RPT-UPDATE 1-Canada poison-pill plans to make hostile takeovers tougher

Thu Mar 14, 2013 4:36pm EDT
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By Euan Rocha

TORONTO, March 14 (Reuters) - Canadian regulators unveiled proposals on Thursday on the use of poison pills as a takeover defense that are likely to make hostile corporate takeovers in the country more difficult.

The two sets of proposals, laid out by provincial securities regulators, aim to bring more coherence to Canada's regulatory regime after conflicting rulings by some provincial regulators on poison pills, which companies use to fend off unwanted suitors.

The plans will curb drastically the ability of regulators to overturn a poison pill, and give companies more ammunition to fight hostile bids through the use of the defensive maneuver.

"This represents one of the most far-reaching debates about the acquisition of corporate control that we have had in this country in almost the last 50 years," said Richard Steinberg, who heads law firm Fasken Martineau's securities and mergers and acquisitions group.

Poison pills, or shareholder rights plans, effectively raise the price of a hostile bid by giving existing shareholders, excluding the hostile bidder, the right to buy more stock in the target company at a discount.

Canadian provincial securities regulators typically quash these pills within two months, giving companies only a narrow window in which to look for an alternative proposal to the hostile bid.

But the lack of a single national securities watchdog has muddied the waters in Canada as individual provincial regulators have on occasion issued varied rulings on poison pills. Some have allowed the pills to stand indefinitely, while others have overturned them before shareholders have had a chance to vote on them.   Continued...