“The rules surrounding take-over bids and defensive tactics remain contentious within the financial community,” commented Geraghty.
November 10, 2016 – Securities regulators made the right move this year when they extended the minimum bid period for takeover bids in Canada, says a new C.D. Howe Institute report. In “Takeover Rules: In Support of the Longer Minimum Bid Period,” author Sharon Geraghty unpacks the implications of the new rules to bidders, boards and shareholders.
On May 9, 2016, the Canadian securities regulators adopted new takeover bid rules that, among other things, extended the minimum bid period from 35 to 105 days.
“The rules surrounding take-over bids and defensive tactics remain contentious within the financial community,” commented Geraghty. “The next year or so should provide a good testing ground for the new rules.”
The author argues the new rules should help level the playing field between bidders and the target by strengthening the board’s role and, therefore, increasing the likelihood that a successful takeover bid will maximize value for the target’s shareholders.
Geraghty recommends that, as experience is gained under the new rules, securities regulators monitor their effect on the number of both hostile bids and negotiated control transactions, and the relative benefits shareholders receive in the two scenarios. Regulators should also measure the broader economic effect of the new rules on the size and competitive position of Canadian-based public companies and capital markets.
Geraghty concludes: “Securities laws should not foster short-term price gains; rather, they should promote strong public companies and capital markets that deliver long-term economic value to investors. That outcome will require strong management endowed with reasonable flexibility to implement strategies for long-term growth. Increasing the minimum bid period is a positive step in that direction.”
Click here for the full report.
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.
For more information contact: Sharon Geraghty, Partner, Torys LLP: 416-865-8138, or email: kmurphy@cdhowe.org.