Jeremy Fraiberg
Jun 12, 2018
Regulators with the Financial and Consumer Affairs Authority of Saskatchewan and Ontario Securities Commission have released the reasons for their December 2017 decision to quash the poison pill that CanniMed Therapeutics Inc. attempted to install in response to Aurora Cannabis Inc.'s initial hostile takeover bid. In an article in The Globe and Mail, journalist Jeffrey Jones takes a look at the fallout from the decision and the impact it could have on future shareholder rights plans. According to the article, the regulators are wary of hastily put-together rights plans that are aimed at preventing lock-ups and allowed market purchases by bidders – particularly because they make the takeover regime less predictable and disregard the revised takeover rules that came into force in 2016. Jones seeks commentary from legal experts, including Jeremy Fraiberg, Co-Chair of Osler’s Mergers & Acquisitions Group. Jeremy says that though the decision doesn’t make tactical plans obsolete, it “raises big questions about their future use.”
He goes on to explain that one outcome may be “reduced protection for boards of target firms looking to extract better offers from would-be white knights. Indeed, poison pills have prevented bidders from acquiring up to 5 per cent more shares when the purchases would bring the total locked-up stock above 20 per cent of the total, as that would make it harder for a rival to win enough support for a potentially higher offer.”
Jeremy observes that “[s]ome people might find that counterintuitive and surprising.”
If you subscribe to The Globe and Mail, you can learn more about the decision and the regulators’ reasons by reading Jeffrey Jones’ full article “How Canada’s biggest cannabis deal made poison pills harder to swallow” first published March 26, 2018 and updated June 5, 2018.