McCarthy Tétrault LLP represented Enbridge on real property and regulatory matters
Canopy Growth implements plan of arrangement to acquire U.S. multi-state cannabis operator Acreage Holdings for US$3.4 billion
The burgeoning cannabis market was choppy in 2019 with a drop in activity as compared to a frothy 2018. The top cannabis deal on Lexpert’s list is unique in how it relies on the future federal legalization of cannabis in the United States. In April, Canopy Growth Corp. purchased the right – for up to ninety months – to acquire all the shares of U.S.-based Acreage Holdings Inc. when the product becomes legal to produce and sell at the federal level in that country.
For phase one of the deal, Acreage shareholders got US$300 million, or around US$2.55 per share. For phase two, when cannabis is legalized in the U.S., Acreage subordinate-voting shareholders will receive .5818 of a common Canopy share for each Acreage subordinate-voting share held.
Canopy Growth said the deal provides “an accelerated pathway” into U.S. cannabis markets and gives Acreage “improved access to capital.” Canopy and Acreage will also execute a licensing agreement giving Acreage access to Canopy brands and intellectual property.
Acreage Holdings is the largest vertically integrated, multi-state owner of cannabis licenses and assets in the U.S., owning licenses to operate or management services agreements with license holders in 20 states, including pending acquisitions, the CBC reported.
Canadian law firm involvement
Cassels Brock & Blackwell LLP represented Canopy Growth
DLA Piper (Canada) LLP represented Acreage Holdings
Stikeman Elliott LLP represented the special committee of Acreage Holdings
McCarthy Tétrault LLP represented Canopy’s financial advisors
Osler Hoskin & Harcourt LLP represented Constellation Brands (Canopy shareholder)
HONOURABLE MENTION
Aphria’s take-over defence of the hostile bid by Green Growth Brands Inc., valued at approximately $2.5 billion
On April 25, Aphria Inc. announced the attempted takeover by Green Growth Brands Inc. was terminated. The Canadian cannabis company Aphria rejected the hostile takeover bid from U.S.-based Green Growth on a unanimous call by Aphria’s board of directors, who also said the bid “significantly” undervalued Aphria, discounting their share price by 23 per cent. The board also said the takeover would delist the company from the TSX and NYSE and give Green Growth shareholders 36 per cent interest in Aphria in exchange for “shares in a company with limited operations or other experience in the cannabis industry.”
Aphria’s CEO and co-founder both left the company in 2019. The exits came after a short-seller’s report raised questions about recent acquisitions and accused the company of being overvalued.
Canadian law firm involvement
Norton Rose Fulbright Canada LLP represented Green Growth Brands
McCarthy Tétrault LLP represented Aphria Inc. financial advisor Scotia Capital
Fasken Martineau DuMoulin LLP represented Aphria
Entertainment evolves
WINNER
Hasbro acquires Entertainment One for $5.3 billion
The $5.3 billion, all-cash deal is a strategic combination between a global play and entertainment company and a global independent studio. “Truly international in scope” the Canadian eOne is also listed on the London Stock Exchange and is being acquired by the Nasdaq-listed U.S. corporation and the deal involves assets and regulatory approvals from all over the world, one lawyer on the deal told Lexpert.
Hasbro Inc. is an international toy, game and entertainment company and Entertainment One Ltd. is Canada’s largest independent film, television and music producer.
Entertainment One is owner of well-known children’s entertainment intellectual property such as Peppa Pig, PJ Masks, Ricky Zoom, Clifford the Big Red Dog and others. The deal will consolidate the content of every child’s imagination by linking those brands with Hasbro’s My Little Pony, Nerf, Play-doh and Power Rangers.
Under the terms of the agreement, Entertainment One shareholders will get $9.55 for every common share. The deal responds to the swift industry consolidation and the disrupting effect of media and content providers such as Apple, Amazon, Netflix and Disney, a lawyer on the deal told Lexpert.
Canadian law firm involvement
Stikeman Elliott LLP represented Hasbro Inc.
Osler, Hoskin & Harcourt LLP represented Entertainment One
HONOURABLE MENTION
Flutter Entertainment and The Stars Group merger
Two of the biggest names in online betting joined forces in the US$15 billion combination between Flutter Entertainment and The Stars Group.
The now merged entities had together earned more than $6.5 billion in 2018, making the combination the largest online betting and gaming operator on earth, according to their announcement of the deal. The merger comes on the cusp of new growth opportunities in the U.S. market, as a recent U.S. Supreme court ruling in 2018 struck down the federal law prohibiting most states from legalizing sports betting.
The combined company intends to “maximize growth” in its core markets: UK, Ireland and Australia, while expanding in Spain, Italy and the U.S., said the company’s announcement.
Canadian law firm involvement
Stikeman Elliott LLP represented Flutter Entertainment PLC
Osler, Hoskin & Harcourt LLP represented The Stars Group Inc.
Fasken Martineau DuMoulin LLP represented ValueAct Holdings L.P.
Blake, Cassels & Graydon LLP represented The Stars Group Inc.
Indigenous influence
WINNER
The C$1.9 billion Wataynikaneyap Transmission Project in northwestern Ontario
A decade in the making, the project is majority-owned by a holding company consisting of 24 First Nations. The deal had “unprecedented First Nations involvement and impact,” said partner in McCarthy Tétrault’s financial services group Lynn Parsons, who was the firm’s lead counsel on the deal. “For the first time, thousands of residents in remote areas across Northwestern Ontario will have access to clean, reliable energy, eliminating the financially unsustainable and environmentally risky reliance on costly diesel generation.”
The Wataynikaneyap transmission project is a 1,725 km system connecting 17 remote First Nations communities in Northwestern Ontario. The project was built in partnership with Fortis Inc., will cost approximately $1.9 billion and is expected to be completed in 2023. The Ontario government said in an October announcement the project will provide reliable electricity to more than 14,000 Indigenous people.
The project was financed through a multi-layer debt financing, including a $1.34 billion loan from the Ontario government, $680-million loan from a five-bank syndicate and a $220 million loan from two life-insurance companies, Stikeman Elliott LLP, who acted on the deal, told Lexpert.
Canadian law firm involvement
Stikeman Elliott LLP represented First Nations Limited Partnership
McCarthy Tétrault LLP represented equity lenders – Manulife and Sun Life
Torys LLP represented Wataynikaneyap Power
Osler, Hoskin & Harcourt LLP represented the syndicate of lenders
Davies Ward Phillips & Vineberg LLP represented Fortis Inc. and its subsidiary FortisOntario Inc.
Fasken Martineau DuMoulin LLP represented the Government of Ontario’s Minister of Energy, Northern Development and Mines
McMillan LLP represented the Federal Department of Justice and Indigenous Services
HONOURABLE MENTIONS
First Air and Canadian North merge, creating Inuit-owned northern Canadian airline
The deal between Makivik Corporation – owner of First Air – and Inuvialuit Development Corporation – owner of Canadian North – was the first ever public interest review carried out under the Canada Transportation Act and included the “very rare” issuing of a public and detailed Competition Bureau report, Bennett Jones told Lexpert.
Canadian law firm involvement
Bennett Jones LLP represented Inuvialuit Development Corporation, as owner of the Canadian North airline
Norton Rose Fulbright Canada LLP represented First Air/Makivik
TD Greystone Asset Management acquires Alberta PowerLine from Canadian Utilities Limited and Quanta Services Inc. for $1.7 billion
In another example of Indigenous ownership of energy infrastructure, seven Alberta Indigenous communities took a 40 per cent equity stake in the Alberta PowerLine. Canadian Utilities Limited and Quanta services sold the project to those communities and a consortium including TD Greystone Asset Management. The transmission line was originally financed through the largest P3 bond transaction in Canadian history, according to Bennett Jones.
Canadian law firm involvement
Bennett Jones LLP represented Canadian Utilities Limited
McCarthy Tétrault LLP represented TD Greystone, IST3
Fasken Martineau DuMoulin LLP represented Quanta Services Inc.
WINNER
Lightspeed POS Inc. in connection with its initial public offering on the Toronto Stock Exchange of subordinate voting shares
In the biggest IPO by a Canadian technology company in almost nine years and among the 10 largest technology IPOs in TSX history, the Montreal-based point-of-sale and ecommerce service raised $276,000,000.
The IPO, which closed March 15, consisted of an offering of 17,250,000 subordinate voting shares at $16-per-share. The IPO was underwritten by a syndicate co-led by BMO Nesbitt Burns Inc., National Bank Financial Inc. and J.P. Morgan Securities Inc. and included CIBC World Markets Inc., TD Securities Inc., Raymond James Ltd. and Scotia Capital Inc.
Lightspeed’s success came after 2018 was “a record year for the innovation sector on the TSX and TSXV,” with 59 new companies listed, said the TMX Group – parent company of the TSX – at the time of the Lightspeed IPO.
Lightspeed CEO and founder Dax Dasilva was named one of 2019’s Top CEOs and his company was named innovator of the year, by to the Globe and Mail Report on Business. In 2019, the company launched global loyalty and payment systems, expanded its client base and acquired an Australian company, gaining a foothold in the Asia-pacific market. Most recently, it has announced it will spend more than US$100-million in cash and stock to buy a German point-of-sale company to expand within Europe.
The Lightspeed IPO was a rare bright spot in Canada’s capital markets. Last summer, the GTA-based waste management company GFL opted not to go ahead with its planned IPO, which was expected to raise over US$2 billion.
While GFL had put the price of shares at around $20, the banks leading the sale told investors they were worth $18 and investors were also spooked at the company’s debt load and growth prospects, reported Bloomberg in November. Even at the lower rate, the listing on the New York and Toronto stock exchanges would have been the biggest for a Canadian company since ManuLife Financial Corp.’s from 1999 and would have given GFL a market value of US$5 billion, said Bloomberg.
Canadian law firm involvement
Stikeman Elliott LLP represented Lightspeed POS
Osler, Hoskin & Harcourt LLP represented the underwriters in Canada
Mining Saga
WINNER
Newmont’s $10 billion acquisition of Goldcorp and subsequent joint venture with Barrick Gold
On April 18, 2019, Newmont Mining Corporation completed its acquisition – via plan of arrangement – of Goldcorp Inc. The $10-billion deal makes Newmont Goldcorp the largest gold company in the world. In the stock-for-stock transaction, Newmont acquired each Goldcorp share for 0.3280 of a Newmont share and US$0.02 in cash. The company is forecasted to produce six-to-seven million ounces of gold every year for the next decade, Reuters reported.
After the merger Newmont Goldcorp and Barrick Gold combined their mining properties in Nevada, creating the world’s largest gold-producing complex, in a deal Barrick Gold president and CEO Mark Bristow said was 20 years in the making. The world’s top two gold producers closed the deal Canada Day and the Newmont/Barrick joint venture includes 10 underground and 12 open-pit mines, two autoclave facilities, two roasting plants, four oxide mills, a flotation plant and five heap-leach operations. In 2018, this northeastern Nevada operation produced 4.1 million ounces of gold. Newmont will own 38.5 per cent and Barrick, 61.5 per cent and the deal will save an estimated $500 million per year in “average annual pre-tax synergies,” said a Barrick announcement.
The venture comes a year after Barrick’s merger with Randgold Resources Ltd, for US$6.062 billion. The purposes of the transaction were for Barrick Gold Corp to offer new products and services, strengthen operations and expand its presence in new geographical regions, to create synergies, increase shareholder value and to take advantage of sound investment opportunities, Lexpert reported back in 2018.
Canadian law firm involvement
Goodmans LLP represented Newmont Mining in Canada
Osler, Hoskin & Harcourt LLP represented the special committee of independent directors of Goldcorp
Davies Ward Phillips & Vineberg LLP represented Barrick Gold Corporation in Canada
Cassels Brock & Blackwell LLP represented Goldcorp in its sale to Newmont Mining Corporation
Blake, Cassels & Graydon LLP represented Bank of America Merrill Lynch, the financial advisor to Goldcorp Inc.
Osisko Mining Completes Reverse Takeover of Chantrell Ventures Corp, Creating O3 Mining Inc.
On July 5, 2019, Osisko Mining Inc. completed a spin-out transaction via plan-of-arrangement with Chantrell Ventures Corp. Osisko – the mineral exploration company – traded two projects, other exploration properties and a portfolio of selected securities for 24,977,898 post-consolidation common shares of Chrantrell. The common shares were consolidated on a 40-to-one basis and the entire board of directors was reconstituted in the transaction. Chantrell Ventures Corp. was changed to O3 Mining.
Canadian law firm involvement
Bennett Jones LLP represented Osisko and later O3 Mining
Cassels Brock & Blackwell LLP represented Chantrell Ventures
Peterson McVicar, LLP represented Chantrell tranche offering
WINNER
Pembina Pipeline Corporation acquires Kinder Morgan for $4.35 billion
2019 continued the trend of consolidation in the Canadian oil sands and the Pembina transaction was part of a generally higher level of M&A in the midstream sector. The deal raised challenges such as cross-border regulatory approvals and the coordination of public acquisition with the private transaction, said Stikeman Elliott, which acted on the deal.
In two concurrent acquisitions, Pembina Pipeline Corporation first acquired Kinder Morgan Canada Limited via plan of arrangement for $2.3 billion and then acquired the U.S. potion of the Cochin pipeline system for $2.05 billion, both from Kinder Morgan Inc. Through these two transactions, Pembina becomes owner of the entire Cochin pipeline system and related assets. The cross-border pipeline system links Pembina’s Channahon, Bakken and Edmonton-area assets and connects them to markets in Mont Belvieu, Texas; Conway, Oklahoma and Edmonton.
The plan-of-arrangement acquisition also involved multi-tiered exchanges of securities, including the exchanges of two classes of voting securities, a class of units of a limited partnership that participated in the Canadian assets with Kinder Morgan and preferred shares of Kinder Morgan – at the option of preferred shareholders, said Stikeman Elliott.
With these difficulties in mind, another lawyer on the transaction said the deal showed that a strong special committee process can be essential in getting a complex, related-party transaction completed without litigation or regulatory scrutiny. There was potential for conflict because Pembina was buying Kinder Morgan Canada Limited plus separate assets, both from Kinder Morgan Inc. An actively engaged special committee meant the deal was supported by minority shareholders at a time when many transactions are subject to shareholder dissent, the lawyer said.
The Cochin Pipeline system spans 2,900 km – from Chicago to Fort Saskatchewan, Alberta. It can transport up to 110,000 barrels-per-day.
Canadian law firm involvement
Stikeman Elliott LLP represented Pembina Pipeline Corporation
Goodmans LLP represented special committee of Kinder Morgan Canada
Osler Hoskin & Harcourt LLP represented BMO Capital Markets, financial advisor to Kinder Morgan’s special committee
Blake, Cassels & Graydon LLP represented Kinder Morgan
HONOURABLE MENTION
Canadian Natural completes $3.775-billion acquisition of Devon Canada Assets
In a deal that closed June 27, Canadian Natural Resources Limited acquired substantially all the assets of Devon Canada Corporation. With a cash-purchase price of $3.775 billion, this was one of 2019’s largest upstream oil and gas M&A deals in North America.
Canadian law firm involvement
Cassels Brock & Blackwell LLP represented Canadian Natural Resources Limited.
Bennett Jones LLP represented Devon Canada Corporation.
Norton Rose Fulbright Canada LLP represented the agent and syndicate of lenders on the $3.25 Billion Term Credit Agreement.
Dream Global sale to Blackstone for $6.2 billion
In a deal closed December 10, The Blackstone Group Inc. acquired all the subsidiaries and assets of Dream Global Real Estate Investment Trust.
With the value of the all-cash transaction at $6.2 billion (including debt), this is Canada’s largest REIT M&A deal in history and Blackstone’s second Canadian REIT acquisition in 18 months. The deal adds Dream Global’s portfolio of more than 200 office and industrial properties in Western Europe – primarily in Germany and the Netherlands – to Blackstone’s real estate business. Blackstone has $157 billion in investor capital under management and a global real estate portfolio of $324 billion, making it among the largest property owners in the world.
2019 was a good year for REITS, as a class, with a strong stock market, low interest rates and lots of deal activity, one lawyer on the deal told Lexpert. Dream Global’s complex structure required a sophisticated purchaser and Dream Global’s unitholders approved the transaction resoundingly, with 99 per cent of the votes cast in favour.
The deal cost Blackstone $16.79 per Dream Global unit, which was widely reported as an 18.56 per cent premium on Dream Global’s share price at the time. Some Blackstone purchasers received newly-created Class B units and the other units were redeemed. The transaction also separated Dream Global’s subsidiary, Dream Asset Management Corporation, as the company’s external asset manager and gave certain Blackstone purchasers minority interests in some of Dream Global’s properties.
Canadian law firm involvement
Davies Ward Phillips & Vineberg LLP represented Blackstone in Canada
Goodmans LLP represented the special committee of the board of trustees of Dream Global
Osler, Hoskin & Harcourt LLP represented Dream Global Real Estate Investment Trust
Blake, Cassels & Graydon LLP represented TD Securities as Financial Advisor
WINNER
Paulson & Co. replacing the board of Detour Gold Corporation
A year after Canada saw 13 public proxy fights – the most since 2014 – that number rose in 2019 to 18. Last year, the proxy battle which distinguished itself above the rest was U.S.-based hedge fund Paulson & Co.’s campaign to change the management structure at Detour Gold Corporation.
In the last two years, shareholder activism in Canada has been concentrated in the mining and energy sectors, with 40 per cent mining and 20 per cent in energy out of the 30 public contests.
In December, Detour-shareholder Paulson & Co. succeeded in convincing the mining company’s shareholders to depose the majority of the company’s board of directors, including the interim CEO and the chairman, reported Bloomberg. Shareholders chose five nominees backed by Paulson to serve on the board. In all, seven out of the eight board members in place when the proxy battle ensued were gone by the end of 2019.
The Paulson/Detour proxy battle represents a trend of activist shareholders “vigorously shaking up the management and boards of underperforming companies in the mining industry,” said Shea Small, co-head of McCarthy Tétrault’s mergers and acquisitions group.
Canadian law firm involvement
Goodmans LLP represented Paulson & Co
Norton Rose Fulbright Canada LLP represented Detour Gold Corporation
McCarthy Tétrault LLP represented Detour Gold Corporation
HONOURABLE MENTION
Transalta Negotiates Strategic Investment with Brookfield
TransAlta Corporation, the Calgary-based power generator and electricity marketer completed the first tranche of a $750-million strategic investment by an affiliate of Brookfield Renewable Partners.
The deal was complicated by a proxy battle launched by two major shareholders. Bluescape Energy Partners and Mangrove Partners, who together held 10.1 per cent of TransAlta’s common shares, engaged TransAlta to obtain board seats and governance and operational changes. Mangrove and Bluescape then filed a joint Schedule 13D and submitted notice of intention to nominate five directors for election at the next shareholders meeting, under TransAlta’s advance-notice bylaw.
Anticipating a proxy contest and attempting to avoid binding a future reconstituted board to a transaction, TransAlta used the novel “Governance Out,” whereby they negotiated a right to enable a new board to revisit the Brookfield transaction. Under the Governance Out, if two directors not recommended by the board were elected at the 2019 meeting, TransAlta would have the right for 30 days to terminate the Brookfield transaction. Bluescape and Mangrove did not end up running a proxy context, but Mangrove brought an ultimately unsuccessful public interest proceeding before the Ontario and Alberta Securities commissions.
Canadian law firm involvement
Davies Ward Phillips & Vineberg LLP represented TransAlta
Torys LLP represented Brookfield
Stikeman Elliott LLP represented Bluescape Energy Partners
Additional Honourable Mentions
Digital Colony completes $720M purchase of Cogeco Peer 1
In a deal closed May 1, the global investment firm Digital Colony bought colocation and network connectivity provider Cogeco Peer 1 for $720 million. The deal creates a standalone business under a new brand. Cogeco Peer 1 had a portfolio of more than 3,300 kilometres of owned, dense metro fibre in the Greater Toronto Area and Montreal and data centres elsewhere in North America and Europe.
A colocation centre rents computing hardware, other equipment and digital data storage to customers. It is also known as a carrier hotel.
The year 2019 was a growth year for Digital Colony. After the Cogeco Peer purchase, the company acquired Beanfield Technologies, the independent bandwidth infrastructure provider serving the enterprise, carrier and multi-dwelling unit markets in Toronto and Montreal through its fibre network.
Canadian law firm involvement
Stikeman Elliott LLP represented Cogeco Communications Inc.
Miller Thomson LLP represented Digital Colony
McCarthy Tétrault LLP represented lenders, which were led by CIBC
BC Partners takes majority stake in Montreal security giant GardaWorld in deal worth $5.2 billion
In October, private equity firm BC Partners completed a $5.2-billion recapitalization of GardaWorld, taking a 51-per-cent common equity interest in the company. GardaWorld supplies armoured trucks and security guards to financial institutions, governments and other clients. BC Partners bought its share of the company from Rhône Group.
The other 49 per cent of GardaWorld is held by CEO Stephan Crétier and other members of the company’s management team. Crétier founded the company in 1995.
Canadian law firm involvement
Stikeman Elliott LLP represented GardaWorld
McCarthy Tétrault LLP represented Rhône Group, a seller
Osler Hoskin & Harcourt LLP represented BC partners
Novacap and other shareholders sell Knowlton Development Corporation
Cornell Capital LLC, a private investment firm based in New York and Hong Kong, bought all issued and outstanding shares of Knowlton Development Corporation from Novacap, the Canadian private equity firm. As part of the transaction, existing shareholders Caisse de dépôt, Investissement Québec and certain members of management reinvested into the company.
An announcement from Novacap said the transaction involved major complexity, including cross-border issues, regulatory matters including competition and antitrust compliance, as well as “significant corporate restructuring.”
Knowlton provides product innovation, research support and other services to beauty, health and personal care brands.
Canadian law firm involvement
Stikeman Elliott LLP represented Cornell Capital LLC, a partner with Knowlton Development Corporation
McCarthy Tétrault LLP represented members of the senior executive management team of Knowlton Development Corporation
Davies Ward Phillips & Vineberg LLP represented Caisse de dépôt et placement du Québec
Fasken Martineau DuMoulin LLP represented Novacap
SNC-Lavalin Group Inc. sells 10.01-per-cent interest in 407 International Inc. to entity controlled by Canada Pension Plan Investment Board for aggregate consideration of up to $3.25 billion, after CPPIB exercised rights of first refusal on SNC-Lavalin’s proposed sale to OMERS
In August, a company controlled by the CPPIB acquired a 10.01-per-cent equity stake in 407 International Inc. Under the agreement, CPPIB paid $3 billion at close and will pay another $250 million over a decade, contingent on the performance of the toll highway meeting certain financial targets.
SNC-Lavalin Group was ready to sell the 10.01 per cent of the Greater Toronto Area toll highway to the pension plan OMERS. The Canada Pension Plan Investment Board, which owns another 40 per cent of the 407, exercised its right of first refusal. Another major shareholder, the Spanish company Cintra Global S.E., had also tried to exercise its right of first refusal, but SNC disputed the validity of Cintra’s claim, saying Cintra waived the right.
Canadian law firm involvement
Norton Rose Fulbright Canada LLP represented SNC-Lavalin
Stikeman Elliott LLP represented Canada Pension Plan Investment Board
McCarthy Tétrault LLP represented OMERS, a bidder