By Danica Bennewies
We’ve made it to the end of another week, but before you dive head first into the weekend get caught up on this week’s corporate and securities law news with the latest installment of Friday Finds. This week, we’re talking about five major headlines, including stories about WestJet, Transat, Facebook and more. Let’s jump right in!
If you’ve been keeping up with our blog posts lately, you’ll know we’ve been following the potential deal between Transat and Air Canada quite closely. Despite opposition from some of its major shareholders, this week Transat is urging shareholders to vote in favour of the deal. In its filings with Canadian securities regulators on Tuesday, the Quebec travel company called Air Canada the “preferred buyer”, saying that the airline had the skills and experience to be successful in the complex industry in which Transat operates. Transat also commented on Groupe Mach, the Montreal-based real estate developer that previously topped Air Canada’s bid but has since dropped its offer. In its filing documents, Transat said that it saw no evidence of Groupe Mach’s financial ability to close the deal. However, despite Transat’s optimism about the takeover deal, it’s not yet clear that shareholders are on board. Air Canada is offering $13 per Transat share, a price that two of Transat’s major shareholders, Letko Brosseau and Penderfund, have both called too low. Neither shareholder has commented on Transat’s filings this week. We’ll soon find out how shareholders feel about the takeover deal, though. Air Canada’s offer will go to a shareholder vote on August 23rd.
Speaking of airlines, there’s another big airline takeover deal that’s been making headlines this week. On Tuesday, WestJet Airlines Ltd. shareholders voted in favour of Onex Corp’s $3.5-billion (or $31 per share) takeover deal. Onex previously made a $35 per share offer back in March, however ended up cutting its bid based on uncertainties such as the grounding of WestJet’s Boeing 737 Max Aircraft. The $31 per share offer was agreed upon by both sides in May, and has now received the approval of over 92% of WestJet’s shareholders. The close of this deal will mark the end of WestJet’s 23 years as an independent company. A number of approvals are still required before the takeover is final, though, including approvals from US regulators, the Canadian Competition Bureau, the Canadian Transportation Agency’s Canadian status determination, and the Court of Queen’s Bench of Alberta. Subject to these approvals, the deal is expected to close later this year.
Moving now to enforcement news, the Ontario Securities Commission (OSC) reached settlement agreements this week with two international trading platforms. On Thursday, the OSC announced that it had approved settlements with Ava Trade Ltd. and International Capital Markets Pty Ltd. for improperly selling derivatives to Ontario investors. These settlement agreements come following allegations that the two firms violated securities laws by operating unregistered online trading platforms that allowed Ontario investors to trade derivatives products. The complaint also alleged that the companies issued and distributed these products to Ontario investors without a prospectus. The penalties in the two settlement agreements totalled $10-million. On top of monetary penalties, the two companies also implemented internal controls to prevent Ontario residents from opening accounts.
The OSC has also been keeping an eye on crypto-asset activity this week. On Wednesday, an OSC panel reached a settlement agreement with the crypto-asset consulting firm CoinLaunch Corp. According to the OSC’s complaint, CoinLaunch was engaging in and holding itself out as engaging in securities trading without the necessary registration, contrary to Ontario securities laws. Under the settlement, CoinLaunch will have to pay nearly $43,000, part of which is an administrative penalty and the remainder of which is disgorgement. Following the settlement, CoinLaunch chose to close up its business rather than go through the registration process. In its press release, the OSC commented on the need for businesses operating in the crypto-asset sector to seek out clarification regarding the applicable securities law requirements and said that businesses that don’t take this step “should consider themselves on notice and will face more severe consequences.”
Lastly, in US enforcement news, Facebook has agreed to a settlement with the Securities and Exchange Commission (SEC). On Wednesday, the social media giant agreed to pay US$100-million to settle allegations by the SEC that it misled investors about the misuse of user data. In its complaint, the SEC alleged that Facebook knew about the misuse of user data by Cambridge Analytica in 2015 but told investors that the risk of data misuse was purely hypothetical. According to the SEC, for two years Facebook told investors that users’ data “may be” improperly used or accessed, despite being aware that the misuse had already taken place. When Facebook ultimately disclosed the misuse of user data in 2018, its stock price dropped in response. In its press release, the SEC highlighted the importance of public companies having proper procedures in place for disclosing material risks accurately and not describing risks as hypothetical when they have already happened. Facebook agreed to pay the settlement without admitting or denying the allegations.
That’s all of the stories we have for this week. Now that you’re all caught up, go and start your weekend! We’ll be back on the CBLB next week with more Friday Finds.