After the 2013 deal year, we wondered if there would be enough impressive deals to celebrate. As it turned out, there were more than enough, sufficient in fact to have the traditional debate as to which deals belonged on the list and in which order. Including and ranking the 2013 deals is open to debate; consensus is more likely, however, in identifying themes that presented themselves this year:
> Company brands are clarified, one way or another.
> Owners of iconic brands are consolidating together in strategic strokes: Saks and Hudson's Bay; Leon's and The Brick; Sobeys and Safeway; and even among the “Coming Soon” deals, not on the Top 10 list, Loblaw and Shoppers Drug Mart. “Strategic synergistic transactions,” which is neither easy to say or do, at least one M&A lawyer called them.
> BRP, a spin-off from Bombardier, continues to expand the reach of its famous yellow Ski-Doo.
> Two banks share the Aeroplan brand.
> As we close the year, we are still seeking clarity for the BlackBerry brand.
> Canadian business “repatriated” at least two companies that had been previously transferred to the US: Sobeys bought the Canadian operations of Safeway, a venerable western Canadian company; and Dominion Diamond purchased Ekati, a diamond company with its assets in the Northwest Territories, that had been previously purchased by Australia-based BHP Billiton.
> Break fees make the news and, arguably, contribute to the direction – or at least twists and turns – in a deal.
> Real estate assets continue to rise in the deal-making space, either as key financing pieces or as the deal itself.
> Facing the regulators continues to be important, especially when it comes to timing.
Here, then, is Lexpert's list of top 10 deals:
1. DEAL OF THE YEAR: EMPIRE COMPANY/ SOBEYS ACQUISITION OF CANADA SAFEWAY
Empire and its wholly owned subsidiary, Sobeys, leads our list, clearly falling into a North American trend of consolidation in consumer-facing businesses. In numbers, there is strength.
Sobeys entered into a definitive agreement with Safeway on June 12, 2013, to acquire substantially all of the assets of Canada Safeway for a cash purchase price of $5.8 billion, subject to a working capital adjustment, plus the assumption of certain liabilities. In addition, Empire and Sobeys expect to incur relevant acquisition and financing costs of approximately $200 million. The Safeway acquisition, according to Sobeys' lead law firm Stewart McKelvey, “will allow Sobeys to leverage its existing assets and, in turn, position Sobeys to compete even more effectively within the changing, and increasingly competitive, grocery retail landscape.” The deal closed in November 2013.
Stewart McKelvey's Jim Dickson, leading for Sobeys, and Blake, Cassels & Graydon LLP's Jeff Lloyd, leading for Safeway, concur that, as an asset rather than a share deal, there was much to be done “to convey every single asset,” says Dickson, who also noted the cross-border aspect of the deal added complexity.
As part of the Competition Bureau approval, Empire divested of 23 stores in the provinces of BC, Alberta, Saskatchewan, and Manitoba. Meanwhile, Empire acquired 200 grocery stores, 200 in-store pharmacies, as well as liquor stores, fuel stations, and distribution centres. Empire, which has been in the food business for more than a century, already owned stores in 10 provinces under the names Sobeys, IGA, Foodland, FreshCo, Price Chopper, and Thrifty Foods.
Stikeman Elliott LLP, led by Paul Collins, represented Sobeys on the deal's Competition aspects. Melanie Aitken of Bennett Jones LLP, the firm that represented Safeway on competition issues, says: “Perhaps most notable was the fact that, while the deal involved an industry with which the Bureau is relatively familiar (having reviewed a number of grocery acquisitions in the early 2000s), the analysis involved, really for the first time, testing the Bureau's appetite for evaluating and weighting the competitive significance of discount-oriented retailers, including Walmart. While the potential constraint from discount-oriented retail entry, including from big US retailers, had been discussed for some time in Canada, there had not been a serious consideration by the Bureau of the appropriate degree of differentiation between conventional grocery stores and more discount-oriented grocery retailers. The Bureau found most are effective competitors.”
For many of its employees, Safeway has “come home” to Canadian ownership. Shareholders are banking on that western Canadian brand, combined with the Sobeys brand that started in Stellarton, Nova Scotia, to retain and win the hearts of grocery shoppers, and to withstand the current vagaries of the grocery and related businesses, which include costs going up, margins going down; superstore power; and, more recently, Amazon entering the fray in the United States.
KEY LEGAL PLAYERS
> Stewart McKelvey
Lead Counsel to Empire/Sobeys and Crombie REIT
> Blake, Cassels & Graydon LLP
Counsel to Safeway
> Stikeman Elliott LLP
Competition counsel to Sobeys; represented the underwriters in public financing; and local counsel on commercial, real estate and agency matters
> Bennett Jones LLP
Competition counsel to Safeway
> MacPherson Leslie & Tyerman LLP
Local counsel to Sobeys on commercial, real estate and agency matters
> Aikins, MacAulay & Thorvaldson LLP
Local counsel to Sobeys on commercial, real estate and agency matters
> Fasken Martineau DuMoulin LLP
Counsel to Bank of Nova Scotia and lenders syndicate
> Simpson Thacher & Bartlett LLP
Counsel to underwriters for Sobeys public financing
> Paul Hastings LLP
Counsel to underwriters for Sobeys public financing
> Gowling Lafleur Henderson LLP
Quebec counsel to Sobeys on the public financing
> Merovitz Potechin LLP
Local counsel to Sobeys on commercial, real estate and agency matters
> McCarthy Tétrault LLP
Tax counsel to Empire/Sobeys
> Aird & Berlis LLP
Counsel to Sobeys on regulatory compliance issues
> Goodmans LLP
Counsel to Crombie REIT's special committee
> Davies Ward Phillips & Vineberg LLP
Counsel to underwriters in Crombie REIT offering
> Sullivan & Cromwell LLP
US counsel to Empire/Sobeys
> Latham & Watkins LLP
US counsel to Safeway
> Shea Nerland Calnan LLP
Assisted on real estate matters in Crombie REIT
> Kanuka Thuringer LLP
Assisted on real estate matters in Crombie REIT
> Thompson Dorfman Sweatman LLP
Assisted on real estate matters in Crombie REIT
2. H&R REIT/PRIMARIS REIT/KINGSETT CAPITAL/RIOCAN REIT
H&R Real Estate Investment Trust acquired Primaris Retail Real Estate Investment Trust in a $4.6-billion, five-way friendly transaction that didn't start out that way. As part of the transaction, a KingSett Capital-led consortium, comprising certain KingSett Capital managed funds, Ontario Pension Board, and RioCan REIT, acquired 17 Primaris properties pursuant to separate purchase agreements between Primaris and the consortium members. H&R then acquired Primaris and its remaining 27 properties.
This deal started with a takeover bid by KingSett Capital, albeit one with a courteous Canadian touch. KingSett managing partner Jon Love met with Primaris CEO John Morrison at an Oakville, Ont., Tim Hortons to inform him of KingSett's plan to lead a consortium in making an offer to unitholders of Primaris. Primaris was the third-largest mall owner in Canada at the time. That coffee meeting took place on Dec. 4, 2012, approaching the festive season and, therefore, leaving not much time to work up a competitive bid.
By January 2013, the KingSett bid was disrupted by H&R REIT, when it agreed to make a white knight, friendly bid to acquire the company by way of a complex plan of arrangement. Up until this point, H&R operated office, retail and industrial properties in the Toronto area. H&R's bid, at $27.33 per share, cash and stock, exceeded KingSett's $26 cash bid of December. Media outlets reported that the bid would likely win because a significant break fee deterred rival bids. Pursuant to that break fee arrangement, a subsequent bidder would need to pay H&R $70 million, plus H&R had an option on two Primaris properties — reports on the break fee's total value varied but hovered around $106.6 million.
At this point we can assume KingSett's Jon Love stopped, reflected, and may even have had another coffee meeting. Explains Emmanuel Pressman of Osler, Hoskin & Harcourt LLP, the firm acting for KingSett Capital: “In an extraordinary display of the art of the deal, the KingSett consortium overcame the odds by putting together a deal that delivered substantially improved economics for Primaris unitholders and carved-up the Primaris assets among four parties [H&R, KingSett, RioCan, and the Ontario Pension Board] with the result that everyone walked away a winner.”
According to The Globe and Mail, “The two rival groups that have been competing to buy Primaris Retail Real Estate Investment Trust, one of Canada's largest shopping mall operators, have reached a $4.6-billion compromise … The three CEOs for H&R, KingSett and Primaris described the deal as a win-win-win for their stakeholders … H&R will become Canada's largest diversified real estate trust after adding the Primaris shopping malls to its retail segment, which will account for 51 per cent of the REIT's overall net operating income after the deal.”
And thus was created Canada's largest diversified REIT, owning office properties, industrial sites and shopping malls across the country. Primaris, based in Toronto, had 33 properties in 26 markets, including the Burlington Mall, Oakville Place, and Place d'Orleans in Ontario. Toronto-Dominion Bank and Canadian Imperial Bank of Commerce advised KingSett, and Canaccord Financial Inc. (CF) worked with Primaris.
On the legal front, Graham Gow and a team at McCarthy Tétrault LLP led in advising Primaris on the transactional front, while Frank DeLuca from Cassels Brock & Blackwell LLP continued to advise Primaris on securities issues. For the client's benefit, says DeLuca, “we are very mindful of what the other is doing and very aware of each other's skill sets.”
KEY LEGAL PLAYERS
> McCarthy Tétrault LLP
Counsel to Primaris/Independent Committee
> Cassels Brock & Blackwell LLP
Counsel to Primaris
> Blake, Cassels & Graydon LLP
Counsel to H&R REIT
> Davies Ward Phillips & Vineberg LLP
Counsel to H&R REIT on certain US law issues
> Osler, Hoskin & Harcourt LLP
Counsel to KingSett Capital-led consortium
> Bennett Jones LLP
Counsel to KingSett Capital-led consortium
> Stikeman Elliott LLP
Counsel to RioCan
> Torys LLP
Counsel to TD
> Paul, Weiss, Rifkind, Wharton & Garrison LLP
Counsel to Primaris
> Fogler, Rubinoff LLP
Counsel to RioCan
3. BCE ACQUIRES ASTRAL MEDIA
BCE Inc. acquired one of the country's last independent media companies, Montreal-based media giant Astral Media Inc., with its various classes of shares. Bell acquired all Class A non-voting shares of Astral for $50 per share for a total cash consideration of approximately $2.8 billion. Bell also acquired all Class B subordinate voting shares for $54.83 per share, for a total cash consideration of approximately $151 million, and all special shares for a total cash consideration of $50 million. The Astral Class A shares and Class B shares were delisted from the Toronto Stock Exchange at the end of trading on July 8, 2013. The acquisition of Astral was done on a cash basis by way of a plan of arrangement for $3.38 billion.
As Grant Buchanan from McCarthy Tétrault LLP, lead outside counsel to BCE on the Astral transaction, says, “This was the second time around for this deal.” In the fall of 2012, the CRTC had turned down the initial BCE/Astral Media deal, expressing concerns over the concentration of media ownership. And so they tried again, divesting assets that were considered anti-competitive. In March 2013, a BCE press release stated: “Under a consent agreement with the Competition Bureau and in its amended filing with the CRTC, Bell committed to divest several Astral TV assets. This includes the sale of Teletoon/ Télétoon, Teletoon Retro/Télétoon Rétro, Cartoon Network (Canada), Historia, and Séries+, as well as [BCE's two] Ottawa radio stations, to Corus in a transaction valued at $400.6 million.” Bell Media also sold the Family, Disney XD, Disney Junior (both English and French channels), Musimax, and MusiquePlus television services.
The CRTC approved BCE's takeover of Astral Media, but with several conditions. “To ensure the public interest is served, we are requiring BCE to invest in new Canadian programming and sell more than a dozen services, and we are putting in place a number of competitive safeguards,” CRTC Chair Jean-Pierre Blais said in a news release. Stipulating that several television and radio stations had to be sold, the CRTC said: “This will maintain a healthy and competitive broadcasting system that offers more programming choices to Canadian consumers and citizens and more opportunities for Canadian creators.”
Corus Entertainment entered into a number of agreements with Bell (and separately with Shaw Media), extending its ownership in the Quebec and the French-language specialty television market.
Even with the divestitures, the deal gave BCE unprecedented access to specialty and pay TV programming, including movies and sports, and to the French-language broadcast market. The new deal gives BCE control of 22.6 per cent of the French-language television market and 35.8 per cent of the English-language market.
Robert Carelli of Stikeman Elliott LLP's Montreal office says this deal was signed in March 2012, and closed more than a year later, in July 2013. “There was mutual respect and trust on the legal teams on both sides of this transaction, which simplified negotiations.” Carelli adds: “This was well-received by the market; there was overwhelming shareholder support.” Given the number of assets, he says, the diligence process was very involved.
KEY LEGAL PLAYERS
> McCarthy Tétrault LLP
Counsel to Bell
> Blake, Cassels & Graydon LLP
Counsel to Bell and Abgreen Holdings (Astral's controlling shareholder)
> Stikeman Elliott LLP
Counsel to Astral
> Goodmans LLP
Counsel to Astral's Special Committee
> Davies Ward Phillips & Vineberg LLP
Counsel to certain members of the Greenberg Family (Abgreen Holdings)
> Dentons Canada LLP
Counsel to Comweb Media (shareholder of Astral)
> Borden Ladner Gervais LLP
Counsel to Bank of Montreal
> Osler, Hoskin & Harcourt LLP
Counsel to Corus (in its acquisition of specialty TV channels and radio station assets from BCE)
4. HBC ACQUIRES SAKS FIFTH AVENUE
Hudson's Bay Company announced on July 29, 2013, that it had entered into a merger agreement with US luxury retailer Saks Fifth Avenue. The deal saw HBC acquire Saks for US$16 per share, totalling US$2.9 billion, including debt. In addition, HBC entered into debt commitments with Bank of America Merrill Lynch and Royal Bank of Canada, and equity investment agreements with Ontario Teachers' Pension Plan (worth US$500 million) and West Face Capital (worth $250 million).
Stikemans acted for HBC as it forayed into exciting retail territory. Ian Putnam says that bidding for this target was under a compressed timeline and a very competitive auction. “This is a great move,” he adds, for HBC, Saks, Canadian business and shoppers. Participants and observers concur that the Ontario Teachers' Pension Plan was vital to the deal. Vince Mercier led the Davies Ward Phillips & Vineberg LLP team acting for the Ontario Teachers' Pension Plan.
KEY LEGAL PLAYERS
> Stikeman Elliott LLP
Counsel to HBC
> Willkie Farr & Gallagher LLP
US counsel to HBC
> Wachtell, Lipton, Rosen & Katz
Counsel to Saks in US
> Davies Ward Phillips & Vineberg LLP
Counsel to Ontario Teachers' Pension Plan
> Borden Ladner Gervais LLP
Counsel to West Face Capital Corp.
5. FIRST QUANTUM MINERALS ACQUIRES INMET MINING
First Quantum Minerals Ltd. and its wholly owned subsidiary FQM (Akubra) Inc. acquired Inmet Mining Corp. in a hostile deal that never did turn friendly. First Quantum and Akubra announced that, on April 1, 2013, a total of 65,206,044 common shares of Inmet, representing 92.74 per cent of the outstanding Inmet shares (on a fully diluted basis), had been validly tendered to the offer. First Quantum and Akubra subsequently acquired the balance of the Inmet shares not tendered, by way of compulsory acquisition. Inmet was amalgamated into FQM (Akubra) following the completion of the compulsory acquisition.
Fasken Martineau DuMoulin LLP's John Turner, who led the legal team for First Quantum, noted its significance as the largest deal in the sector this year. Leading for Inmet, Torys LLP's James Scarlett pointed out that it “was the last big takeover in the mining space before everything went haywire.”
KEY LEGAL PLAYERS
> Fasken Martineau DuMoulin LLP
Lead counsel to First Quantum Minerals
> McCarthy Tétrault LLP
Counsel to First Quantum Minerals
> Torys LLP
Lead Counsel to Inmet Mining Corp.
> Osler, Hoskin & Harcourt LLP
Independent counsel to the Special Committee of Inmet
> Goodmans LLP
Counsel to Leucadia National Corporation (Inmet's largest shareholder)
> Weil, Gotshal & Manges LLP
Counsel to Leucadia National Corporation (Inmet's largest shareholder)
> Blake, Cassels & Graydon LLP
Counsel to lenders
6. LEON'S/THE BRICK
Leon's Furniture completed its takeover of The Brick in a deal with a value of approximately $700 million. Leon's is now the largest furniture, mattress and major appliance retailer in Canada with annual sales of $2.4 billion.
The Brick, based in Edmonton, had been facing financial challenges, while Leon's in Toronto had been dealing with decreasing consumer confidence. It appears that the two rivals calculated that together they would stand a better chance at fending off expanding foreign players, including Target Corp. Once the deal was given a “no action” letter from the Competition Bureau, it was a smooth transaction. Now we will see if the strategy prevails.
KEY LEGAL PLAYERS
> McCarthy Tétrault LLP
Counsel to Leon's
> Blake, Cassels & Graydon LLP
Counsel to The Brick
> Torys LLP
Counsel to Fairfax Financial Holdings Ltd.
7. HECLA MINING ACQUIRES AURIZON MINES
Hecla Mining Company, the largest and lowest-cost primary silver producer in the US, acquired Aurizon Mines Ltd. in a transaction valued at $796 million. Aurizon owns and operates eight properties in Quebec, including the Casa Berardi gold mine.
Hecla describes the deal this way: “The transaction took the form of a plan of arrangement and was the result of a contest for control initiated by an unsolicited takeover bid launched by Alamos Gold Inc. on January 14, 2013. Hecla paid a combination of cash and shares to the shareholders of Aurizon. After proration, Hecla issued an aggregate of 56,997,790 shares and paid total cash consideration of $514.5 million. The cash consideration was funded, in part, by a US$500-million private placement of senior notes by Hecla in the United States, Canada and elsewhere.”
During the course of this deal's contest, there were timing challenges and defensive measures, according to Gordon Chambers, who led the team at Cassels Brock that represented Hecla in Canada. “No one wants to be making a competitive bid at the last minute,” he muses, but it happened. And then Alamos contested the break fee at the BC Securities Commission. It would have been payable to Hecla if Alamos had acquired more than 33.3 per cent of Aurizon's common shares. Although the BCSC did cease trade the second shareholder rights plan that had been put in place, it did not cease trade the transaction. According to the BCSC, “The evidence was that the Aurizon board was not going to be able to obtain an alternative transaction with Hecla without the break fee in the form of that which ultimately prevailed. In the exercise of its fiduciary duties, the board assessed the value of the Hecla transaction as a whole in considering whether the transaction would be in the best interest of Aurizon. The board concluded that it would be. We therefore concluded that the break fee was a necessary element of an alternative transaction the Aurizon board negotiated for its shareholders to consider, rather than an attempt to frustrate the Alamos offer.”
KEY LEGAL PLAYERS
> Cassels Brock & Blackwell LLP
Counsel to Hecla Mining
> Nathanson Schachter & Thompson LLP
Special litigation counsel to Hecla in BC
> K&L Gates LLP
Counsel to Hecla in US
> DuMoulin Black LLP
Counsel to Aurizon
> Blake, Cassels & Graydon LLP
Counsel to Aurizon
> Paul, Weiss, Rifkind, Wharton & Garrison LLP
Counsel to Aurizon in US
> Torys LLP
Counsel to Alamos in competing bid for Aurizon and subsequent sale of their shares
8. DOMINION DIAMOND ACQUIRES EKATI FROM BHP BILLITON
BHP Billiton sold the Ekati Diamond Mine in the Northwest Territories, and its related marketing business in Antwerp, to Dominion Diamond Corporation (formerly Harry Winston Diamond Corporation) for aggregate cash consideration of US$500 million. BHP Billiton's interest in Ekati consisted of an 80 per cent interest in the Core Zone joint venture comprising existing operations (with the other 20 per cent owned by the geologists who discovered it) and a 58.8 per cent interest in the Buffer Zone joint venture, which is focused on exploration opportunities. Here we had a “Canadian company buying a company in Canada,” says Dominion Diamond external counsel Mark Wheeler of Borden Ladner Gervais LLP. “The company is moving more executives to Yellowknife and plans to expand the Buffer Zone.”
(Harry Winston also signalled its intention to focus on diamonds by selling its high-end luxury brand diamond jewelry and timepiece division to Switzerland's Swatch. Stikemans acted for Harry Winston Diamond Corporation in this sale of Harry Winston Inc., to The Swatch Group Ltd. for US$750 million plus their assumption of up to US$250 million of pro forma net debt.)
KEY LEGAL PLAYERS
> Davies Ward Phillips & Vineberg LLP
Counsel to BHP Billiton
> Borden Ladner Gervais LLP
Counsel to Dominion Diamond
> Blake, Cassels & Graydon LLP
Counsel to financing
9. BRP IPO
In the best-performing IPO this year, BRP shares have risen 31 per cent since the $301.5-million IPO debuted in May 2013. This comes 10 years after Bombardier sold BRP Inc., the maker of Ski-Doo snowmobiles and three-wheeled motorcycles, to private investors including private-equity firm Boston-based Bain Capital Partners LLC, members of the Bombardier and Beaudoin families, who are part of Beaudier Group, and Caisse de dépôt et placement du Québec. Warren Katz of Stikeman Elliott, the firm that led the BRP team, says the success of this IPO reflects revitalized levels of consumption in recreational sports vehicles, which are highly discretionary, after the 2008 downturn.
BRP's products now go well beyond the Ski-Doo, travelling on land, air and sea, including Lynx snowmobiles, Sea-Doo watercrafts, Can-Am off-road vehicles (which include ATVs and SSVs), Can-Am roadsters, Evinrude outboard engines, and Rotax propulsion systems for motorcycles, boats and recreational and small aircraft, plus a parts and accessories business. Its corporate headquarters are still in Valcourt, Quebec, where in 1942, Joseph-Armand Bombardier began his eponymous company, L'Auto-Neige Bombardier Limitée.
KEY LEGAL PLAYERS
> Stikeman Elliott LLP
Counsel to BRP
> McCarthy Tétrault LLP
Counsel to underwriting syndicate
> Davies Ward Phillips & Vineberg LLP
Counsel to Bain Capital (principle shareholder of BRP)
> Norton Rose Fulbright Canada LLP
Counsel to Beaudier Group (principle shareholder of BRP)
> Fasken Martineau DuMoulin LLP
Counsel to Caisse de dépôt et placement du Québec (principle shareholder of BRP)
> Ropes & Gray LLP
Counsel to Bain Capital (principle shareholder of BRP)
10. AGRIUM/JANA PROXY BATTLE
Agrium fended off Jana in a protracted proxy battle, leaving the Canadian business community with a contrasting result to the Canadian Pacific Railway Ltd. proxy battle of 2012. Pat Finnerty and Ross Bentley, on the Blakes team for Agrium, accord much credit to former Agrium CEO Mike Wilson for presenting the company's case to shareholders and preserving the company's status quo. Says Finnerty: “In the big picture, what Agrium really did was show that in a well-run company, where management has a clear view and a plan, it could still prevail over a seasoned, well-armed activist. Management wasn't helpless.”
Bentley adds that the long length of the process made this challenging for the Agrium leadership, but they prevailed: “A proxy battle is fought over the hearts, minds and wallets of shareholders. They want time with senior executives, and want to hear what the CEO has to say. Mike Wilson was very engaged. As a company that finds itself the target of the activist, you need to assemble a team quickly, evaluate what has happened, focus board and management and develop a thoughtful strategy, including shareholder relations and communications.”
As 2014 begins, it remains to be seen the extent to which shareholder activism will continue as an alternative to M&A. As Walied Soliman of Norton Rose Fulbright Canada LLP puts it: “The fight stands for the proposition that boards and management teams who believe in their thesis and effectively deliver their message can succeed even against the toughest of dissidents. The fight serves as a counterbalance in boardrooms after the CP fight.” Boards and executive teams beware, the Canadian score is thus far 1-1.
KEY LEGAL PLAYERS
> Davies Ward Phillips & Vineberg LLP
Counsel to Jana Partners
> Blake, Cassels & Graydon LLP
Counsel to Agrium
> Norton Rose Fulbright Canada LLP
Counsel to Agrium's special committee
> Paul, Weiss, Rifkind, Wharton & Garrison LLP
US counsel to Agrium
LEXPERT BIG DEALS METHODOLOGY
LEXPERT'S TOP 10 DEALS OF THE YEAR LIST, published annually since January 2004, is unique and distinct from league tables prepared by accountants, investment banks and financial analysts, and ranked, for the most part, by size of the transaction. This list is based on an extensive canvass conducted in October and November 2013 by Editor-in-Chief Jean Cumming of Canadian M&A, securities and corporate finance lawyers.
There were several criteria this year, including the fact that the deal must be announced between Nov. 1, 2012 and Nov. 1, 2013, and closed or expected to close early in 2014, preferably by January 2014. Transactions with particularly long gestation periods also qualify. Canadian legal content of the deal must be significant.
Most importantly, the deal must stand for more than itself: represent a trend, illustrate some aspect of the year's economic climate, or be a portent of things to come.
There is no minimum size or preferred structure — this list's definition of “deal” is anything Canadian lawyers worked on that they considered to be significant.
Lexpert also co-sponsors, with Deloitte, The Globe and Mail and Thomson Reuters (Markets), the Canadian Dealmaker Awards. We will report on these awards in the March issue of the magazine, at which time it will be interesting to compare the winners with the Lexpert Top Deals.
Certain of the deals are bound to overlap, while others do not. Top Deals tends more toward “lawyers' deals” in the sense that they comprise compelling legal issues. Clients aren't nearly as interested in compelling legal issues as lawyers are.
“COMING SOON”
Many Lexpert readers voted for Loblaw's friendly takeover of Shoppers Drug Mart Corp. to be included on this Top 10 list and indeed, at a quantum of $12.4 billion, to lead it. We sided with those other readers who argued it needed to wait until closing, not scheduled until first quarter 2014. Suffice it to say at this point, if all goes according to plan, this deal will team up Canada's largest grocery retailer with its largest chain of pharmacy stores. The Shoppers brand name will remain and operate as a separate division of Loblaw.
“Our networks are very complementary, as opposed to overlapping, and therefore don't raise any competitive issues,” Shoppers CEO Domenic Pilla said after the company's shareholder meeting that voted 99.9 per cent approval of the takeover. “But clearly we'll have to submit that to the Bureau and make sure we work with them so that they come to the same conclusion.” Controlling shareholder George Weston Ltd. had already provided written consent to the deal to the Toronto Stock Exchange, satisfying the shareholder approval requirements from the Loblaw end.
Lexpert expects to join in the celebration of this deal on next year's Top 10 list.
Fewer readers, but they were very dedicated, thought the BlackBerry deal with Fairfax should be on the list. After all, Fairfax Financial Holdings Limited and other institutional investors invested in BlackBerry through a US$1-billion private placement of convertible debentures. As of the transaction's closing in November, John Chen became executive chair of BlackBerry's board of directors and Thorsten Heins stepped down as chief executive officer. Yet the fate of BlackBerry is far from certain. Maybe Barbara Stymiest, chair of BlackBerry's board, is right when she says the Fairfax deal “represents a significant vote of confidence in BlackBerry and its future by this group of preeminent, long-term investors.” But this deal with Fairfax had been a $4.7-billion buyout, one in which Fairfax sought new buyers to join in. None surfaced.
Another break fee made the news here. At the time of the tentative offer, Fairfax Chief Executive Officer Prem Watsa had not identified the rest of the buyout group or financing (for the obvious reason), the BlackBerry board still agreed to pay the group a $157-million break fee if it struck a better deal with another buyer. Some say that may have deterred rival bidders, who, let's face it, weren't exactly rushing to the altar even before they heard about the dowry.
MORE CANADIANA
Two more deals showed Canadian colours this year. TD Bank Group and Canadian Imperial Bank of Commerce will each take 50 per cent of the Aeroplan credit card portfolio by agreement with Aimia Inc., the parent company of the loyalty rewards program. As The Globe and Mail puts it, “The next battle is to make their individual strategies bear fruit.”
Davis + Henderson, the venerable Canadian cheque-printing and manufacturing company, announced it has completed the US$1.2-billion all-cash acquisition of Harland Financial Solutions, a US-based provider of strategic technology, including lending and compliance, core banking, and channel management technology solutions. With the acquisition, D+H improves its competitive position by expanding its value-added suite of financial technology (FinTech) products for banks and credit unions and accelerates its strategy as a North American FinTech provider.
> Company brands are clarified, one way or another.
> Owners of iconic brands are consolidating together in strategic strokes: Saks and Hudson's Bay; Leon's and The Brick; Sobeys and Safeway; and even among the “Coming Soon” deals, not on the Top 10 list, Loblaw and Shoppers Drug Mart. “Strategic synergistic transactions,” which is neither easy to say or do, at least one M&A lawyer called them.
> BRP, a spin-off from Bombardier, continues to expand the reach of its famous yellow Ski-Doo.
> Two banks share the Aeroplan brand.
> As we close the year, we are still seeking clarity for the BlackBerry brand.
> Canadian business “repatriated” at least two companies that had been previously transferred to the US: Sobeys bought the Canadian operations of Safeway, a venerable western Canadian company; and Dominion Diamond purchased Ekati, a diamond company with its assets in the Northwest Territories, that had been previously purchased by Australia-based BHP Billiton.
> Break fees make the news and, arguably, contribute to the direction – or at least twists and turns – in a deal.
> Real estate assets continue to rise in the deal-making space, either as key financing pieces or as the deal itself.
> Facing the regulators continues to be important, especially when it comes to timing.
Here, then, is Lexpert's list of top 10 deals:
1. DEAL OF THE YEAR: EMPIRE COMPANY/ SOBEYS ACQUISITION OF CANADA SAFEWAY
Empire and its wholly owned subsidiary, Sobeys, leads our list, clearly falling into a North American trend of consolidation in consumer-facing businesses. In numbers, there is strength.
Sobeys entered into a definitive agreement with Safeway on June 12, 2013, to acquire substantially all of the assets of Canada Safeway for a cash purchase price of $5.8 billion, subject to a working capital adjustment, plus the assumption of certain liabilities. In addition, Empire and Sobeys expect to incur relevant acquisition and financing costs of approximately $200 million. The Safeway acquisition, according to Sobeys' lead law firm Stewart McKelvey, “will allow Sobeys to leverage its existing assets and, in turn, position Sobeys to compete even more effectively within the changing, and increasingly competitive, grocery retail landscape.” The deal closed in November 2013.
Stewart McKelvey's Jim Dickson, leading for Sobeys, and Blake, Cassels & Graydon LLP's Jeff Lloyd, leading for Safeway, concur that, as an asset rather than a share deal, there was much to be done “to convey every single asset,” says Dickson, who also noted the cross-border aspect of the deal added complexity.
As part of the Competition Bureau approval, Empire divested of 23 stores in the provinces of BC, Alberta, Saskatchewan, and Manitoba. Meanwhile, Empire acquired 200 grocery stores, 200 in-store pharmacies, as well as liquor stores, fuel stations, and distribution centres. Empire, which has been in the food business for more than a century, already owned stores in 10 provinces under the names Sobeys, IGA, Foodland, FreshCo, Price Chopper, and Thrifty Foods.
Stikeman Elliott LLP, led by Paul Collins, represented Sobeys on the deal's Competition aspects. Melanie Aitken of Bennett Jones LLP, the firm that represented Safeway on competition issues, says: “Perhaps most notable was the fact that, while the deal involved an industry with which the Bureau is relatively familiar (having reviewed a number of grocery acquisitions in the early 2000s), the analysis involved, really for the first time, testing the Bureau's appetite for evaluating and weighting the competitive significance of discount-oriented retailers, including Walmart. While the potential constraint from discount-oriented retail entry, including from big US retailers, had been discussed for some time in Canada, there had not been a serious consideration by the Bureau of the appropriate degree of differentiation between conventional grocery stores and more discount-oriented grocery retailers. The Bureau found most are effective competitors.”
For many of its employees, Safeway has “come home” to Canadian ownership. Shareholders are banking on that western Canadian brand, combined with the Sobeys brand that started in Stellarton, Nova Scotia, to retain and win the hearts of grocery shoppers, and to withstand the current vagaries of the grocery and related businesses, which include costs going up, margins going down; superstore power; and, more recently, Amazon entering the fray in the United States.
KEY LEGAL PLAYERS
> Stewart McKelvey
Lead Counsel to Empire/Sobeys and Crombie REIT
> Blake, Cassels & Graydon LLP
Counsel to Safeway
> Stikeman Elliott LLP
Competition counsel to Sobeys; represented the underwriters in public financing; and local counsel on commercial, real estate and agency matters
> Bennett Jones LLP
Competition counsel to Safeway
> MacPherson Leslie & Tyerman LLP
Local counsel to Sobeys on commercial, real estate and agency matters
> Aikins, MacAulay & Thorvaldson LLP
Local counsel to Sobeys on commercial, real estate and agency matters
> Fasken Martineau DuMoulin LLP
Counsel to Bank of Nova Scotia and lenders syndicate
> Simpson Thacher & Bartlett LLP
Counsel to underwriters for Sobeys public financing
> Paul Hastings LLP
Counsel to underwriters for Sobeys public financing
> Gowling Lafleur Henderson LLP
Quebec counsel to Sobeys on the public financing
> Merovitz Potechin LLP
Local counsel to Sobeys on commercial, real estate and agency matters
> McCarthy Tétrault LLP
Tax counsel to Empire/Sobeys
> Aird & Berlis LLP
Counsel to Sobeys on regulatory compliance issues
> Goodmans LLP
Counsel to Crombie REIT's special committee
> Davies Ward Phillips & Vineberg LLP
Counsel to underwriters in Crombie REIT offering
> Sullivan & Cromwell LLP
US counsel to Empire/Sobeys
> Latham & Watkins LLP
US counsel to Safeway
> Shea Nerland Calnan LLP
Assisted on real estate matters in Crombie REIT
> Kanuka Thuringer LLP
Assisted on real estate matters in Crombie REIT
> Thompson Dorfman Sweatman LLP
Assisted on real estate matters in Crombie REIT
2. H&R REIT/PRIMARIS REIT/KINGSETT CAPITAL/RIOCAN REIT
H&R Real Estate Investment Trust acquired Primaris Retail Real Estate Investment Trust in a $4.6-billion, five-way friendly transaction that didn't start out that way. As part of the transaction, a KingSett Capital-led consortium, comprising certain KingSett Capital managed funds, Ontario Pension Board, and RioCan REIT, acquired 17 Primaris properties pursuant to separate purchase agreements between Primaris and the consortium members. H&R then acquired Primaris and its remaining 27 properties.
This deal started with a takeover bid by KingSett Capital, albeit one with a courteous Canadian touch. KingSett managing partner Jon Love met with Primaris CEO John Morrison at an Oakville, Ont., Tim Hortons to inform him of KingSett's plan to lead a consortium in making an offer to unitholders of Primaris. Primaris was the third-largest mall owner in Canada at the time. That coffee meeting took place on Dec. 4, 2012, approaching the festive season and, therefore, leaving not much time to work up a competitive bid.
By January 2013, the KingSett bid was disrupted by H&R REIT, when it agreed to make a white knight, friendly bid to acquire the company by way of a complex plan of arrangement. Up until this point, H&R operated office, retail and industrial properties in the Toronto area. H&R's bid, at $27.33 per share, cash and stock, exceeded KingSett's $26 cash bid of December. Media outlets reported that the bid would likely win because a significant break fee deterred rival bids. Pursuant to that break fee arrangement, a subsequent bidder would need to pay H&R $70 million, plus H&R had an option on two Primaris properties — reports on the break fee's total value varied but hovered around $106.6 million.
At this point we can assume KingSett's Jon Love stopped, reflected, and may even have had another coffee meeting. Explains Emmanuel Pressman of Osler, Hoskin & Harcourt LLP, the firm acting for KingSett Capital: “In an extraordinary display of the art of the deal, the KingSett consortium overcame the odds by putting together a deal that delivered substantially improved economics for Primaris unitholders and carved-up the Primaris assets among four parties [H&R, KingSett, RioCan, and the Ontario Pension Board] with the result that everyone walked away a winner.”
According to The Globe and Mail, “The two rival groups that have been competing to buy Primaris Retail Real Estate Investment Trust, one of Canada's largest shopping mall operators, have reached a $4.6-billion compromise … The three CEOs for H&R, KingSett and Primaris described the deal as a win-win-win for their stakeholders … H&R will become Canada's largest diversified real estate trust after adding the Primaris shopping malls to its retail segment, which will account for 51 per cent of the REIT's overall net operating income after the deal.”
And thus was created Canada's largest diversified REIT, owning office properties, industrial sites and shopping malls across the country. Primaris, based in Toronto, had 33 properties in 26 markets, including the Burlington Mall, Oakville Place, and Place d'Orleans in Ontario. Toronto-Dominion Bank and Canadian Imperial Bank of Commerce advised KingSett, and Canaccord Financial Inc. (CF) worked with Primaris.
On the legal front, Graham Gow and a team at McCarthy Tétrault LLP led in advising Primaris on the transactional front, while Frank DeLuca from Cassels Brock & Blackwell LLP continued to advise Primaris on securities issues. For the client's benefit, says DeLuca, “we are very mindful of what the other is doing and very aware of each other's skill sets.”
KEY LEGAL PLAYERS
> McCarthy Tétrault LLP
Counsel to Primaris/Independent Committee
> Cassels Brock & Blackwell LLP
Counsel to Primaris
> Blake, Cassels & Graydon LLP
Counsel to H&R REIT
> Davies Ward Phillips & Vineberg LLP
Counsel to H&R REIT on certain US law issues
> Osler, Hoskin & Harcourt LLP
Counsel to KingSett Capital-led consortium
> Bennett Jones LLP
Counsel to KingSett Capital-led consortium
> Stikeman Elliott LLP
Counsel to RioCan
> Torys LLP
Counsel to TD
> Paul, Weiss, Rifkind, Wharton & Garrison LLP
Counsel to Primaris
> Fogler, Rubinoff LLP
Counsel to RioCan
3. BCE ACQUIRES ASTRAL MEDIA
BCE Inc. acquired one of the country's last independent media companies, Montreal-based media giant Astral Media Inc., with its various classes of shares. Bell acquired all Class A non-voting shares of Astral for $50 per share for a total cash consideration of approximately $2.8 billion. Bell also acquired all Class B subordinate voting shares for $54.83 per share, for a total cash consideration of approximately $151 million, and all special shares for a total cash consideration of $50 million. The Astral Class A shares and Class B shares were delisted from the Toronto Stock Exchange at the end of trading on July 8, 2013. The acquisition of Astral was done on a cash basis by way of a plan of arrangement for $3.38 billion.
As Grant Buchanan from McCarthy Tétrault LLP, lead outside counsel to BCE on the Astral transaction, says, “This was the second time around for this deal.” In the fall of 2012, the CRTC had turned down the initial BCE/Astral Media deal, expressing concerns over the concentration of media ownership. And so they tried again, divesting assets that were considered anti-competitive. In March 2013, a BCE press release stated: “Under a consent agreement with the Competition Bureau and in its amended filing with the CRTC, Bell committed to divest several Astral TV assets. This includes the sale of Teletoon/ Télétoon, Teletoon Retro/Télétoon Rétro, Cartoon Network (Canada), Historia, and Séries+, as well as [BCE's two] Ottawa radio stations, to Corus in a transaction valued at $400.6 million.” Bell Media also sold the Family, Disney XD, Disney Junior (both English and French channels), Musimax, and MusiquePlus television services.
The CRTC approved BCE's takeover of Astral Media, but with several conditions. “To ensure the public interest is served, we are requiring BCE to invest in new Canadian programming and sell more than a dozen services, and we are putting in place a number of competitive safeguards,” CRTC Chair Jean-Pierre Blais said in a news release. Stipulating that several television and radio stations had to be sold, the CRTC said: “This will maintain a healthy and competitive broadcasting system that offers more programming choices to Canadian consumers and citizens and more opportunities for Canadian creators.”
Corus Entertainment entered into a number of agreements with Bell (and separately with Shaw Media), extending its ownership in the Quebec and the French-language specialty television market.
Even with the divestitures, the deal gave BCE unprecedented access to specialty and pay TV programming, including movies and sports, and to the French-language broadcast market. The new deal gives BCE control of 22.6 per cent of the French-language television market and 35.8 per cent of the English-language market.
Robert Carelli of Stikeman Elliott LLP's Montreal office says this deal was signed in March 2012, and closed more than a year later, in July 2013. “There was mutual respect and trust on the legal teams on both sides of this transaction, which simplified negotiations.” Carelli adds: “This was well-received by the market; there was overwhelming shareholder support.” Given the number of assets, he says, the diligence process was very involved.
KEY LEGAL PLAYERS
> McCarthy Tétrault LLP
Counsel to Bell
> Blake, Cassels & Graydon LLP
Counsel to Bell and Abgreen Holdings (Astral's controlling shareholder)
> Stikeman Elliott LLP
Counsel to Astral
> Goodmans LLP
Counsel to Astral's Special Committee
> Davies Ward Phillips & Vineberg LLP
Counsel to certain members of the Greenberg Family (Abgreen Holdings)
> Dentons Canada LLP
Counsel to Comweb Media (shareholder of Astral)
> Borden Ladner Gervais LLP
Counsel to Bank of Montreal
> Osler, Hoskin & Harcourt LLP
Counsel to Corus (in its acquisition of specialty TV channels and radio station assets from BCE)
4. HBC ACQUIRES SAKS FIFTH AVENUE
Hudson's Bay Company announced on July 29, 2013, that it had entered into a merger agreement with US luxury retailer Saks Fifth Avenue. The deal saw HBC acquire Saks for US$16 per share, totalling US$2.9 billion, including debt. In addition, HBC entered into debt commitments with Bank of America Merrill Lynch and Royal Bank of Canada, and equity investment agreements with Ontario Teachers' Pension Plan (worth US$500 million) and West Face Capital (worth $250 million).
Stikemans acted for HBC as it forayed into exciting retail territory. Ian Putnam says that bidding for this target was under a compressed timeline and a very competitive auction. “This is a great move,” he adds, for HBC, Saks, Canadian business and shoppers. Participants and observers concur that the Ontario Teachers' Pension Plan was vital to the deal. Vince Mercier led the Davies Ward Phillips & Vineberg LLP team acting for the Ontario Teachers' Pension Plan.
KEY LEGAL PLAYERS
> Stikeman Elliott LLP
Counsel to HBC
> Willkie Farr & Gallagher LLP
US counsel to HBC
> Wachtell, Lipton, Rosen & Katz
Counsel to Saks in US
> Davies Ward Phillips & Vineberg LLP
Counsel to Ontario Teachers' Pension Plan
> Borden Ladner Gervais LLP
Counsel to West Face Capital Corp.
5. FIRST QUANTUM MINERALS ACQUIRES INMET MINING
First Quantum Minerals Ltd. and its wholly owned subsidiary FQM (Akubra) Inc. acquired Inmet Mining Corp. in a hostile deal that never did turn friendly. First Quantum and Akubra announced that, on April 1, 2013, a total of 65,206,044 common shares of Inmet, representing 92.74 per cent of the outstanding Inmet shares (on a fully diluted basis), had been validly tendered to the offer. First Quantum and Akubra subsequently acquired the balance of the Inmet shares not tendered, by way of compulsory acquisition. Inmet was amalgamated into FQM (Akubra) following the completion of the compulsory acquisition.
Fasken Martineau DuMoulin LLP's John Turner, who led the legal team for First Quantum, noted its significance as the largest deal in the sector this year. Leading for Inmet, Torys LLP's James Scarlett pointed out that it “was the last big takeover in the mining space before everything went haywire.”
KEY LEGAL PLAYERS
> Fasken Martineau DuMoulin LLP
Lead counsel to First Quantum Minerals
> McCarthy Tétrault LLP
Counsel to First Quantum Minerals
> Torys LLP
Lead Counsel to Inmet Mining Corp.
> Osler, Hoskin & Harcourt LLP
Independent counsel to the Special Committee of Inmet
> Goodmans LLP
Counsel to Leucadia National Corporation (Inmet's largest shareholder)
> Weil, Gotshal & Manges LLP
Counsel to Leucadia National Corporation (Inmet's largest shareholder)
> Blake, Cassels & Graydon LLP
Counsel to lenders
6. LEON'S/THE BRICK
Leon's Furniture completed its takeover of The Brick in a deal with a value of approximately $700 million. Leon's is now the largest furniture, mattress and major appliance retailer in Canada with annual sales of $2.4 billion.
The Brick, based in Edmonton, had been facing financial challenges, while Leon's in Toronto had been dealing with decreasing consumer confidence. It appears that the two rivals calculated that together they would stand a better chance at fending off expanding foreign players, including Target Corp. Once the deal was given a “no action” letter from the Competition Bureau, it was a smooth transaction. Now we will see if the strategy prevails.
KEY LEGAL PLAYERS
> McCarthy Tétrault LLP
Counsel to Leon's
> Blake, Cassels & Graydon LLP
Counsel to The Brick
> Torys LLP
Counsel to Fairfax Financial Holdings Ltd.
7. HECLA MINING ACQUIRES AURIZON MINES
Hecla Mining Company, the largest and lowest-cost primary silver producer in the US, acquired Aurizon Mines Ltd. in a transaction valued at $796 million. Aurizon owns and operates eight properties in Quebec, including the Casa Berardi gold mine.
Hecla describes the deal this way: “The transaction took the form of a plan of arrangement and was the result of a contest for control initiated by an unsolicited takeover bid launched by Alamos Gold Inc. on January 14, 2013. Hecla paid a combination of cash and shares to the shareholders of Aurizon. After proration, Hecla issued an aggregate of 56,997,790 shares and paid total cash consideration of $514.5 million. The cash consideration was funded, in part, by a US$500-million private placement of senior notes by Hecla in the United States, Canada and elsewhere.”
During the course of this deal's contest, there were timing challenges and defensive measures, according to Gordon Chambers, who led the team at Cassels Brock that represented Hecla in Canada. “No one wants to be making a competitive bid at the last minute,” he muses, but it happened. And then Alamos contested the break fee at the BC Securities Commission. It would have been payable to Hecla if Alamos had acquired more than 33.3 per cent of Aurizon's common shares. Although the BCSC did cease trade the second shareholder rights plan that had been put in place, it did not cease trade the transaction. According to the BCSC, “The evidence was that the Aurizon board was not going to be able to obtain an alternative transaction with Hecla without the break fee in the form of that which ultimately prevailed. In the exercise of its fiduciary duties, the board assessed the value of the Hecla transaction as a whole in considering whether the transaction would be in the best interest of Aurizon. The board concluded that it would be. We therefore concluded that the break fee was a necessary element of an alternative transaction the Aurizon board negotiated for its shareholders to consider, rather than an attempt to frustrate the Alamos offer.”
KEY LEGAL PLAYERS
> Cassels Brock & Blackwell LLP
Counsel to Hecla Mining
> Nathanson Schachter & Thompson LLP
Special litigation counsel to Hecla in BC
> K&L Gates LLP
Counsel to Hecla in US
> DuMoulin Black LLP
Counsel to Aurizon
> Blake, Cassels & Graydon LLP
Counsel to Aurizon
> Paul, Weiss, Rifkind, Wharton & Garrison LLP
Counsel to Aurizon in US
> Torys LLP
Counsel to Alamos in competing bid for Aurizon and subsequent sale of their shares
8. DOMINION DIAMOND ACQUIRES EKATI FROM BHP BILLITON
BHP Billiton sold the Ekati Diamond Mine in the Northwest Territories, and its related marketing business in Antwerp, to Dominion Diamond Corporation (formerly Harry Winston Diamond Corporation) for aggregate cash consideration of US$500 million. BHP Billiton's interest in Ekati consisted of an 80 per cent interest in the Core Zone joint venture comprising existing operations (with the other 20 per cent owned by the geologists who discovered it) and a 58.8 per cent interest in the Buffer Zone joint venture, which is focused on exploration opportunities. Here we had a “Canadian company buying a company in Canada,” says Dominion Diamond external counsel Mark Wheeler of Borden Ladner Gervais LLP. “The company is moving more executives to Yellowknife and plans to expand the Buffer Zone.”
(Harry Winston also signalled its intention to focus on diamonds by selling its high-end luxury brand diamond jewelry and timepiece division to Switzerland's Swatch. Stikemans acted for Harry Winston Diamond Corporation in this sale of Harry Winston Inc., to The Swatch Group Ltd. for US$750 million plus their assumption of up to US$250 million of pro forma net debt.)
KEY LEGAL PLAYERS
> Davies Ward Phillips & Vineberg LLP
Counsel to BHP Billiton
> Borden Ladner Gervais LLP
Counsel to Dominion Diamond
> Blake, Cassels & Graydon LLP
Counsel to financing
9. BRP IPO
In the best-performing IPO this year, BRP shares have risen 31 per cent since the $301.5-million IPO debuted in May 2013. This comes 10 years after Bombardier sold BRP Inc., the maker of Ski-Doo snowmobiles and three-wheeled motorcycles, to private investors including private-equity firm Boston-based Bain Capital Partners LLC, members of the Bombardier and Beaudoin families, who are part of Beaudier Group, and Caisse de dépôt et placement du Québec. Warren Katz of Stikeman Elliott, the firm that led the BRP team, says the success of this IPO reflects revitalized levels of consumption in recreational sports vehicles, which are highly discretionary, after the 2008 downturn.
BRP's products now go well beyond the Ski-Doo, travelling on land, air and sea, including Lynx snowmobiles, Sea-Doo watercrafts, Can-Am off-road vehicles (which include ATVs and SSVs), Can-Am roadsters, Evinrude outboard engines, and Rotax propulsion systems for motorcycles, boats and recreational and small aircraft, plus a parts and accessories business. Its corporate headquarters are still in Valcourt, Quebec, where in 1942, Joseph-Armand Bombardier began his eponymous company, L'Auto-Neige Bombardier Limitée.
KEY LEGAL PLAYERS
> Stikeman Elliott LLP
Counsel to BRP
> McCarthy Tétrault LLP
Counsel to underwriting syndicate
> Davies Ward Phillips & Vineberg LLP
Counsel to Bain Capital (principle shareholder of BRP)
> Norton Rose Fulbright Canada LLP
Counsel to Beaudier Group (principle shareholder of BRP)
> Fasken Martineau DuMoulin LLP
Counsel to Caisse de dépôt et placement du Québec (principle shareholder of BRP)
> Ropes & Gray LLP
Counsel to Bain Capital (principle shareholder of BRP)
10. AGRIUM/JANA PROXY BATTLE
Agrium fended off Jana in a protracted proxy battle, leaving the Canadian business community with a contrasting result to the Canadian Pacific Railway Ltd. proxy battle of 2012. Pat Finnerty and Ross Bentley, on the Blakes team for Agrium, accord much credit to former Agrium CEO Mike Wilson for presenting the company's case to shareholders and preserving the company's status quo. Says Finnerty: “In the big picture, what Agrium really did was show that in a well-run company, where management has a clear view and a plan, it could still prevail over a seasoned, well-armed activist. Management wasn't helpless.”
Bentley adds that the long length of the process made this challenging for the Agrium leadership, but they prevailed: “A proxy battle is fought over the hearts, minds and wallets of shareholders. They want time with senior executives, and want to hear what the CEO has to say. Mike Wilson was very engaged. As a company that finds itself the target of the activist, you need to assemble a team quickly, evaluate what has happened, focus board and management and develop a thoughtful strategy, including shareholder relations and communications.”
As 2014 begins, it remains to be seen the extent to which shareholder activism will continue as an alternative to M&A. As Walied Soliman of Norton Rose Fulbright Canada LLP puts it: “The fight stands for the proposition that boards and management teams who believe in their thesis and effectively deliver their message can succeed even against the toughest of dissidents. The fight serves as a counterbalance in boardrooms after the CP fight.” Boards and executive teams beware, the Canadian score is thus far 1-1.
KEY LEGAL PLAYERS
> Davies Ward Phillips & Vineberg LLP
Counsel to Jana Partners
> Blake, Cassels & Graydon LLP
Counsel to Agrium
> Norton Rose Fulbright Canada LLP
Counsel to Agrium's special committee
> Paul, Weiss, Rifkind, Wharton & Garrison LLP
US counsel to Agrium
LEXPERT BIG DEALS METHODOLOGY
LEXPERT'S TOP 10 DEALS OF THE YEAR LIST, published annually since January 2004, is unique and distinct from league tables prepared by accountants, investment banks and financial analysts, and ranked, for the most part, by size of the transaction. This list is based on an extensive canvass conducted in October and November 2013 by Editor-in-Chief Jean Cumming of Canadian M&A, securities and corporate finance lawyers.
There were several criteria this year, including the fact that the deal must be announced between Nov. 1, 2012 and Nov. 1, 2013, and closed or expected to close early in 2014, preferably by January 2014. Transactions with particularly long gestation periods also qualify. Canadian legal content of the deal must be significant.
Most importantly, the deal must stand for more than itself: represent a trend, illustrate some aspect of the year's economic climate, or be a portent of things to come.
There is no minimum size or preferred structure — this list's definition of “deal” is anything Canadian lawyers worked on that they considered to be significant.
Lexpert also co-sponsors, with Deloitte, The Globe and Mail and Thomson Reuters (Markets), the Canadian Dealmaker Awards. We will report on these awards in the March issue of the magazine, at which time it will be interesting to compare the winners with the Lexpert Top Deals.
Certain of the deals are bound to overlap, while others do not. Top Deals tends more toward “lawyers' deals” in the sense that they comprise compelling legal issues. Clients aren't nearly as interested in compelling legal issues as lawyers are.
“COMING SOON”
Many Lexpert readers voted for Loblaw's friendly takeover of Shoppers Drug Mart Corp. to be included on this Top 10 list and indeed, at a quantum of $12.4 billion, to lead it. We sided with those other readers who argued it needed to wait until closing, not scheduled until first quarter 2014. Suffice it to say at this point, if all goes according to plan, this deal will team up Canada's largest grocery retailer with its largest chain of pharmacy stores. The Shoppers brand name will remain and operate as a separate division of Loblaw.
“Our networks are very complementary, as opposed to overlapping, and therefore don't raise any competitive issues,” Shoppers CEO Domenic Pilla said after the company's shareholder meeting that voted 99.9 per cent approval of the takeover. “But clearly we'll have to submit that to the Bureau and make sure we work with them so that they come to the same conclusion.” Controlling shareholder George Weston Ltd. had already provided written consent to the deal to the Toronto Stock Exchange, satisfying the shareholder approval requirements from the Loblaw end.
Lexpert expects to join in the celebration of this deal on next year's Top 10 list.
Fewer readers, but they were very dedicated, thought the BlackBerry deal with Fairfax should be on the list. After all, Fairfax Financial Holdings Limited and other institutional investors invested in BlackBerry through a US$1-billion private placement of convertible debentures. As of the transaction's closing in November, John Chen became executive chair of BlackBerry's board of directors and Thorsten Heins stepped down as chief executive officer. Yet the fate of BlackBerry is far from certain. Maybe Barbara Stymiest, chair of BlackBerry's board, is right when she says the Fairfax deal “represents a significant vote of confidence in BlackBerry and its future by this group of preeminent, long-term investors.” But this deal with Fairfax had been a $4.7-billion buyout, one in which Fairfax sought new buyers to join in. None surfaced.
Another break fee made the news here. At the time of the tentative offer, Fairfax Chief Executive Officer Prem Watsa had not identified the rest of the buyout group or financing (for the obvious reason), the BlackBerry board still agreed to pay the group a $157-million break fee if it struck a better deal with another buyer. Some say that may have deterred rival bidders, who, let's face it, weren't exactly rushing to the altar even before they heard about the dowry.
MORE CANADIANA
Two more deals showed Canadian colours this year. TD Bank Group and Canadian Imperial Bank of Commerce will each take 50 per cent of the Aeroplan credit card portfolio by agreement with Aimia Inc., the parent company of the loyalty rewards program. As The Globe and Mail puts it, “The next battle is to make their individual strategies bear fruit.”
Davis + Henderson, the venerable Canadian cheque-printing and manufacturing company, announced it has completed the US$1.2-billion all-cash acquisition of Harland Financial Solutions, a US-based provider of strategic technology, including lending and compliance, core banking, and channel management technology solutions. With the acquisition, D+H improves its competitive position by expanding its value-added suite of financial technology (FinTech) products for banks and credit unions and accelerates its strategy as a North American FinTech provider.
Lawyer(s)
Emmanuel Pressman
Graham P.C. Gow
Grant Buchanan
Robert Carelli
James D. Scarlett
John S.M. Turner
Gordon R. Chambers
Pat C. Finnerty
Ross Bentley
Jeffrey R. Lloyd
James M. Dickson
Firm(s)
Bennett Jones LLP
Blake, Cassels & Graydon LLP
Stewart McKelvey
MLT Aikins LLP
Stikeman Elliott LLP
Fasken Martineau DuMoulin LLP
Gowling WLG
McCarthy Tétrault LLP
Aird & Berlis LLP
Goodmans LLP
Davies Ward Phillips & Vineberg LLP
Thompson Dorfman Sweatman LLP
Osler, Hoskin & Harcourt LLP
Cassels Brock & Blackwell LLP
Torys LLP
Dentons Canada LLP
Borden Ladner Gervais LLP (BLG)
Nathanson, Schachter & Thompson LLP
Norton Rose Fulbright Canada LLP