From the Regulators

A proposed 120-day requirement is intended to ensure that boards have enough time to respond to unsolicited take-over bids

By James Langton |

Companies facing hostile takeover bids will have more time to mount a defence, and shareholders will have more latitude to decide on these kinds of offers, under proposals unveiled by securities regulators.

The Canadian Securities Administrators (CSA) Tuesday published a series of proposed changes to the rules governing takeover bids The proposed amendments would require that all non-exempt bids remain open for at least 120 days, unless the board of the target company agrees to a shorter period (the current minimum is 35 days). They would also require that bids meet a minimum tender requirement of at least 50% of the outstanding shares that are subject to the bid (excluding shares owned by the bidder, or a group supporting a bid); and that, if that minimum tender requirement is met, bids be extended for 10 days.

Under the current regime, there is no minimum tender requirement, or obligation to extend a bid period, defensive shareholder rights plans are typically cease traded within 45 to 60 days of a hostile bid, the CSA notes.

In its proposals, the CSA says that the proposed 120-day requirement is intended to ensure that boards have enough time to respond to unsolicited take-over bids, either through seeking seeking alternative deals, or to articulate their views on the merits of the bid. The proposed minimum tender requirement aims to ensure that takeovers are approved by a majority of independent shareholders; and, the 10-day extension is intended to mitigate the "pressure to tender", the CSA says, by protecting shareholders' ability to tender whether or not they supported a bid from the outset.

"The proposed amendments promise to bring important enhancements to the take-over bid regime in Canada. Our goal is to provide target boards with sufficient time to respond to hostile bids, while facilitating the ability of target shareholders to make voluntary, informed and co-ordinated tender decisions," said newly appointed CSA chairman Louis Morisset, president and CEO of the Autorité des marchés financiers (AMF).

Regulators have been considering reforms to the takeover bid regime for several years now. Back in 2013, the AMF and the rest of the CSA proposed two different approaches to reform. Last September, the CSA announced that they intended to adopt a common approach to reforming the bid regime. Today's proposed amendments aim to enhance the quality and integrity of the take-over bid regime through a harmonized approach.

"The outcome of this initiative reflects well on the CSA's ability to align its members' efforts to address the variety of concerns that were raised across the country," noted Morisset.

The proposals are now out for a 90-day comment period, ending on June 29.