Fasken Martineau (now Fasken Martineau DuMoulin) assisted InfoSpace.com, Inc. (“InfoSpace US”), in connection with the Canadian aspects of its “merger” with INEX Corporation, an Ontario company developing internet commerce tools. InfoSpace US , a publicly traded Delaware corporation, aggregates and integrates content services, including directories, classified advertisements, stock quotes and other information, to provide private label solutions for content, community and commerce to internet web sites and other internet access devices. The Fasken team consisted of Ian Kyer, John Hough, William Bies, David Coultice, John Marsalek and Jennifer Mazin. Rory Cattanach, Rob Wortzman and Susan Thomson from Wildeboer Rand Thomson Apps and Dellelce acted for INEX. InfoSpace in the US was represented by Wilson Sonsini, while INEX used Dorsey & Whitney.
The transaction was effected through a statutory arrangement under the Business Corporations Act (Ontario). Each INEX Common Shareholder was entitled to choose to receive in exchange for each INEX Common Share held either an agreed percentage of an InfoSpace US Common Share or of a share in an indirect, wholly-owned subsidiary of InfoSpace US known as InfoSpace.com Canada Holdings Inc. (“InfoSpace Canada”) that is exchangeable into an InfoSpace US Common Share (the “Exchangeable Shares”). The INEX Common Shareholders who choose to receive the Exchangeable Shares receive a bundle of rights that is intended to be the financial equivalent of the InfoSpace US Common Shares. The Exchangeable Shares are exchangeable at any time by a holder into InfoSpace US Common Shares on a one-for-one basis. This exchangeable share transaction permits all INEX Common Shareholders to effect the exchange of their shares as a tax-deferred rollover for Canadian federal income tax purposes. What made the transaction interesting was that it was structured to be a pooling of interests for US accounting purposes and a taxable transaction for US tax purposes. Litigation counsel became involved when a dissident INEX shareholder brought an oppression action and sought to block the court approval of the statutory arrangement. Sam Rickett of Faskens and Alan Mark of Goodman Phillips and Vineberg, representing INEX, led a team of litigators fighting off the court challenge.
There were two aspects to the litigation. There was an action against INEX and its principals alleging oppressive conduct to the minority shareholder. They also appeared at the hearing of the motion to approve the statutory arrangement. Kevin Aalto of Gowling Strathy & Henderson acted for the dissident shareholder. The judge approved the statutory arrangement without ruling on the merits of the action. This approval is under appeal, although INEX (now known as InfoSpace.com Canada Inc.) has moved to quash the appeal as being mute since the transaction has closed. The shareholder action will proceed.