A new report from the C.D. Howe Institute says securities regulators were right to change the rules earlier this year allowing corporate boards more time to evaluate proposed takeover bids. Regulators should be monitoring the impact of these new rules on companies, shareholders, and the capital markets overall, the report adds.
The report, written by securities lawyer Sharon Geraghty, partner at Torys LLP in Toronto and published today by the Toronto-based think tank, argues that the Canadian Securities Administrators “made the right move” when they extended the minimum bid period in Canada from 35 days to 105 days, among other changes to the takeover rules that were adopted earlier this year.
The report says that giving boards more time to evaluate proposed deals and consider alternatives “should help level the playing field” between bidders and target companies. This, in turn, should help companies maximize value for the shareholders of companies facing takeover bids.
Looking ahead, the report argues, regulators should monitor the effect of the new regime on the number of hostile bids and friendly takeover deals, and the relative benefits to shareholders in each scenario. Additionally, it says, regulators should “measure the broader economic effect of the new rules on the size and competitive position of Canadian-based public companies and capital markets.”
The report concludes: “Securities laws should not foster short-term price gains; rather, they should promote strong public companies and capital markets that deliver long-term economic value to investors. That outcome will require strong management endowed with reasonable flexibility to implement strategies for long-term growth. Increasing the minimum bid period is a positive step in that direction.”
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