Friday News Finds – October 23, 2020

By Bryan Yau

Happy Friday CBLB readers! This week, we will be discussing a recent Supreme Court of Canada decision concerning pension plan discrimination, the announcement of a national security review of TMAC Resources Inc., as well as updates to our coverage on Air Canada’s acquisition of Air Transat and Altice USA Inc.’s takeover bid for Cogeco Communications Inc.

On October 16, 2020, the Supreme Court of Canada (SCC) released its decision in Fraser v. Canada (Attorney General), a ruling that will undoubtedly impact Canadian pension plan design and administration. The case was brought by three retired RCMP officers who, at the time of their service, were all mothers. Joanne Fraser, Allison Pilgrim, and Colleen Fox argued that the RCMP’s defined benefit pension plan breached their equality rights under Section 15(b) of the Charter by denying them the benefit of accruing full-time pension credit for periods when they temporarily worked reduced hours due to family reasons. RCMP members receive full-time pensionable service credit for periods in which they work forty hours a week. Normally, members who take leave without pay (LWOP) for a variety of reasons are permitted to “buy-back” the credits for the period associated with the LWOP. The right to buy-back service years provides members who took leave the opportunity to increase their pension’s value to the amount it would have been had they not taken time off. The three appellants had previously taken part in an RCMP job-sharing program that allowed them to better balance work and family matters. During this time, the RCMP Pension Plan considered participants in the job-sharing program to be “part-time” workers, denying buy-back rights for the period of their involvement. This restriction practically denied participants in the RCMP job-sharing program from accruing full-time pension benefits, resulting in a smaller pension upon retirement. A majority of the SCC found that this buy-back restriction constituted adverse impact discrimination, where seemingly neutral laws have disproportionate impacts on people based on a protected ground. Going forward, Fraser may be applicable to any public or private sector pension plans that have similar buy-back restrictions. Moreover, the SCC’s analysis in Frasier may influence how human rights tribunals and commissions interpret and apply human rights legislation when adjudicating similar allegations.

In other news, TMAC Resources Inc., a Canadian gold mining company, says the federal cabinet has ordered a national security review of their proposed sale to Shandong Gold Mining Co. Ltd., a Chinese company. The cabinet national security review, brought under the Investment Canada Act, raises concerns that the deal may not be able to close by its Feb. 8, 2021 deadline. This review comes at a time of heightened scrutiny towards foreign investment into “strategic” industries, strained Canada-China relations, and concerns that Canadian businesses may be sold at a steep discount due to the COVID-19 pandemic. Normally, national security reviews take place for investments that involve Canada’s defence and intelligence interests, sensitive technologies, critical infrastructure, or other key international interests. However, the scope of what investments should be reviewed has recently expanded. In April 2020, the Government of Canada announced a new policy in response to the COVID-19 pandemic regarding enhanced national security reviews. This included reviews to public health, critical goods and services, and investments from state-owned enterprises. This case suggests that foreign direct investment into Canadian companies will continue to come under increased scrutiny. This may make some potential transactions unfeasible, or lengthen the time needed to close deals.

In an update to a story from the September 6, 2019 edition of Friday Finds, Air Canada says that it will go ahead with its plan to buy Air Transat, but it will purchase the airline at a steep discount to what it first agreed to last year. The two companies said in a release that Air Canada will buy all outstanding shares of Air Transat for $5 per share (total purchase price of $180 million). This is compared to its previously agreed price of $18 per share. The press release made no mention as to whether the new purchase price is acceptable to major Air Transat shareholders, including Caisse de dépôt et placement du Québec and investment manager Letko, Brosseau and Associates, which owns about one-fifth of the company. These investors were reported to have been major obstacles to the original agreement until Air Canada increased their initial offer to the $18 per share price. Air Transat must now restart the process for reviews and approvals from shareholders, courts, and various regulatory bodies. The company previously received approvals from shareholders as well as the Superior Court of Quebec, however, it received a warning from the Competition Bureau that the deal could be bad for consumers. Additionally, it was awaiting final responses from the federal Minister of Transportation and the European Commission. Any analysis of the deal’s impact on industry competition likely depends on what the airline industry looks like after the pandemic. The federal Minister of Transportation and the European Commission will make approvals and recommendations for the deal, conditional on the fulfillment of their requests to the two parties regarding public interest and competition law concerns. All things considered, Air Canada has stated it will be able to finalize the deal by January or February of 2021.

There is also a new update to the Cogeco takeover bid covered in the September 25, 2020 edition of Friday Finds. Over the past week, the Audet family, which owns Cogeco Communications Inc. and its parent company Cogeco Inc. (both collectively known as “Cogeco”), has rejected a sweetened offer for the two companies from Altice USA Inc. and Rogers Communications Inc. In a statement released on Sunday night, the family said that “this [rejection of the second proposed price] is not a negotiating strategy, but a definitive refusal.” Under the new offer, Altice would pay $11.1 billion in cash to buy all shares of both Cogeco companies, including $900 million to buy the Audet family’s multiple voting shares and subordinate shares. That is up from Altice’s previous offer of $10.3 billion announced last month. Analysts on Monday wondered if Cogeco’s independent directors might be pressured to take a stand in favour of talking to the bidders. So far, at least one shareholder has expressed frustration with the controlling Audet family. The Audet family has previously accused the joint bidders as having engaged in “bad faith tactics”, while the chief executives of Rogers and Altice sent a letter stating that Cogeco’s “boards and their independent directors failed to fulfill their most basic duties in representing the shareholders” when they turned down the first takeover bid. The Audet family, however, retains control of Cogeco through a dual-class structure. The CBLB will continue to update you as the takeover bid progresses.

That wraps up this week’s Friday Finds! Thanks for reading and come back next week for more business law news highlights.