By Danica Bennewies
Happy Friday! Start your weekend off on a high note with the latest installment of Friday Finds. We’ve collected five of the major corporate and securities law news stories that dominated the headlines as well as our conversations over the past week, including updates on the Husky/MEG takeover bid and the latest securities regulator news.
You may recall that back in October Husky Energy Inc launched a hostile takeover bid for MEG Energy Corp, which MEG formally rejected shortly after (see our previous post on this story for more). However, despite this rejection, Husky held out hope that the bid would succeed by the January expiry date. Well, that expiry date came and went this Wednesday, but Husky’s offer failed to secure the support of the required number of investors. There was some speculation that Husky would try to extend the deadline for the bid, allowing the company an extra 10 days to garner the necessary support. Such an extension would have required Husky to win the support from those investors holding more than 50% of the outstanding shares. Ultimately, however, Husky chose not to extend the bid deadline and instead opted to walk away from its offer. Following the news, MEG’s share price dropped 37% while Husky stock rose by 11%.
In other industry news, Vancouver mining company Goldcorp Inc agreed to a US$10-billion takeover by its US competitor, Newmont Mining Corp, on Monday. This deal will bring Newmont’s market capitalization up to around $35-billion, setting it up to surpass its main competitor, Barrick Gold Corp. The agreed upon deal has Newmont paying a premium for Goldcorp, with each Goldcorp shareholder receiving 0.328 of a Newmont share plus US$0.02 in cash for each Goldcorp share. This amounts to a 17% higher value than Goldcorp’s recent trading price. However, according to the Globe and Mail, this premium is low compared to other similar-sized acquisitions, which tend to have premiums ranging from 30-40%. This is already the second major deal of 2019 involving a Canadian gold company. At the beginning of the month, the African company Randgold Resources Ltd was acquired for US$6-billion by Barrick, bringing Barrick’s market capitalization to $29-billion.
Now let’s talk about what the regulators were up to this week. On Monday, the Ontario Securities Commission (OSC) published a notice outlining a plan of action for reducing the regulatory burden on Ontario market participants. The plan includes a wide-range consultation with market participants to identify outdated rules and regulations that can be eliminated in order to save businesses time and money. The OSC highlighted three main areas that the consultation will focus on: operational changes, outdated or unnecessary rules, and opportunities to make disclosure provided to investors more streamlined and effective. Interestingly, the notice also states that harmonization of securities regulations across the country will be one of the issues under discussion. However, one would think that this should be a regulatory goal of the OSC regardless of the existence of this task force. The OSC has encouraged stakeholders to submit comments up until March 1st, and will then be holding a roundtable in late March to discuss the suggestions that were received during the comment period. Whether the potential amendments coming out of this task force are beneficial for investors remains to be seen. A lot of this impact will depend on how “regulatory burden” is defined and addressed.
On Tuesday, the Investment Industry Regulatory Organization of Canada (IIROC) released a report on its compliance priorities for 2018/2019. These priorities include implementing changes to the risk models it uses to assess dealers, working with the Canadian Securities Administrators (CSA) to develop a regulatory framework for digital assets, and creating initiatives to enhance cybersecurity. In the coming year, IIROC also intends to maintain its focus on compensation-related conflicts of interest. In a test model run last year, the organization found that many firms had not yet implemented an effective process to identify and manage compensation-related conflicts of interest. To strengthen its effectiveness in examining conflict management, IIROC intends to assess the existing data to identify best practices, and to implement new testing modules focused on more complex conflicts, such as mutual-fund sales incentives. Underlying these priorities, IIROC also stated that it will continue to focus on ensuring that IIROC-regulated firms demonstrate a commitment to a strong compliance culture and will impose terms and conditions on those dealers that fail to do so. The full IIROC report can be found here.
Finally, in the US this week, the Securities and Exchange Commission (SEC) brought charges against nine defendants for the hacking of its Electronic Data Gathering, Analysis, and Retrieval system (EDGAR). The defendants, which included a Ukrainian hacker and a number of individual traders in California, the Ukraine, and Russia, are alleged to have hacked into EDGAR in 2016, in order to extract nonpublic information to use for illegal trading. In total, between May and October of 2016, the traders generated at least US$4.1-million in illegal profits from this activity. The same hacker was charged in 2015 for a similar scheme that involved hacking into newswire services in order to trade on nonpublic information. Under the SEC’s complaint, the defendants are being charged with violating the federal securities antifraud laws and the SEC is seeking an order for penalties and return of the illegal gains. The defendants are also facing criminal charges brought in a parallel action by the US Attorney’s Office for the District of New Jersey.
That’s all of the news we have for this week. Come back to the CBLB next Friday for another round-up of the biggest securities law news stories!