Advantage Energy Ltd.
Multilateral Instrument 11-102 Passport System -- National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions -- Dual application -- Issuer bid -- Modified Dutch auction -- Application for relief from the requirement that the Offer not be extended if all the terms and conditions of the Offer have been complied with or waived unless the issuer first takes up all Shares deposited under the Offer and not withdrawn (Section 2.32 of NI 62-104).
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 6.1 and 2.32(4).
Citation: Re Advantage Energy Ltd., 2022 ABASC 163
December 5, 2022
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF ADVANTAGE ENERGY LTD. (the Filer)
The securities regulatory authority or regulator responsible in each of the Jurisdictions (the Decision Makers) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) granting the Filer, in connection with the proposed purchase of a portion of its outstanding common shares (the Shares) pursuant to an issuer bid (the Offer), an exemption (the Exemption Sought) from the requirements in Section 2.32(4) of National Instrument 62-104 Take-over Bids and Issuer Bids (NI 62-104) that an issuer bid not be extended if all the terms and conditions of the issuer bid have been complied with or waived unless the Filer first takes up all securities deposited under the issuer bid and not withdrawn (collectively, the Extension Take-Up Requirement).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filer has given notice that it intends to rely on subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (the MI 11-102) in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut; 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 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 head office of the Filer is located in Alberta.
2. The Filer is a reporting issuer in each of the provinces of Canada and the Filer's Shares are listed for trading on the Toronto Stock Exchange (the TSX). The Filer is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.
3. The authorized share capital of the Filer consists of an unlimited number of Shares, non-voting shares, preferred shares and exchangeable shares. As at November 7, 2022, 181,114,976 Shares were issued and outstanding and there were no non-voting shares, preferred shares or exchangeable shares issued and outstanding.
4. On November 2, 2022, the last full trading day prior to the date of announcement of the Filer's intention to make the Offer, the closing price of the Shares on the TSX was $10.73 per Share. On November 7, 2022, the last full trading day prior to the announcement by the Filer of the price range being offered under the Offer, the closing price of the Shares on the TSX was $11.87 per share.
5. The Filer has made the Offer pursuant to which it has offered to purchase that number of Shares having an aggregate purchase price of up to $100,000,000.
6. The Offer is scheduled to expire at 5:00 pm (Eastern Standard Time) on December 16, 2022 (the Expiration Date).
7. Prior to making the Offer, the board of directors of the Filer determined that the Offer was in the best interests of the Filer.
8. The purchase price per Share will be determined by the Filer through a modified "Dutch auction" procedure in the manner described below, but will not be less than $11.20 and not more than $12.90 per Share (the Price Range).
9. The aggregate purchase price of up to $100,000,000 has been determined and was announced by the Filer in a press release issued on November 2, 2022. Both the maximum aggregate purchase price of $100,000,000 and the Price Range were announced by the Filer in a press release issued on November 7, 2022 and are specified in the issuer bid circular (the Circular).
10. The Filer expects to fund the purchase of Shares pursuant to the Offer, together with the fees and expenses of the Offer, with a combination of cash on hand and drawings on existing credit facilities. The Offer will not be conditional upon the receipt of any financing.
11. Holders of Shares (collectively, the Shareholders) wishing to tender to the Offer will be able to do so in the following ways:
(a) by making auction tenders in which the tendering Shareholders specify the number of Shares being tendered at a specified price per Share (the Auction Price) within the Price Range (the Auction Tenders); and
(b) by making purchase price tenders in which the tendering Shareholders do not specify a price per Share, but rather agree to have a specified number of Shares purchased at the Purchase Price (as defined below) to be determined pursuant to the Offer (the Purchase Price Tenders).
12. Shareholders may make multiple Auction Tenders, but not in respect of the same Shares (i.e. Shareholders may tender different Shares at different prices, but cannot tender the same Shares at different prices). Shareholders may also make an Auction Tender in respect of certain of their Shares and a Purchase Price Tender in respect of other Shares.
13. Any Shareholder who owns fewer than 100 Shares and tenders all of such Shareholder's Shares pursuant to an Auction Tender at or below the Purchase Price or makes a Purchase Price Tender will be considered to have made an "Odd-Lot Tender".
14. The Filer will determine the purchase price payable per Share (the Purchase Price), representing a single price per Share within the Price Range, taking into account the Auction Prices and the number of Shares deposited pursuant to valid Auction Tenders and Purchase Price Tenders. The Purchase Price will be the lowest price that enables the Filer to purchase that number of Shares properly deposited pursuant to Auction Tenders and Purchase Price Tenders having an aggregate purchase price not exceeding $100,000,000.
15. If the aggregate purchase price for Shares validly tendered pursuant to Auction Tenders at Auction Prices at or below the Purchase Price and Purchase Price Tenders (the Tender Amount) is less than or equal to $100,000,000 and the conditions of the Offer are satisfied, the Filer will purchase at the Purchase Price all Shares so deposited pursuant to Auction Tenders at or below the Purchase Price and Purchase Price Tenders.
16. If the aggregate purchase price for Shares validly deposited and not withdrawn pursuant to Auction Tenders at Auction Prices at or below the Purchase Price and Purchase Price Tenders would result in an aggregate purchase price in excess of $100,000,000 and the conditions of the Offer are satisfied and/or waived, then a portion of such deposited Shares will be purchased as follows:
(a) first, the Filer will purchase at the Purchase Price all Shares tendered at or below the Purchase Price by Shareholders who own fewer than 100 Shares (the Odd Lot Holders); and/or
(b) second, the Filer will purchase at the Purchase Price on a pro rata basis (according to the number of Shares deposited or deemed to be deposited at a price equal to or less than the Purchase Price) that portion of Shares tendered pursuant to Auction Tenders at or below the Purchase Price and Purchase Price Tenders having an aggregate purchase price, based on the Purchase Price, equal to (i) $100,000,000, less (ii) the aggregate amount paid by the Filer for Shares tendered by Odd Lot Holders.
17. The number of Shares that the Filer will purchase pursuant to the Offer and the aggregate purchase price will vary depending on whether the Tender Amount is equal to or less than $100,000,000. If the Tender Amount is equal to $100,000,000, the Filer will purchase Shares pursuant to the Offer for an aggregate purchase price equal to $100,000,000. If the Tender Amount is less than $100,000,000, the Filer will purchase proportionately fewer Shares in the aggregate, with a proportionately lower aggregate purchase price.
18. All Shares purchased by the Filer pursuant to the Offer (including Shares tendered at Auction Prices below the Purchase Price) will be purchased at the Purchase Price. Shareholders will receive the Purchase Price in cash. All Auction Tenders and Purchase Price Tenders will be subject to adjustment to avoid the purchase of fractional Shares. All payments to Shareholders will be subject to deduction of applicable withholding taxes.
19. All Shares tendered to the Offer and not purchased under the Offer (including Shares not purchased because of proration, invalid tender, or Shares deposited pursuant to Auction Tenders at Auction Prices in excess of the Purchase Price), or Shares properly withdrawn before the Expiration Date, will be returned, promptly after the Expiration Date or termination of the Offer or the date of withdrawal of the Shares, without expense to the Shareholder.
20. Until expiry of the Offer, all information about the number of Shares tendered and the prices at which the Shares are tendered will be required to be kept confidential by the depositary and the Filer until the Purchase Price has been determined.
21. Shareholders who do not accept the Offer will continue to hold the same number of Shares as before the Offer and their proportionate Share ownership will increase following completion of the Offer, in accordance with the number of Shares purchased under the Offer.
22. If all the terms and conditions of the Offer have been complied with or waived by the Filer by the Expiration Date but the aggregate purchase price for the Shares validly tendered and not withdrawn pursuant to Auction Tenders and Purchase Price Tenders is less than $100,000,000, the Filer may wish to extend the Offer. The Filer will not extend the Offer if all the terms and conditions of the Offer have been complied with or waived by the Filer by the Expiration Date and the aggregate purchase price for the Shares validly tendered and not withdrawn pursuant to Auction Tenders and Purchase Price Tenders is equal to or greater than $100,000,000.
23. Under the Extension Take-Up Requirement contained in Section 2.32(4) of NI 62-104, an offeror may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the offeror first takes up all the securities deposited and not withdrawn under the issuer bid.
24. As the determination of the Purchase Price requires that all Auction Prices and the number of Shares deposited pursuant to both Auction Tenders and Purchase Price Tenders be known and taken into account, the Filer will be unable to take up the Shares deposited and not withdrawn under the Offer at the time of expiry of the Offer prior to extending the Offer because the Purchase Price will not and cannot be known as additional Auction Tenders and Purchase Price Tenders may be made during the extension period that will impact the calculation of the Purchase Price. Accordingly, the Exemption Sought is required in connection with an extension of the Offer to enable the Filer to make a final determination regarding the Purchase Price, taking into account all Shares tendered prior to time of expiry of the Offer and those tendered during any extension period.
25. Shares deposited pursuant to the Offer, including those deposited prior to the time of expiry of the Offer, may be withdrawn by the Shareholder at any time during any extension period.
26. 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).
27. There was a "liquid market" for the Shares, as such term is defined in MI 61-101, as of the date of the making of the Offer, because the test in paragraph 1.2(1)(a) of MI 61-101 was satisfied. ln addition, an opinion was voluntarily sought by the Filer and obtained from RBC Dominion Securities Inc. as of November 7, 2022 in accordance with Section 1.2 of MI 61-101 confirming that a liquid market exists for the Shares as of the date of the making of the Offer and such opinion will be included in the Circular (the Liquidity Opinion).
28. Based on the maximum number of Shares that may be purchased under the Offer, as of the date of the Offer, it was reasonable to conclude (and the Liquidity Opinion provides that it will be reasonable to conclude) that, following the completion of the Offer in accordance with its terms, there will be a market for holders of the 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.
29. The Filer has disclosed in the Circular relating to the Offer the following information:
(a) the mechanics for the take-up of and payment for Shares as described herein;
(b) that, by tendering Shares at the lowest price in the Price Range under an Auction Tender, or by tendering Shares under a Purchase Price Tender, a Shareholder can reasonably expect that the 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 filed for an exemption from the Extension Take-Up Requirement;
(d) the manner in which an extension of the Offer will be communicated to Shareholders and the public;
(e) that Shares deposited pursuant to the Offer may be withdrawn at any time prior to the expiry of the Offer;
(f) if known after reasonable enquiry, the name of every person in a relationship with the Filer described in Item 11 of Form 62-104F2 Issuer Bid Circular who has accepted or intends to accept the Offer and the number of 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, including the Liquidity Opinion; and
(h) the disclosure prescribed by applicable securities laws for issuer bids.
Each of the Decision Makers 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 Makers under the Legislation is that the Exemption Sought is granted provided that the Filer:
(a) takes up Shares validly deposited pursuant to the Offer and not withdrawn and pays for such Shares, in each case, in the manner described herein and as set out in the Circular;
(b) is eligible to rely on the Liquid Market Exemption; and
(c) will issue and file a press release announcing receipt of the Exemption Sought promptly, and in any case, no later than (1) business day following receipt of the Exemption Sought.