Monday, September 10, 2012
Now, I don't often say that, but things are happening up there that we should pay a little attention to. Canada has for a long time been much less solicitous towards the poison pill than Delaware (or other US) courts. In Canada, boards have the authority to adopt poison pills, subject to review by the provincial securities commissions. The commissions have the authority to order pills redeemed. In making the determination with respect to whether or not to order a pill redeemed, the commissions consider, among other things, whether the shareholders have voted to ratify the adoption of the plan. (I've blogged about Candadian pill standards before, see here).
In any event, the Canadians take a position that is very Gilson/Bebchuk-like on the scale of things in the long-standing takeover debate: the corporation is ultimately owned by the stockholders. In response to an unsolicited offer, boards may use defensive measures in order to help negotiate a higher price, but in the end, a board may not stand between shareholders and the opportunity to tender into a non-coercive offer. I suspect there's a finance study out there on takeover premia in Canada. If not, that sounds like a study/summer project.
Contrast the Canadian position with the Delaware position, which, following Airgas and Versata, can only be called a reluctant endorsement by the Chancery Court of "just-say-no". In that long-standing debate, it's pretty clear that Marty Lipton has won the day.
So, and this is where Canada is interesting, it looks like Canada is making increasing noises about moving away from its long-standing position with respect to poison pills and its more shareholder-centric approach to the takeover law and towards a more Delaware-like approach. Already last year, it was bubbling under the surface. High profile takeovers of Canadian firms by foreign acquirers tends to ignite the passions of nationalism. Recently, it's been proposed acquisition of Rona Inc by Lowe's Co - we can't have the Yanks owning our big-box hardware stores afterall. In any event, the acquisition played an important role in the recent provincial elections in Quebec, which saw the Quebec nationalist party put back in power. During that election, both the Liberal and PQ included anti-takeover legislation in their party platforms. Liberal leader Charest went so far as to announce a $1 billion "foreign-takeover fund" that would be used to finance domestic acquisitions of Quebecois companies. No clue whether he intended to use the proposed fund to fend off interlopers from Alberta, but we won't ever find out. Charest lost and he's on his way out. The incoming PQ has already signaled that they aren't supportive of a Lowe's/Rona deal (and here). I suppose the PQ could try to stymie foreign takeovers by requiring that all tender offer documents be in French. Or, it could repeat what the Canadian government did last year in the proposed Potash aquisition - declare the Rona hardware retailer a vital national asset and a transaction not to Canada's benefit block the deal. Uh ... too much?
Short of that, it looks like the more obvious path would be to adopt a constituency statute that would place more power in the hands of the board and permit them to more aggresively resist unwanted offers.
So, something to watch. Of course, putting more power in the hands of boards doesn't ensure that Canadian businesses stay Canadian, but I suppose that's a lesson our friends up North will have to learn on their own.