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Fairfax Africa Holdings Corporation
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- issuer required to comply with Item 14.2 of Form 51-102F5 -- Information Circular in respect of an acquisition that triggered the 20% threshold significance test for reporting issuers that are not venture issuers -- on November 18, 2020 rule amendments come into force that increase the threshold significance test for reporting issuers that are not venture issuers to at least two of the existing significance tests at 30% threshold level -- the acquisition is not significant under the amended threshold -- relief granted from requirement to comply with Item 14.2 of Form 51-102F5.
Applicable Legislative Provisions
Form 51-102F5 to National Instrument 51-102 Continuous Disclosure Obligations, Item 14.2.
October 28, 2020
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS ANDIN THE MATTER OF FAIRFAX AFRICA HOLDINGS CORPORATION (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the Filer be exempt from the requirements of Item 14.2 of Form 51-102F5 Information Circular (Form 51-102F5) in connection with the management information circular (the Circular) prepared in relation to the Acquisition described below (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (collectively, with Ontario, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation governed by the Canada Business Corporations Act.
2. The head and registered office of the Filer is located at 95 Wellington Street West, Suite 800, Toronto, Ontario, M5J 2N7.
3. The Filer is a reporting issuer in each of the Jurisdictions and is not in default of any requirement of the securities legislation in the Jurisdictions.
4. The subordinate voting shares of the Filer are listed and posted for trading on the Toronto Stock Exchange under the symbol "FAH.U".
5. The Filer is an investment holding company whose investment objective is to achieve long-term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments of African businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, Africa.
6. On July 10, 2020, the Filer entered into a purchase and sale agreement with HFA TopCo, L.P. (the Partnership), Helios Holdings Limited (HHL) and Helios Holdings Partners Limited (HHPL), pursuant to which the Filer will acquire: (a) all of the issued and outstanding Class A partnership interests of the Partnership from HHL; and (b) all of the issued and outstanding Class B partnership interests of the Partnership from HHPL, in exchange for such number of multiple voting shares and subordinate voting shares of the Filer so that HHL and HHPL will collectively hold beneficial ownership of 45.9% of the total equity and 45.9% of the voting power of the pro forma share capital of the Filer (the Acquisition).
7. The Filer will call a special meeting (the Meeting) at which the shareholders of the Filer (the Shareholders) will be asked to approve, among other things, an amendment to the Filer's articles and bylaws in order to give effect to the Acquisition. In addition, certain aspects of the Acquisition must be approved by: (i) at least 66 ?% of the votes cast by the Shareholders (including certain votes on a class by class basis), present in person or represented by proxy and entitled to vote at the Meeting, and (ii) at least a simple majority of the votes cast by the holders of the Filer's subordinate voting shares, present in person or represented by proxy and entitled to vote at the Meeting, who are not excluded by operation of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) (because certain elements of the transaction are "related party transactions" within the meaning of MI 61-101), being all holders of subordinate voting shares of the Filer other than Fairfax Financial Holdings Limited and its affiliates.
8. Item 14.2 of Form 51-102F5 to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) provides that if action is to be taken at a shareholder meeting in respect of a "significant" acquisition, the circular must include, among other things, disclosure for the business being acquired.
9. Under Part 8 of NI 51-102, an acquisition is determined to be significant if the acquisition satisfies any of the significance tests in subsection 8.3(2) of NI 51-102 or the optional significance tests in subsection 8.3(4) of NI 51-102. The threshold of the significance tests for reporting issuers that are not venture issuers is 20%.
10. Effective November 18, 2020, amendments have been made to NI 51-102 such that: (i) an acquisition is determined to be significant if the acquisition satisfies any two of the significance tests in subsection 8.3(2) of NI 51-102 or the optional significance tests in subsection 8.3(4) of NI 51-102; and (ii) the threshold of the significance tests for reporting issuers that are not venture issuers is increased from 20% to 30%.
11. Under section 8.3 of NI 51-102, the "Investment Test" for the Acquisition is 29.92%. Because the Filer is required to determine the significance of the Acquisition prior to November 18, 2020, without the Exemption Sought being granted, the Filer is required to comply with the requirements of Item 14.2 of Form 51-102F5.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted.
"Marie-France Bourret"
Manager, Corporate Finance
Ontario Securities Commission