all relevant information that must be sent to all shareholders for review during a takeover bid.
What is a creeping takeover?
The acquisition of a target company over time by the gradual accumulation of its shares.
What is a two-part tender offer and why is it illegal in Canada?
A two-part tender offer is a coercive takeover bid where the acquirer offers one price for the shares needed to get control and then a lower price once it has control.
It is illegal in Canada because it pressures shareholders to sell in the first stage.
What happens when an acquirer holds 20 percent of shares in a company under the Ontario Securities Act?
They cannot buy any more shares in the open market without making a takeover bid.
What happens if a firm owns 66.7 percent of the shares following a takeover bid?
They can force the minority of the shareholders to sell their shares at the takeover price.
What does the 10-percent early warning threshold refer to?
The level of shareholding by any one owner that requires a report to be sent to the OSC, letting the company know who owns its shares and whether a significant block has been bought by a potential acquirer.
