Investing in Canada deals with the Acquisition of Canadian Resource Companies as well as Media & Entertainment Industries in Canada.

1. Investing in Canada
Presented by:
Gordon Esau, Partner
Jeffrey Read, Partner
September 10, 2010
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2. About FMC Law
• Established in 1839, FMC is one of Canada’s leading full service
law firms with over 500 lawyers.
• The largest national firm in Western Canada, FMC has offices
in Montréal, Ottawa, Toronto, Edmonton, Calgary, and
Vancouver.
• FMC is a founding member of the Pacific Rim Advisory Council,
a unique strategic alliance of Pacific Rim law firms.
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3. Acquisition of Canadian
Resource Companies
Jeffrey Read, Partner
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4. Overview
• Mergers and Acquisitions
• Trend is acquisition of Canadians
‐ by Chinese and Indians – Why?
• Abundant National Resources
• Friendly Regulatory System
• Take‐over Bids
‐ Cash
‐ Stock
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5. Overview (cont.)
• Securities Legislation and Rules
• Competition Act
• Investment Canada Act
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6. Take‐over Bids ‐ Cash
• Chinese company establishes Canadian subsidiary
• Isolates liability
• Mechanism for squeeze‐out
• Stock Exchange Bid vs. Circular Bid
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7. Take‐over Bids – Cash (cont.)
• Circular bid allows conditions
• Approach taken by BHP Billiton on bid for Potash
Corporation of Saskatchewan
• Mandatory acquisition procedure with 90%
• Otherwise two step transaction to squeeze out
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8. Take‐over – Squeeze out
• Propose amalgamation or plan of arrangement with
target
• Only hope for liquidity for minority
• Requisition extraordinary resolution to approve
amalgamation
• Notice, information circular and proxy
• 60 – 75 days (can be reduced to 35 days)
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9. Take‐over – Squeeze out (cont.)
• “Related party” transaction
• “Going Private” transaction
• Ontario Securities Commission – Rule 61‐501
• CVMQ Q‐27
• Valuation
• Majority of minority
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10. Planning
• Pre‐bid accumulation of shares
• 90 day pre‐bid integration
• Acquisitions during currency of bid
• 20 day post bid integration
• Collateral benefits
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11. Documentation
• Circular
• Cash bid
• Stock bid
• Conditions (66 2/3%, 75%, 90% etc.)
• 35 day minimum
• Withdrawal rights
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12. Defensive Tactics
• Shareholder rights plans
• More limited in scope than U.S.
• 45 – 60 days
• Securities Commissions adjudicate
• Little use of courts
• Provincial regulatory regime
• Only buys time
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13. Friendly Merger
• Lock up agreements
• Support agreements
• Fairness opinion
• Break fees
• Fiduciary outs
• One step merger
• Amalgamation or plan of arrangement
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14. Competition Act
• Competition Act, notification requirements
• Pre‐notification or notification
• Depends on size of parties
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15. Competition Act (cont.)
• Pre‐notification where the parties to the transaction,
together with their affiliates, have assets or annual gross
revenues in Canada in excess of $400 million and size of
transaction threshold exceeded:
‐ Acquisition or Amalgamation
Assets or revenue $70 million
• Short form or long form notifications
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16. Investment Canada Act
• Direct acquisition of established business
• WTO members
• Threshold of over $299 million assets, adjusted annually
• Non‐WTO $5,000,000
• Needs Minister of Industry to conclude that the transaction
is in the best interests of Canada
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17. Investment Canada Act (cont.)
• Cultural business $5,000,000
• Notification and review procedures
• Protected business sectors – Book publishing and cultural
industries
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18. Labour and Employment
• No “right to work” legislation
• No dismissal at will
• Notice or pay in lieu of notice
• Prescribed by Employment Standards Act
• Common law notice provisions
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19. Conclusion
• Growing activity
• Public and private deals
• More flexibility with private companies
• During tech boom stock was effective currency
• Now strong companies using cash
• Don’t dismiss hostile bids as a tool
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20. Media and Entertainment
Industries in Canada
Gordon Esau, Partner
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21. Overview
• FMC has one of the three leading Media and Entertainment
Practices in Canada. Our lawyers act for five of the six Motion
Picture of America Studios.
• Vancouver is the third largest film production centre in North
America.
• 75% of the total film production activity in British Columbia is
for the major Hollywood Studios and other U.S. producers.
• Last year the direct film production expenditures in British
Columbia exceeded $1.3 billion.
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22. Media & Entertainment Industries in Canada
• Canada introduced Film and Video Production Services Tax
Credits as an incentive to foreign film producers in 1997. The
success of that program has lead 40 U.S. states, plus the
United Kingdom, Australia and many other jurisdictions, to
implement similar incentives.
• Treaty co‐productions can be undertaken between Canada and
China for theatrical motion pictures.
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23. Media & Entertainment Industries in Canada
• The animation and visual effects industries are growing rapidly
in Vancouver.
• With its large ethnic Chinese population and strong roots in
the North American film and television industries, Vancouver is
an ideal location for Chinese production companies looking to
access the North American market.
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24. Questions and Answers
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25. Contact:
Gordon Esau Jeffrey Read
gordon.esau@fmc‐law.com jeffrey.read@fmc‐law.com
Phone: +1 (604) 443‐7105 Phone: +1 (604) 443‐7107
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26. The preceding presentation contains examples of the kinds of
issues companies looking to invest in Canada could face.
If you are faced with one of these issues, please retain professional
assistance as each situation is unique.