On October 7, 2016, SunOpta Inc., a Nasdaq- and TSX-listed global organic foods company, completed a cross-border PIPE transaction involving a private placement of US$85 million exchangeable preferred shares (Shares) to private equity funds managed by Oaktree Capital Management, L.P. SunOpta completed the transaction with the support of shareholders Tourbillon Capital Partners and Engaged Capital following a review of strategic alternatives conducted by SunOpta’s board of directors (Board).
The transaction involved the issuance by a US subsidiary of preferred shares that are exchangeable into common shares of the parent public company. Through a voting trust arrangement, as long as the preferred shares are held by affiliates of Oaktree, the holders of the preferred shares have the right to vote on an as-exchanged basis with common shareholders. Oaktree obtained governance rights in the public company and the right to nominate two new Board members. SunOpta has announced, in addition, the appointment of a representative of Engaged Capital, SunOpta’s second largest shareholder, to the Board. The net proceeds from the Shares were used to repay a portion of the principal owing under one of SunOpta’s credit agreements.
The transaction represents a novel use of a cross-border exchangeable preferred share structure by a Canadian company. The structure allows a Canadian company to effectively issue a form of equity security comparable to the type of voting, convertible preferred stock common in the US private equity and PIPE market in a manner that respects Canadian tax and regulatory constraints that have historically made such transactions unachievable in Canada.
Kirkland & Ellis LLP acted as counsel to Oaktree with a team including Hamed Meshki, Dennis Myers, Wayne Williams, Craig Garvey, Kevin Behseresht, Alexander Schwartz and Dilveer Singh Vahali (corporate/capital markets), Dave Nemecek and Nisha Kanchanapoomi (debt finance) and Russell Light and Brett Willis (tax). Stikeman Elliott LLP acted as Canadian counsel to Oaktree with a team including John Leopold, Simon Romano, David Massé, Jeremy Sculnick, Jordan Altman and Michael Ball (corporate/capital markets), Jeffrey Brown and Ryan Sheahan (competition/regulatory) and Frank Mathieu and Philippe Kattan (tax).
Davies Ward Phillips & Vineberg LLP represented SunOpta, with a team that included Patricia Olasker, Alex Moore, Mindy Gilbert, Steven Harris, Geoff Rawle, Jared Solinger and Jonathan Bilyk (M&A/corporate), Raj Juneja and Peter Glicklich (tax). Stoel Rives LLP provided advice on US corporate and securities law matters to SunOpta, with a team that included Reed Topham, James Kearney, Jennifer Johnson, Sara Benzion and Nathan Hurllbut.
Rothschild Financial Advisory acted as financial adviser to the Special Committee of the Board of SunOpta.