Great Canadian Gaming Corporation
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 AND IN THE MATTER OF GREAT CANADIAN GAMING CORPORATION (the "Filer")
The principal regulator in the Jurisdiction (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") that, in connection with the proposed purchase by the Filer of a portion of its issued and outstanding common shares (the "Common Shares") pursuant to a formal issuer bid (the "Offer"), the Filer be exempt, subject to the conditions set forth herein from the following requirements (the "Exemption Sought"):
(a) the proportionate take up requirements in Section 2.26 of National Instrument 62-104 -- Take-Over Bids and Issuer Bids ("NI 62-104") to take up and pay for Common Shares deposited pursuant to the Offer proportionately according to the number of Common Shares deposited by each shareholder (collectively, the "Proportionate Take-up Requirement");
(b) the requirements in Item 8 of Form 62-104F2 to NI 62-104 to provide disclosure of the proportionate take up and payment of Common Shares under the Offer in the Filer's issuer bid circular (the "Circular") (collectively, the "Proportionate Take-Up Disclosure Requirement"); and
(c) the requirement in Subsection 2.32(4) of NI 62-104 that the Offer not be extended if all the terms and conditions of the Offer have been complied with or waived unless the Filer first takes up all Common Shares deposited under the Offer and not withdrawn (the "Extension Take-Up Requirement").
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 Subsection 4.7(1) of Multilateral Instrument 11-102 -- Passport System ("MI 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Newfoundland and Labrador and Prince Edward Island.
Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation governed by the Business Corporations Act (British Columbia).
2. The head office and registered office of the Filer is located at 39 Wynford Drive, North York, Ontario M3C 3K5.
3. The Filer is a reporting issuer in each of the provinces of Canada and the Common Shares are listed for trading on the Toronto Stock Exchange (the "TSX") under the symbol "GC". The Filer is not in default of any requirement of the securities legislation in any of the jurisdictions in which it is a reporting issuer.
4. The Filer's authorized share capital consists of an unlimited number of Common Shares with no par value. As of February 7, 2020, there were 55,520,886 Common Shares issued and outstanding.
5. On February 7, 2020, the closing price of the Common Shares on the TSX was $39.86. On the basis of this closing price, on such date the Common Shares had an aggregate market value of approximately $2,213,062,500 (on a non-diluted basis).
6. As at February 7, 2020, according to publicly available information, BloombergSen Inc. ("BloombergSen") exercised control or direction over 10,731,228 Common Shares, representing approximately 19.4% of the issued and outstanding Common Shares, and Cambridge Global Asset Management (a business unit of CI Investments Inc.) ("Cambridge") exercised control or direction over 8,112,072 Common Shares, representing approximately 14.7% of the issued and outstanding Common Shares. To the knowledge of the Filer, no other person holds in excess of 10% of the outstanding Common Shares.
7. To the knowledge of the Filer and its directors and officers, after reasonable inquiry, no director or officer of the Filer, no associate or affiliate of a director or officer of the Filer, no associate or affiliate of the Filer, nor any other insider of the Filer (including BloombergSen and Cambridge, each of whom beneficially own or control more than 10% of the Filer's outstanding Common Shares), and no person or company acting jointly or in concert with the Filer, has indicated any present intention to deposit any of such person's or company's Common Shares pursuant to the Offer.
8. Shareholders of the Filer are subject to certain share ownership restrictions and constraints (derived from the terms and conditions of registration or licensing and operations services agreements, under the gaming statutes in the jurisdictions in which the Filer operates or the Filer's articles).
9. The Filer launched the Offer on February 14, 2020 pursuant to which it is offering to purchase that number of Common Shares having an aggregate purchase price of up to $500 million.
10. On March 11, 2020, the Filer issued a press release announcing an amendment to the offer to decrease the aggregate purchase amount from $500 million to $350 million (the "Specified Maximum Dollar Amount"). Such amendment was fully described in a notice of extension and variation, dated March 11, 2020 ("NOVE") and filed on the Filer's SEDAR profile. All references to the Offer herein are deemed to include the NOVE.
11. The board of directors of the Filer (the "Board") has determined that the Offer is in the best interests of the Filer.
12. The purchase price per Common Share will be determined by the Filer through a modified "Dutch auction" procedure in the manner described below within a range (the "Price Range") between a minimum of $39.00 per Common Share and a maximum of $46.00 per Common Share as specified in the Circular.
13. The Filer will fund the purchase of Common Shares pursuant to the Offer, together with the fees and expenses of the Offer, with drawings on existing credit facilities and cash on hand. The Offer is not conditional upon the receipt of financing.
14. A holder of Common Shares (a "Common Shareholder", and collectively, the "Common Shareholders") wishing to tender to the Offer is able to do so in one of three ways:
(a) by making an auction tender pursuant to which it agrees to sell to the Filer, at a specified price per Common Share within the Price Range (an "Auction Price"), a specified number of Common Shares (an "Auction Tender");
(b) by making a purchase price tender pursuant to which it agrees to sell a number of Common Shares to the Filer at the Purchase Price (as defined below) (a "Purchase Price Tender"); or
(c) by making a proportionate tender pursuant to which it agrees to sell to the Filer that number of Common Shares owned by it that will result in it maintaining its proportionate Common Share ownership following the completion of the Offer at the Purchase Price (a "Proportionate Tender").
15. Common Shareholders may deposit some of their Common Shares pursuant to an Auction Tender and deposit different Common Shares pursuant to a Purchase Price Tender. Common Shareholders who tender shares in an Auction Tender and/or a Purchase Price Tender cannot tender shares in a Proportionate Tender. Common Shareholders may not deposit the same Common Shares pursuant to more than one method of tender or pursuant to an Auction Tender at more than one price. Common Shareholders who tender shares in a Proportionate Tender may not tender shares in an Auction Tender or a Purchase Price Tender.
16. Any Common Shareholder who owns fewer than 100 Common Shares and tenders all of such Common Shareholder's Common Shares pursuant to an Auction Tender at or below the Purchase Price or pursuant to a Purchase Price Tender will be considered to have made an "Odd Lot Tender".
17. The Filer will determine the purchase price payable per Common Share (the "Purchase Price") based on the Auction Prices and the number of Common Shares specified in valid Auction Tenders and Purchase Price Tenders (considered for purposes of determining the Purchase Price to have been tendered at the minimum price per Common Share offered). The Purchase Price will be the lowest price that enables the Filer to purchase that number of Common Shares tendered pursuant to valid Auction Tenders and Purchase Price Tenders having an aggregate purchase price not to exceed an amount (the "Auction Tender Limit Amount") equal to
(a) the Specified Maximum Dollar Amount, less
(b) the product of
(i) the Specified Maximum Dollar Amount; and
(ii) a fraction, the numerator of which is the aggregate number of Common Shares owned by Common Shareholders making valid Proportionate Tenders, and the denominator of which is the aggregate number of Common Shares outstanding at the time of expiry of the Offer.
18. If the aggregate purchase price for Common Shares validly tendered pursuant to Auction Tenders (at Auction Prices at or below the Purchase Price) and Purchase Price Tenders is less than or equal to the Auction Tender Limit Amount, the Filer will purchase, at the Purchase Price, all Common Shares so deposited pursuant to Auction Tenders at or below the Purchase Price and Purchase Price Tenders.
19. If the aggregate purchase price for Common Shares validly tendered pursuant to Auction Tenders (at Auction Prices at or below the Purchase Price) and Purchase Price Tenders is greater than the Auction Tender Limit Amount, the Filer will purchase a portion of the Common Shares so deposited pursuant to Auction Tenders (at or below the Purchase Price) and Purchase Price Tenders, determined as follows: (i) the Filer will purchase all such Common Shares tendered by Common Shareholders pursuant to Odd Lot Tenders; and (ii) the Filer will purchase on a pro rata basis that portion of such Common Shares having an aggregate purchase price, based on the Purchase Price, equal to (A) the Auction Tender Limit Amount, less (B) the aggregate amount paid by the Filer for Common Shares tendered pursuant to Odd Lot Tenders, in each of the cases set forth in clauses (i) and (ii) of this paragraph, at the Purchase Price.
20. The Filer will purchase at the Purchase Price that portion of the Common Shares owned by Common Shareholders making valid Proportionate Tenders that results in each tendering Common Shareholder maintaining its proportionate Common Share ownership following completion of the Offer (the "Proportionate Take Up").
21. The number of Common Shares that the Filer will purchase pursuant to the Offer and the aggregate purchase price will vary depending on whether the aggregate purchase price payable in respect of Common Shares required to be purchased pursuant to Auction Tenders (at or below the Purchase Price) and Purchase Price Tenders (the "Aggregate Tender Purchase Amount") is equal to or less than the Auction Tender Limit Amount. If the Aggregate Tender Purchase Amount is equal to the Auction Tender Limit Amount, the Filer will purchase Common Shares pursuant to the Offer for an aggregate purchase price equal to the Specified Maximum Dollar Amount; if the Aggregate Tender Purchase Amount is less than the Auction Tender Limit Amount, the Filer will purchase proportionately fewer Common Shares in the aggregate, with a proportionately lower aggregate purchase price.
22. All Common Shares purchased by the Filer pursuant to the Offer (including Common Shares tendered at Auction Prices at or below the Purchase Price) will be purchased at the Purchase Price. Common Shareholders will receive the Purchase Price in cash. All Auction Tenders, Purchase Price Tenders and Proportionate Tenders will be subject to adjustment to avoid the purchase of fractional Common Shares. All payments to Common Shareholders will be subject to deduction of applicable withholding taxes.
23. All Common Shares tendered to the Offer and not taken up will be returned to the appropriate Common Shareholders.
24. The Offer is subject to the provisions of Regulation 14E promulgated under the United States Securities Exchange Act of 1934, as amended ("Regulation 14E").
25. Until expiry of the Offer, all information about the number of Common Shares tendered and the prices at which the Common Shares are tendered will be required to be kept confidential by the depositary and the Filer until the Purchase Price has been determined.
26. Common Shareholders who do not accept the Offer will continue to hold the number of Common Shares owned before the Offer, assuming Common Shares are validly tendered to the Offer, their proportionate Common Share ownership will increase following completion of the Offer.
27. The Filer may elect to extend the Offer without first taking up all the Common Shares deposited and not withdrawn under the Offer if the aggregate purchase price for Common Shares validly tendered pursuant to Auction Tenders and Purchase Price Tenders is less than or equal to the Auction Tender Limit Amount. Under the Extension Take Up Requirement contained in Section 2.32 of NI 62-104, an issuer may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the issuer first takes up all the securities deposited and not withdrawn under the issuer bid. Under Regulation 14E, the Filer must promptly pay for all securities deposited pursuant to the Offer at the time of expiry of the Offer. Regulation 14E does not allow the Filer to extend the Offer after having taken up and paid for securities deposited pursuant to the Offer.
28. The Filer is relying on the exemption from the formal valuation requirements applicable to issuer bids under Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions ("MI 61-101") set out in Subsection 3.4(b) of MI 61-101 (the "Liquid Market Exemption").
29. The Board has determined that there is a "liquid market" for the Common Shares, as such term is defined in MI 61-101, as of the date of the making of the Offer because the test in Subsection 1.2(1)(a) of MI 61-101 has been satisfied. In addition, the Board has also obtained a liquidity opinion (the "Liquidity Opinion") from Scotia Capital Inc. Subject to the qualifications, assumptions and restrictions set out therein, the Liquidity Opinion confirms the determination of the Filer with respect to market liquidity. A copy of the Liquidity Opinion is attached to the Circular. In addition, Scotia Capital Inc. has advised the Filer that its opinion on liquidity remains the same notwithstanding the amendment of the Offer described above in paragraph 10. A copy of Scotia Capital's consent, which references the foregoing confirmation, is included in the NOVE.
30. Based on the maximum number of Common Shares that may be purchased under the Offer, as of the date of the Offer (for greater certainty, as amended by the NOVE), the Board has determined that it will be reasonable to conclude (and the Liquidity Opinion, provides that it is reasonable to conclude) that, following the completion of the Offer in accordance with its terms, there will be a market for holders of the Common Shares who do not tender to the Offer that is not materially less "liquid", as such term is defined in MI 61-101, than the market that existed at the time of the making of the Offer.
31. The Filer has disclosed in the Circular (or as applicable, the NOVE) relating to the Offer the following information:
(a) the mechanics for the take up of and payment for Common Shares as described herein;
(b) that, by tendering Common Shares at the lowest price in the Price Range under an Auction Tender or by tendering Common Shares under a Purchase Price Tender or a Proportionate Tender, a Common Shareholder can reasonably expect that the Common Shares so tendered will be purchased at the Purchase Price, subject to proration and other terms of the Offer as specified herein;
(c) that the Filer has applied for an exemption from the Proportionate Take Up Requirement, the Proportionate Take Up Disclosure Requirement and the Extension Take Up Requirement;
(d) the manner in which an extension of the Offer will be communicated to Common Shareholders;
(e) that Common Shares deposited pursuant to the Offer may be withdrawn at any time prior to the Common Shares being taken up by the Filer;
(f) if known after reasonable inquiry, the name of every person named in Item 11 of NI 62-104 who has accepted or intends to accept the Offer and the number of Common Shares in respect of which the person has accepted or intends to accept the Offer;
(g) the facts supporting the Filer's reliance on the Liquid Market Exemption and the Liquidity Opinion; and
(h) except to the extent exemptive relief is granted further to this application, the disclosure prescribed by applicable securities laws for issuer bids.
The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted, provided that:
(a) Common Shares deposited pursuant to the Offer and not withdrawn are taken up and paid for, or dealt with, in each case, in the manner described above;
(b) the Filer is eligible to rely on the Liquid Market Exemption; and
(c) the Filer complies with the requirements of Regulation 14E.