National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from provisions in section 8.4 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) exempting the filer to file a business acquisition report pursuant to section 13.1 of NI 51-102.
Applicable Legislative Provisions
National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4 and 13.1.
September 11, 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 KINAXIS INC. (the Filer)
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) providing exemptive relief (Exemption Sought) from the requirements of Sections 8.2 of NI 51-102 -- Continuous Disclosure Obligations (NI 51-102) to file a business acquisition report (BAR) in connection with the completion of the acquisition (the Acquisition) by the Filer of the assets of Rubikloud Technologies Inc. (the Target) on July 2, 2020.
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 (the Principal Regulator);
(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 all other provinces of Canada where the Filer is a reporting issuer (collectively, the Passport Jurisdictions); and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 -- Definitions, MI 11-102 and NI 51-102, as amended from time to time, 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 existing under the provisions of the Canada Business Corporation Act with its head office in Ottawa, Ontario.
2. The Filer is a reporting issuer under the securities legislation of each of the provinces and territories of Canada.
3. The common shares of the Filer are posted and listed for trading on the Toronto Stock Exchange under the symbol "KXS".
4. The Filer is not in default of securities legislation in any jurisdiction.
5. The Filer is in the business of providing cloud-based software as a service for supply chain planning and related business operations.
6. On July 2, 2020, the Filer completed the Acquisition for a total cash purchase price of US $60,000,000, subject to customary adjustments.
7. The Acquisition is additive for the Filer, with an objective of obtaining intellectual property and highly-qualified technical employees, consistent with the Filer's organic growth strategy.
Significance Tests for the BAR
8. Under Part 8 of NI 51-102, the Filer is required to file a BAR for any completed acquisition that is determined to be significant based on the acquisition satisfying any of the three significance tests set out in section 8.3(2) of NI 51-102.
9. The Acquisition is not a significant acquisition under the asset test in section 8.3(2)(a) of NI 51-102 as the value of the Acquisition represented only approximately 3% of the consolidated assets of the Filer as at December 31, 2019.
10. The Acquisition is not a significant acquisition under the investment test in section 8.3(2)(b) of NI 51-102 as the Filer's acquisition costs represented only approximately 17% of the consolidated assets of the Filer as of December 31, 2019.
11. The Acquisition would, however, be a significant acquisition under the profit or loss test in section 8.3(2)(c) of NI 51-102; in particular, the Filer's proportionate share of the consolidated specified profit or loss of the Target exceeds 20% of the consolidated specified profit or loss of the Filer calculated using the audited financial statements of the Filer for the year ended December 31, 2019 and the audited financial statements of the Target for the year ended March 31, 2020.
12. The application of the profit or loss test produces an anomalous result for the Filer because it exaggerates the significance of the Acquisition out of proportion to its significance on an objective basis in comparison to the results of the asset test and investment test.
Not a Significant Acquisition
13. The Filer believes that the application of the profit and loss test does not demonstrate any correlation with the actual significance of the Acquisition from a commercial, business or financial perspective.
14. The Filer has provided additional operational measures that better demonstrate the significance of the Acquisition of the Target to the Filer; these additional operational measures include the Filer's proportionate share of: (i) total revenue; (ii) market capitalization; and (iii) non-financial metrics such as number of employees and customers, which yield results that are generally more consistent with the results of the asset test and the investment test.
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.
Manager, Corporate Finance
Ontario Securities Commission