UPDATE 2-Canada regulators to propose extended poison pills

Tue Feb 26, 2013 7:06pm EST
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* Change would better protect companies from hostile bids

* Proposal would bring Canada more in line with U.S. rules

* Quebec plans a more far-reaching plan

By Alastair Sharp and Euan Rocha

TORONTO, Feb 26 (Reuters) - Canadian securities regulators want to change the rules on takeover defenses to make it more difficult for hostile bidders to buy Canadian companies, according to officials and lawyers briefed on the matter.

The plan, due to be published in draft form on March 14, is designed to bring more coherence to Canada's regulatory regime after conflicting provincial rulings on so-called "poison pill" defenses to fend off unwanted suitors, the sources said.

"There has been some criticism over the years that Canada is too bidder-friendly and that companies should have more tools at their disposal to fight hostile bids," said Ralph Shay who heads the securities law group at Fraser Milner Casgrain in Toronto.

Poison pills effectively raise the price of a hostile bid by giving all existing shareholders, excluding the hostile bidder, the right to buy additional stock in the target company at a discount.

In Canada, boards of companies that are targets of a hostile bid typically have limited time in which to bring an alternate proposal before shareholders, as provincial regulators usually quash poison pills 45 to 60 days after a bid is launched.   Continued...