OSC Policy 9.3: OSCP - 62-601 - Securities Exchange Take-Over Bids - Trades in the Offeror's Securities

OSC Policy 9.3: OSCP - 62-601 - Securities Exchange Take-Over Bids - Trades in the Offeror's Securities

Amendments to OSC Policy

O.S.C. POLICY 9.3 -


1. The private agreement exemption contained in section 93(1)(c) of the Securities Act (Ontario) (the "Act") is not available, in the opinion of the Ontario Securities Commission, to an offeror while that offeror has a circular bid outstanding. The Commission is of this view for the following reasons:

(a) a circular offer is an offer to purchase securities made to security holders generally which precludes the use of the private agreement exemption in section 93(1)(c);

(b) section 97(1) of the Act requires that the same (identical) consideration be offered to all holders of the same class of securities and no collateral agreement with any such holders shall have the effect, directly or indirectly, of offering such holders a consideration of greater value for their securities than that offered to the other holders of the same class of securities. A private agreement in the context of a circular bid must necessarily involve an offer on different terms and conditions than the circular bid; and

(c) it would be extremely difficult to enforce the prohibition against collateral agreements in section 97(2) that might be offered in connection with such private purchases.

2. Prima facie, crosses, put-throughs and any other pre-arranged trades are a form of private agreement.


1. The Commission has been concerned that, notwithstanding the intent of Part XX of the Act, in some situations, holders of large blocks of shares may be or perceived to be treated better than the holders of smaller numbers of shares by an offeror in the context of a take-over bid or by an issuer in the context of an issuer bid. It is the policy of the Act that all shareholders should be treated equally. Of concern particularly are partial take-over bids or issuer bids following or at the same time as private agreements for the purchase of all of the securities of the class sought from a particular holder.

2. When a take-over bid or an issuer bid is made, section 97(1) of the Act requires that all holders of the same class of securities be offered the same consideration. For this purpose, it is the view of the Commission that offering to purchase all the securities of a class of any holder pursuant to a private agreement will require that, if the purchaser makes a linked or related take-over bid or issuer bid for the securities of that class, it must be made for all of the class of securities sought at a price at least as great as that paid in the private agreement.


1. In a securities exchange take-over bid, where securities of a class listed on a stock exchange or traded on the over-the-counter market are being offered in whole or in part in exchange for the securities sought by the offeror, the offeree's perception of the value of the consideration being offered will be affected, at least in part, by the market price of the securities of the class offered in exchange (the "offered security"). This price should be arrived at by normal market forces operating in an orderly fashion, taking into account the terms of the offer.

2. The Commission views it as inappropriate for:

(a) any person or company acting on behalf of an offeror who is making, or intends to make, a securities exchange take-over bid, or

(b) any person or company who is supporting, or intends to support, an offeror who is making, or intends to make, a securities exchange take-over bid,

to bid for, or make purchases of, the offered securities in the market in the guise of market "support", market "maintenance" or market "stabilization" (hereinafter collectively referred to as "market stabilization") which have the effect of increasing or maintaining the price of the offered securities at a market price which is higher than the market price would be in the absence of such bids or purchases. Notwithstanding any announcement that such a program has been undertaken, the Commission views the potential results of market stabilization as giving an artificial or deceptive appearance to the market price of the offered securities.

3. Conversely, the Commission also views it as inappropriate for any person or company to sell the offered securities for the purpose of depressing the price of such securities in order to defeat a take-over bid.

4. The Commission, however, appreciates the need to maintain public confidence in the market by ensuring a fair and orderly market. In the context of a securities exchange take-over bid involving securities of an offeror listed on a stock exchange, it is recognized that a market may require assistance to minimize price disparities caused by temporary supply-demand imbalances in an offered security which often follow the public announcement of a take-over bid. Market balancing transactions may therefore be required for the purpose of ensuring fair and orderly changes in the price of the offered security. A market balancing transaction is a bid, purchase, offer or sale made through the facilities of a stock exchange in accordance with the by-laws, rules or policies of the stock exchange which, in the opinion of the stock exchange, contributes to a fair and orderly market by contributing to price continuity and depth and by minimizing supply-demand disparity. The level of purchases or sales which will contribute to a fair and orderly market will vary from company to company and from time to time for a particular company. The extent to which market balancing activity is required is dependent upon an assessment of a number of criteria, including, but not limited to, the size of the public float, the number of shareholders and recent disclosures relating to the company or its particular economic sector. Unlike market stabilization, market balancing does not seek to prevent or unduly retard any price movements, but merely to prevent erratic or disorderly changes in price by bridging time gaps in the market which result from temporary differences in public bids and offers which reach the market. Accordingly, the Commission does not view as inappropriate market balancing bids for, offers for, or purchases of, an offered security when made by a member of a stock exchange, recognized by the Commission for this purpose, which is acting as a dealer-manager for a securities ex

5. Pending the making of a regulation amending Form 32 under the Regulation to the Securities Act the Commission is of the view that, where applicable, a person or company filing a take-over bid circular with the Commission should include as part of the take-over bid circular a description of:

(a) any market balancing activity engaged in by such person or company prior to the date of the take-over bid circular; and

(b) any market balancing activity contemplated by such person or company following the date of the take-over bid circular.

(Former Policy 3-37, paragraph 9: Paragraph 9 added to 3-37 (1984) 1 O.S.C.B. 24E; published as 9.3 (1982) 4 O.S.C.B. 551E.)