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Just hours after the takeover bid expired, Chapters and Trilogy reached an agreement for an orderly transition of the Chapters board. Chapters also dropped its announced issuer bid and declared a special dividend of $.50 a share for shareholders of record on February 12, 2001. Trilogy agreed it will not receive the dividend so that it will only be paid on the shares not taken up by Trilogy.
The events surrounding the takeover of Chapters heated up on January 18, 2001, when Future Shop stepped in as white knight with a friendly bid for 100 per cent of Chapters shares at $16 a share, or two Future Shop shares, for each Chapters share. At that time, Chapters’ Board of Directors unanimously recommended that shareholders accept Future Shop’s bid, which was higher than the current Trilogy bid. Future Shop also entered into lock-up agreements with shareholders owning approximately 30 per cent of Chapters’ shares. The aggregate value of the Future Shop bid was approximately $200 million.
On Sunday, February 4, 2001, Heather Reisman, who together with husband Gerry Schwartz formed Trilogy to attempt the hostile takeover of Canada’s largest book chain, was appointed Chief Executive of both Chapters and Chapters Online Inc., replacing Larry Stevenson. Trilogy eventually plans to propose merging Chapters with former rival Indigo Books & Music Inc. (Indigo), Reisman’s smaller Canadian retail book company. The parties still await approval of the takeover from the federal Competition Bureau.
Initially, Trilogy was represented by Davies, Ward & Beck LLP (now, Davies Ward Phillips & Vineberg LLP) with a team composed of J-P. Bisnaire, Shawn McReynolds and Andrea Daly, on corporate matters, Berl Nadler on banking issues, David Smith on tax matters, Sandra Forbes on litigation matters and Cal Goldman, John Bodrug, Brian Facey and Christopher Margison on competition matters.
Following the Superior Court ruling on December 26, 2000, that Davies had a conflict of interest, Trilogy retained Torys, with a takeover team led by Peter Jewett, Phil Brown, Kevin Morris and Melanie Shishler, with competition law advice from James Baillie, Q.C. and Jay Holsten, and banking law assistance from Peter Birkness and Bill Charnetski. John B. Laskin and James C. Tory led the Torys litigation team which included Patrick Flaherty and Paul Michell. The intense litigation activity during the bid included three full-day hearings before the OSC on four applications, including two disclosure applications by Chapters (one dismissed and one abandoned during the hearing), a poison pill application by Trilogy (granted after an unusual Sunday hearing) and an application by Chapters concerning Trilogy’s share purchases during the bid (heard on the eve of the bid expiry, and dismissed).
Cassels Brock & Blackwell LLP acted for Chapters, with a takeover team led by Lawrence Wilder, together with Norman Findlay, Peter Marrone, Tom Koutoulakis, Bruce McNeely and John McGowan, with assistance from Maxwell Leveson. Osler, Hoskin & Harcourt LLP were special counsel to Chapters and the special committee of the Board, retained to defend against Trilogy’s hostile takeover bid. The Osler defence team was led by John T. Evans and included his partners Mark A. Trachuk, Donald G. Gilchrist and associates Gina Caldarelli and Brian Temins. Mark Gelowitz and Allan Coleman led the Oslers litigation team. Blake, Cassels & Graydon LLP acted for Chapters in connection with competition law matters, with a team led by Jack Quinn and including Glenn Leslie, Rob Kwinter and Mark Nicholson.
McCarthy Tétrault acted for Future Shop with a team that included Eric Spindler, Graham Gow, Jasprit Gill, Rob Hansen and Vito Ciraco, with Gabrielle Richards providing tax advice. Paul Steep led the litigation team.
In a related transaction, Chapters announced plans in December, 2000 to buy back the minority shares of its publicly held subsidiary, Chapters Online Inc., for $3.40 a share in cash. On Monday, February 5, 2001, Chapters increased the offer for the online unit, in which it already holds a 69 per cent interest, to $3.50 a share in Chapters common shares, up from the initial offer of $3.40 a share in cash.
Prior to the takeover by Trilogy, Chapters was represented on the minority interest purchase of Chapters Online Inc. by Tom Koutoulakis of Cassels Brock & Blackwell LLP, with assistance from Howard Burshtein and Candice Solomon. Fraser Milner Casgrain LLP acted on behalf of Chapters Online Inc., with a team comprised of Jeff Barnes, Dan Dishy, Will Fung and Jamie Knight.
In another related transaction, on January 29, 2001, Chapters completed the purchase of the remaining 18 per cent stake in its distribution subsidiary, Pegasus Wholesale Inc. (Pegasus), held by minority shareholder Canadian General Capital Ltd. (CGC). Consideration for the transaction was about C$7.5 million in Chapters convertible shares. Ann Watterworth of Cassels Brock & Blackwell LLP acted for Chapters on the Pegasus deal. CGC was represented by a team from Blake, Cassels & Graydon LLP led by Peter MacGowan and including Mario Josipovic and Jeff Kerbel.
Following the successful completion of Trilogy’s offer, Davies Ward Phillips & Vineberg LLP has been retained by Chapters, Trilogy and Indigo to jointly represent them on competition mattes related to the proposed merger. Torys will act as general counsel to Chapters and Trilogy. |
