Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the issuer bid requirements set out in Part 2 of NI 62-104 in connection with purchases by the issuer of up to 15% of its outstanding shares through the facilities of the NYSE under repurchase programs that the issuer may implement from time to time -- the shares are not listed on any Canadian exchange and are only listed and posted for trading on the NYSE -- the issuer believes that less than 2% of the shares are beneficially owned by resident Canadians -- requested relief granted, subject to conditions, including that the bid is made in compliance with applicable U.S. securities laws and the rules of the NYSE, the aggregate number of shares acquired by the issuer and any joint actors within a 12 month period doesn't exceed 15% of the outstanding shares at the beginning of the 12-month period, the shares are not listed and posted for trading on an exchange in Canada, and the requested relief is time limited.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2, s. 6.1.
May 21, 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 AND IN THE MATTER OF IMAX CORPORATION (the Filer)
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the principal regulator (the Legislation) varying a decision of the principal regulator dated March 25, 2019 (the Original Decision) which exempted the Filer from the requirements applicable to issuer bids (the Issuer Bid Requirements) in Part 2 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) in connection with purchases by the Filer of up to 10% of the Filer's outstanding common shares (the Shares, and such maximum, the Original Repurchase Maximum) made through the facilities of the New York Stock Exchange (the NYSE) under repurchase programs that the Filer may implement from time to time (such programs, the Repurchase Programs).
The Filer has requested that the Original Decision be varied to increase the Original Repurchase Maximum such that the Filer will be exempted from the Issuer Bid Requirements in connection with purchases by the Filer of up to 15% of the Filer's outstanding Shares (the Amended Repurchase Maximum) made through the facilities of the NYSE under Repurchase Programs (the Exemption Sought). For ease of reference, each of the representations of the Filer made in the Original Decision has been repeated here and updated where appropriate given the passage of time since the date of the Original Decision and/or to reflect matters in connection with the Amended Repurchase Maximum. The Original Decision ceases to be effective and is superseded by this decision as of the date hereof.
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 British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation existing under the Canada Business Corporations Act with its head office and one of its two principal executive offices located in Mississauga, Ontario. The Filer's other principal executive office is located in New York, New York.
2. The Filer is a reporting issuer in all of the provinces of Canada, and is not in default of any requirements of the securities legislation of the jurisdictions in which it is a reporting issuer.
3. The Filer is also a registrant with the Securities and Exchange Commission in the United States (the SEC) and is subject to the requirements of the Securities Act of 1933 (United States) (the 1933 Act) and the Securities Exchange Act of 1934 (United States) (the 1934 Act).
4. The authorized capital of the Filer consists of an unlimited number of Shares and an unlimited number of non-voting special shares. As at May 5, 2020, the Filer had 58,878,749 Shares and no special shares issued and outstanding.
5. Upon the completion of its initial public offering in 1994, the Shares were concurrently listed and posted for trading on the Toronto Stock Exchange (the TSX) and the NASDAQ Stock Exchange (the NASDAQ). In 2011, the Filer delisted the Shares from the NASDAQ and instead listed and posted the Shares for trading on the NYSE. From that point onward, until January 19, 2015, the Shares were listed and posted for trading on the TSX and the NYSE.
6. The Filer was of the view that the low trading volume of the Shares on the TSX over a sustained period no longer justified the financial and administrative costs associated with maintaining its listing of the Shares on the TSX, and on January 12, 2015, the Filer applied for a voluntary delisting of the Shares from the TSX. The delisting was effective as of the close of markets on January 19, 2015.
7. The Shares are no longer listed and posted for trading on any exchange in Canada. The Shares are only listed and posted for trading on the NYSE under the symbol "IMAX".
8. As at May 5, 2020, the Filer's "public float" (as such term is defined by the TSX and the NYSE) consisted of 49,015,789 Shares, representing approximately 83.25% of the outstanding Shares.
9. On June 12, 2017, the Filer announced that its board of directors approved a U.S.$200 million share Repurchase Program (the Current Repurchase Program). The Current Repurchase Program commenced on July 1, 2017 and authorizes the Filer to purchase up to U.S.$200 million worth of Shares until June 30, 2020 pursuant to open market purchases or private transactions, subject to market conditions, applicable legal requirements and other relevant factors.
10. The exemption from the Issuer Bid Requirements set out in subsection 4.8(3) of NI 62-104 (the Other Published Markets Exemption) provides that an issuer bid that is made in the normal course on a published market, other than a designated exchange, is exempt from the Issuer Bid Requirements if, among other things, the bid is for not more than 5% of the outstanding securities of a class of securities of the issuer and the aggregate number of securities acquired in reliance on the Other Published Markets Exemption by the issuer and any person acting jointly or in concert with the issuer within any period of 12 months does not exceed 5% of the outstanding securities of that class at the beginning of the 12-month period.
11. The Ontario Securities Commission issued a decision on April 1, 2016 (the 2016 Decision) exempting the Filer from the Issuer Bid Requirements in connection with purchases by the Filer of up to 10% of its outstanding Shares made through the facilities of the NYSE under Repurchase Programs implemented by the Filer from time to time, subject to certain conditions set out in the decision, for a period of 36 months.
12. The Filer repurchased an aggregate of 7,575,737 Shares pursuant to the 2016 Decision. Any and all Shares purchased under the Current Repurchase Program prior to April 1, 2019 were acquired in reliance on the 2016 Decision.
13. As at May 5, 2020, the Filer has:
(a) repurchased a total of 2,618,507 Shares for an aggregate amount of U.S.$39,229,625 through the facilities of the NYSE under the Current Repurchase Program in reliance on the Original Decision; and
(b) approximately U.S.$89,361,337 remaining available to repurchase Shares under the Current Repurchase Program.
14. The Filer wishes to be able to continue to make repurchases under the Current Repurchase Program and any Repurchase Programs that may be implemented by the Filer on the facilities of the NYSE in excess of the maximum allowable in reliance on the Other Published Markets Exemption (such repurchases, the Proposed Bids). The Filer intends to approve and implement a Repurchase Program to allow it to continue to make repurchases following the expiry of the Current Repurchase Program.
15. The Filer believes that the Proposed Bids are in the best interests of the Filer and its shareholders.
16. Although the Original Decision will not expire until March 25, 2022, the Filer has continued to repurchase Shares under the Original Decision and believes that it may reach the Original Repurchase Maximum as a result of purchases under the Current Repurchase Program in response to the unexpected decrease in the Share price due to market events outside of the Filer's control, particularly the extraordinary circumstances surrounding the coronavirus outbreak. Accordingly, the Filer wishes to increase the maximum number of Shares that may be purchased under a Proposed Bid from the Original Repurchase Maximum to the Amended Repurchase Maximum.
17. Based on information provided by the Filer's transfer agent, as at May 5, 2020:
(a) 51,826,032 Shares (or approximately 88.022% of the issued and outstanding Shares) were registered to shareholders in the United States;
(b) 7,051,281 Shares (or approximately 11.976% of the issued and outstanding Shares) were registered to shareholders in Canada (the Registered Canadian Shares);
(c) of the Registered Canadian Shares, (i) 7,035,616 Shares were registered to The Canadian Depositary for Securities (the CDS Position), and (ii) 15,665 Shares (or approximately 0.027% of the issued and outstanding Shares) were held among fewer than 50 registered shareholders in Canada; and
(d) of the CDS Position, 6,119,384 Shares were held by American intermediaries (the U.S. Intermediary Shares), and 916,232 Shares (or approximately 1.556% of the issued and outstanding Shares) were held by Canadian intermediaries.
18. Based on the information provided by the Filer's transfer agent noted in paragraph 17, the Filer reasonably believes that:
(a) less than 2% of the Shares are beneficially owned by more than 50 shareholders resident in Canada; and
(b) the size of the CDS Position, and the fact that the U.S. Intermediary Shares form part of the CDS Position, is likely a result of the Shares having been listed on the TSX for over 20 years.
19. The Proposed Bids will be effected in accordance with the 1933 Act, the 1934 Act, the rules of the SEC made pursuant thereto, including the safe harbour provided by Rule 10b-18 under the 1934 Act (collectively, the Applicable U.S. Securities Laws) and any by-laws, rules, regulations or policies of the NYSE (the Exchange Rules).
20. Applicable U.S. Securities Laws require that, in respect of purchases by an issuer of its own securities through the facilities of the NYSE: (a) all purchases made during a single trading day must be conducted through a single broker or dealer; (b) purchases cannot be effected during the last 10 minutes before the scheduled close of market or be the opening purchase; (c) purchases must be made at a price that does not exceed the highest independent bid or the last transaction price quoted; and (d) in any given day, the issuer cannot purchase more than 25% of its average daily trading volume on the NYSE over the past four weeks.
21. Applicable U.S. Securities Laws also require that the Filer report any repurchases conducted pursuant to the Current Repurchase Program (and any Repurchase Programs that may be implemented by the Filer) in its quarterly and annual reports.
22. The Proposed Bids would be permitted under the Exchange Rules and Applicable U.S. Securities Laws.
23. The purchase of Shares under the Proposed Bids will not adversely affect the Filer or the rights of any of the Filer's security holders and they will not materially affect control of the Filer.
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 provided that:
(a) the Proposed Bids are permitted under the Exchange Rules and Applicable U.S. Securities Laws, and are established and conducted in accordance and compliance with the Exchange Rules and Applicable U.S. Securities Laws;
(b) the aggregate number of Shares acquired in reliance on the Exemption Sought by the Filer and any person acting jointly or in concert with the Filer within any period of 12 months does not exceed 15% of the outstanding Shares at the beginning of the 12-month period;
(c) the Shares are not listed and posted for trading on an exchange in Canada;
(d) the Exemption Sought apply only to the acquisition of Shares by the Filer occurring within 36 months of the date of the Original Decision pursuant to a Proposed Bid; and
(e) prior to purchasing Shares in reliance on this decision, the Filer discloses the terms of the Exemption Sought and the conditions applicable thereto in a press release that is issued and filed on the System for Electronic Document Analysis and Retrieval, and includes such information as part of the news release required to be issued in accordance with the Other Published Markets Exemption in respect any Repurchase Program that may be implemented by the Filer.
Manager, Office of Mergers & Acquisitions
Ontario Securities Commission