By Danica Bennewies
Hello and welcome back to the CBLB! It’s time for another Friday Finds – the weekly series where we share five of the top corporate and securities law news stories that dominated the headlines over the past week. In today’s post we’re discussing the Barrick/Newmont deal, ExxonMobil, Elon Musk’s latest tweets, and more.
Last week we talked about a potential hostile takeover bid by Barrick Gold Corp for Newmont Mining Corp. This week, Barrick officially launched its bid for Newmont with a US$17.8-million all share offer. Barrick’s bid comes at the same time that Newmont is closing its takeover of Goldcorp Inc. Mark Bristow, Barrick’s CEO, called Newmont’s deal with Goldcorp “ill-conceived” and said that Newmont should instead consider Barrick’s “clearly superior” bid. While the all stock offer has no premium, Barrick claims that the merger will create up to US$7-billion in synergies, mainly coming through cost savings from overlap in the two firms’ Nevada productions. However, in a statement released on Monday, Newmont said that Barrick’s deal overstated the rewards and minimized the risks of the merger. Should Newmont’s shareholders forgo the deal with Barrick and continue with the takeover of Goldcorp, Newmont would become the world’s biggest gold producer, with Barrick following in second. However, if Barrick is successful in its takeover of Newmont, the merging of the world’s two largest gold miners would create a mammoth firm worth US$42-billion.
While we’re on the topic of takeovers, lets take a look at what’s been going on with ExxonMobil. The oil and gas company acquired InterOil back in 2017. Two years later, this deal is still generating interesting M&A cases. Most recently, the Yukon Supreme Court awarded dissenting shareholders a 43% premium on the originally negotiated deal price. In Canada, when shareholder approval is required for a corporation to make a substantial change, shareholders have the right to dissent and be paid fair market value of their shares. In this case, two valuations of “fair value” were brought before the court. ExxonMobil argued that the fair value should be US$49.98, based on the original transaction price. However, the court ultimately sided with the dissenting shareholders’ valuation of US$71.46, which was reached using the discounted cash flow approach. In assessing the two different valuations, the court found that the original transaction price was “established in a flawed corporate governance process” and therefore cannot constitute fair value. Notably, this decision goes against a Delaware Supreme Court ruling that only “compelling evidence of market failure” justifies deviating from the original deal price in arm’s-length mergers. Though the holding in the ExxonMobil case may be appealed, the court’s decision here highlights the importance of having a well-designed, rigorous sales process that can stand up under judicial scrutiny.
In regulatory news, changes to the Canada Business Corporations Act (CBCA) are coming this summer. Bill C-86 titled Budget Implementation Act, 2018, No. 2 is a hefty 800 pages long and amends a number of different laws, including the Trademarks Act, the Canada Labour Code, and the CBCA. In particular, under the new regulations, corporations that are governed by the CBCA will have to prepare and maintain a securities register that lists all individuals with “significant control” over the corporation. Under the new rules, an individual has significant control when they hold more than 25% of the voting rights or 25% of the fair market value of a corporation’s outstanding shares. Additionally, individuals who have enough influence over a corporation such that it constitutes control must also be included on the register. Provinces are expected to follow suit and implement similar provisions in their corporate statutes. All of this is part of a coordinated effort between the federal and provincial governments to improve transparency regarding corporate ownership. These reforms, which come into effect in June of this year, also come following similar changes in the European Union and the United Kingdom, highlighting an international push for improved transparency.
The Ontario Securities Commission (OSC) also made headlines this week. On Wednesday, the regulator announced the first ever award made through its whistleblower program. A total of $7.5 million was paid out to three individuals who provided the OSC tips on different securities misdeeds in companies. In its statement, the regulator said that the three whistleblowers supplied “high quality, timely, specific and credible information” that furthered enforcement actions and resulted in monetary payments to the OSC. As per the OSC’s policy, the identities of the individuals were not released. The OSC instituted its whistleblower program in 2016, and it has generated over 200 tips since that time. Unlike other jurisdictions, the OSC caps its individual award payments at $5-million. While there was initially some concern that this maximum payment would be insufficient to attract high quality tips, this week’s award announcement suggests that the program is moving in the right direction.
Its been a few months now since we’ve had any Elon Musk news to discuss. Musk returned to Twitter this week to share Tesla’s production and delivery levels for the coming year. You may recall that the settlement reached with the Securities and Exchange Commission (SEC) last October mandated that Musk get approval before making any social media post containing “material” information. Tesla agreed to create a board to oversee Musk’s social media activity. Following this week’s tweets, the SEC asked a federal judge to hold Musk in contempt for violating these provisions of the settlement. Tesla also made a court filing, conceding that Musk did not receive pre-approval for the tweets, but that the information shared had already been made public in Tesla’s earnings transcript. However, the settlement agreement stipulates that changes to pre-approved language also require approval prior to posting, and pre-approval expires after two days. In its court filing, the SEC said that Musk did not make a “diligent or good faith effort” to comply with the settlement. If Musk is found in contempt, he could be charged up to $1,000 per day until the court finds that he is in full compliance with the settlement.
Those were our top news stories from this week, we hope you enjoyed getting caught up with us! Check back on the CBLB next Friday for more corporate and securities law news.