TWENTY-TWENTY will go down in the books as one of the toughest years for Canadian businesses in a long time. Trying to keep things going while the COVID-19 pandemic swept over the globe — sadly killing millions and making millions more ill — was a true test of our makeup. Quarantines, lockdowns, social distancing and travel restrictions just made things that much tougher. For businesses and law firms involved in deal-making — whether an initial public offering, infrastructure project financing, restructuring under insolvency, raising capital or a merger or acquisition — it was important to keep their eyes on the prize through all the turmoil.
Those on Lexpert’s Canadian Law Awards list of 2021 Excellence Awardees for Deals categories demonstrated what can be accomplished even under adverse circumstances. While some of these deals were announced and completed before the pandemic declaration, others were announced and completed after. Others may have taken longer to complete or required renegotiation after COVID-19 hit, but, in the end, they got done.
This year, we’ve named 26 deals in five categories (capital markets, infrastructure and project financing, insolvency and restructuring, mid-market deals and M&A) as Excellence Awardees.
Hundreds of submissions from firms and legal departments across Canada were received during the nomination phase. Given what it took to get these deals done, we salute all for their perseverance in tough times.
Capital Markets Deal of the Year
Canadian Law Firm Involvement (Client)
Cornerstone financing of Intact Acquisition of RSA
> Blake Cassels & Graydon LLP (Intact)
> Norton Rose Fulbright Canada LLP (investors CDPQ, CPPIB, OTPP)
>Stikeman Elliott (RSA Insurance Group PLC)
Creation of Brookfield Infrastructure Corporation and Brookfield Renewable Corporation
> McMillan LLP (BC counsel to issuers)
> Torys LLP (issuers)
Creation of a new form of Tier 1 Regulatory capital
> McCarthy Tétrault LLP (RBC dealer, NBC issuer, CIBC dealer, BMO dealer, CWB dealer)
> Osler Hoskin & Harcourt LLP (RBC issuer)
> Torys LLP (NBC as dealer, CIBC as issuer, BMO as issuer on tax, CWB as issuer)
> Davies Ward Phillips & Vineberg LLP (syndicate of underwriters led by J.P. Morgan, BMO Capital Markets, Goldman Sachs & Co. LLC, RBC Capital Markets)
> Stikeman Elliott LLP (GFL)
Nuvei IPO and private placement
> Davies Ward Phillips & Vineberg LLP (funds managed by selling shareholders and Caisse de dépôt et placement du Québec)
> Fasken Martineau DuMoulin LLP (Nuvei)
> McCarthy Tétrault LLP (underwriter)
> Stikeman Elliott LLP (Nuvei founder, CEO Philip Fayer)
COVID-19 or not, Canadian dealmakers kept the capital markets moving with initial public offerings and innovative financing mechanisms. This year’s Canadian Law Awards’ Excellence Awardees demonstrated how law firms worked with their clients to make what might have once seemed impossible happen.
Even those deals not directly hurt by the pandemic had to overcome complex situations, whether it was tax laws, regulatory issues or the logistics of cross-border deals.
Take, for example, the US$2.2-billion cross-border initial public offering of GFL Environmental, the fourth-largest diversified environmental services company in North America, which closed last March. This transaction, the largest such listing in 15 years, involved navigating complex and sometimes contradictory rules in Canada and the United States and coordinating legal and business teams located in both countries.
Further complicating the transaction was the marketing of the IPO, and its closing, taking place at the start of the COVID-19 pandemic in North America and when there was significant volatility in the capital markets.
The GFL security offering combines both a debt component and a prepaid forward purchase contract, only the second offering of so-called “tangible equity” units in Canada.
Finally, the $1.1 billion in margin loans to significant shareholders of GFL added complexity from a disclosure and structuring perspective.
Another Excellence Awardee was the creation of Brookfield Infrastructure Corporation and the Brookfield Renewable Corporation, which closed March 2020 and July 2020. With a combined value of $6.4 billion, BIPC and BEPC issued a security like exchangeable shares used in cross-border mergers. However, they deviated from those models because they have their own public disclosure.
This deviation gives rise to novel securities law issues, as there have been no examples of any exchangeable share issue created through an IPO in the last 20 years, and they are virtually unheard of in the United States. Both also involved extensive tax and structuring advice relating to making both entities qualify as a Canadian “mutual fund corporation” for Canadian income tax purposes, including the Canadian tax treatment of dividends received and paid by it to various investor classes.
Brookfield Asset Management, the major shareholder of BIPC and BEPC, also completed both companies’ secondary offerings. These offerings increased the public float of each.
Cornerstone Investors’ financing of RSA Insurance Group PLC’s acquisition by Intact Financial Corporation — a deal valued at $3.2 billion — demonstrated another innovative mechanism for raising capital. Comprised of the Caisse de depot et placement du Quebec, the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan, Cornerstone invested in the private placement of subscription receipts by Intact. Money raised help finance the $12.5-billion acquisition of RSA by Intact. The deal represents the largest acquisition of a U.K.-listed company announced in 2020 and the largest subscription receipts issuance in Canada for 2020.
This financing was made complex due to the interplay of both Canadian requirements and U.K. “certain funds” imperatives under its “Takeover Code.”
Another novel way of raising money was creating a new form of Tier 1 regulatory capital. In 2020, several Canadian banks issued “limited recourse capital notes” in public offerings starting with RBC in July 2020. These securities involve novel tax structuring to accommodate competing tax and regulatory requirements.
These new debt instruments are available only to institutional investors, and they are treated as equity by federal regulators to calculate regulatory capital requirements. Not only do these LRCNs qualify as Tier 1 capital for regulatory capital purposes, but they also allow interest payments to be deductible for Canadian federal income tax purposes.
To qualify as Tier 1 capital for banks, the securities cannot have any stated maturity date and the bank must have complete discretion whether to pay distributions. The securities must also represent “borrowed money” and the bank has a legal obligation to pay interest so that the interest may be deductible for Canadian federal income tax purposes.
Since RBC’s initial offering in July 2020, financial institutions have issued $5.675 billion of LRCNs in 2020, primarily targeted toward domestic Canadian investors, but other cross-border offerings could also use the structure.
Nuvei Corporation’s $1.32-billion IPO on the TSX caused a lot of excitement among investors. It represents the most significant technology IPO on the exchange — by both equity capital raised and market capitalization — at the time of listing.
On Sept. 22, 2020, Nuvei completed its initial public offering of subordinate voting shares consisting of a treasury offering by Nuvei and a secondary offering by funds managed by Novacap Management Inc. The transaction included a complex pre-closing reorganization and negotiation of a dual-class structure and shareholder rights plan with the three principal investors, Whiskey Papa Fox Inc. (controlled by founder Philip Fayer), Novacap and CDP Investissements Inc.
Infrastructure & Projects Deal of the Year
Canadian Law Firm Involvement (Client)
Financing of Cascade Power project
> Bennett Jones LLP (OPTrust)
> Davies Ward Phillips & Vineberg LLP (Axium Infrastructure)
> DLA Piper (Canada) LLP (DIF Capital Partners)
> Duncan Craig LLP (Alexis and Enoch Cree First Nations)
> McCarthy Tétrault LLP (syndicate of lenders, ATB Financial)
> Miller Thomson LLP (Backwoods Energy Services, Indigenous communities)
> Osler Hoskin & Harcourt LLP (Kineticor Resource Corp)
> Stewart McKelvey (undisclosed client)
> Stikeman Elliott LLP (Alberta Indigenous Opportunities Corporation)
> Torys LLP (Cascade Power Project Limited Partnership)
> Reynolds Mirth Richards & Farmer LLP (PCL Industrial Management Inc.)
Financing of Coastal Gaslink pipeline
> Blake Cassels & Graydon LLP (Coastal GasLink Pipeline LP, TC Energy Corp.)
> Norton Rose Fulbright Canada LLP (RBC as agent for 30 other lenders)
> Osler Hoskin & Harcourt LLP (KKR-Keats Pipeline Investors II Canada Ltd.)
> Stikeman Elliot LLP (AIMCo)
> Torys LLP (LNG Canada Development)
Financing of Edmonton Valley Line West LRT Extension
> Aird & Berlis LLP (The City of Edmonton)
> Farris LLP (lenders to Marigold Infrastructure Partners Limited Partnership)
> McCarthy Tétrault LLP (Marigold Infrastructure Partners Limited Partnership)
Financing of Louis-Hippolyte-La-Fontaine Tunnel
> Borden Ladner Gervais LLP (Renouveau Lafontaine Inc.)
> Gowling WLG (Ministère des Transports du Québec and the Société québécoise des infrastructures)
> Stikeman Elliott LLP (syndicate of lenders and hedge providers)
Financing of Nova Scotia Highway 104 Twinning Project
> Aird & Berlis LLP (Government of Nova Scotia)
> Blake Cassels & Graydon LLP (Dexter Nova Alliance GP)
> BOYNECLARKE LLP (Government of Nova Scotia)
> Farris LLP (funders)
> Stewart McKelvey (Dexter Nova Alliance GP)
Building bigger and better requires money — a lot of it. Whether it’s a pipeline, a power transmission system or even a highway twinning project, getting the cash together is vital to building critical infrastructure. Our 2020 Excellence Awardees demonstrated skill and innovation in making these projects happen.
For example, the Cascade Power project financing deal, which closed in August, means that a 900-megawatt combined-cycle natural gas-fired power generating facility near Edson, Alta. is one step closer to reality. The estimated development and construction costs for Cascade are about $1.5 billion. The project financing deal will cover a significant portion of that cost.
Cascade will help Alberta transition to a new power grid in Alberta by transitioning off coal-fired power generation and creating efficient low-carbon emissions electricity. It will supply more than eight per cent of Alberta’s average demand and result in one of the largest emission reductions in Canada’s electricity sector. Construction is underway and should be completed in the second half of 2023.
Cascade’s project financing was unique as projects of this nature typically require guaranteed contracted cash flow to obtain project financing. Cascade also entered long-term gas netback arrangements. The project provides a template for future gas-fired power project development and financing in Alberta.
The transaction involved the formation and governance arrangements between OPTrust, Kineticor and the Alexis Nakota Sioux Nation, Enoch Cree Nation, Kehewin Cree Nation, O’Chiese First Nation, Paul First Nation and Whitefish Lake First Nation (all part of the Indigenous Communities Syndicate Limited Partnership).
The Coastal GasLink Pipeline project is another Excellence Awardee in the energy infrastructure category. The $6.6-billion financing allows for the permitting, construction, commissioning, startup, ownership, operation and maintenance of a natural gas pipeline that will deliver natural gas from the Dawson Creek, B.C. area to the natural gas liquefaction facility now under construction near Kitimat. The TC Energy Corporation project is considered the largest project financing in Canadian history.
TC Energy also monetized some of the pipeline’s value by selling a 65-per-cent equity stake to KKR and AIMCo.
The deal was a highly complex matter combining an M&A transaction, a joint venture arrangement and construction project financing. It also involved 10 commercial parties and the 27 Canadian and international financial institutions providing the project financing.
While not as large, dollar-wise, as Cascade or the Coastal pipeline, the Edmonton Valley Line West LRT Extension Project, which closed in December, is an essential part of improving public transit in the area. Marigold Infrastructure Partners Limited Partnership entered into a project agreement with the City of Edmonton to design, build and finance the LRT extension, valued at $2.6 billion.
The project includes constructing a 140-kilometre light rail extension from downtown Edmonton to Lewis Farms in west Edmonton, including 14 street-level stations and two elevated stations. Construction starts during the summer of 2021 and is scheduled for completion in late 2026.
Moving eastwards, our next Excellence Awardee, the financing of a major rehabilitation of the Louis-Hippolyte-La-Fontaine Tunnel in Quebec, is structured as a design-build finance project.
Valued at about $1.1 billion, it is the largest such project ever in the province of Quebec. The Louis-Hippolyte-La Fontaine Tunnel is the longest underwater structure in Canada, and it is a strategic transport corridor for the Montreal urban area, with 120,000 daily crossings.
The file was complex because the responsibility for the operation and maintenance of the existing infrastructures, and the associated risks, were allocated to the proponent, a joint venture between Vinci Construction subsidiaries, a significant construction player in France, and Pomerleau. The syndicate of lenders consisted of Canadian financial institutions and a U.S. bank.
Finally, on the East Coast, the Nova Scotia Highway 104 PPP project is a $718-million contract that closed during the peak of the first wave of the COVID-19 pandemic. It was at a time when bond markets were in turmoil, and Nova Scotia was closed off in the “Atlantic Bubble.”
Nevertheless, government, bank lenders and bond underwriters worked with law firms to close the project. The financing went forward with a senior construction facility from the Canadian Imperial Bank of Commerce, National Bank of Canada and Royal Bank of Canada and an offering of both medium-term and long-term bonds undertaken by National Bank Financial Inc. and HSBC Securities (Canada) Inc. The agreement acknowledged COVID-19 by including customized force majeure relief for epidemics and pandemics during the construction period. The project will be built and operated by Nova Scotia-based Dexter Construction and Nova Construction, with additional equity provided by Luxembourg-based BBGI and financing from Canadian banks and underwriters.
Insolvency & Restructuring Deal of the Year
Canadian Law Firm Involvement (Client)
CCAA restructuring of Cirque du Soleil
> Bennett Jones LLP (secured lender Catalyst)
> Davies Ward Phillips & Vineberg LLP (undisclosed client)
> Fasken Martineau DuMoulin LLP (Monitor Ernst & Young)
> Goodmans LLP (secured creditor group)
> Lavery Lawyers (secured creditor group)
> McCarthy Tétrault LLP (Caisse de dépôt et placement)
> McMillan LLP (RBC)
> Norton Rose Fulbright Canada LLP (Investissement Québec)
> Osler Hoskin & Harcourt LLP (TPG)
> Stikeman Elliott LLP (Cirque)
> Torys LLP (MGM Resorts)
> Woods LLP (Ad Hoc Committee of first lien lenders of Cirque du Soleil)
CCAA restructuring of James E. Wagner Cultivation Corporation
> Bennett Jones LLP (James E. Wagner Cultivation Corporation)
> Cassels Brock & Blackwell LLP (RIV Capital Corp., formerly Canopy Rivers Corp.)
> Davies Ward Phillips & Vineberg LLP (monitor KSV Kofman Inc., now KSV Restructuring Inc.)
> DLA Piper (Canada) LLP (James E. Wagner Cultivation Corporation)
> Torys LLP (lenders)
CBCA restructuring of Just Energy Group Inc.
> Goodmans LLP (Ad hoc committee of bondholders)
> McCarthy Tétrault LLP (Just Energy’s first-lien lenders)
> Osler Hoskin & Harcourt LLP (Just Energy Group Inc.)
> Torys LLP (Just Energy’s second lien lenders)
CCAA restructuring of Nemaska Lithium
> Blake Cassels & Graydon LLP (SoftBank)
> Borden Ladner Gervais LLP (BLG) (FMC Lithium USA Corp., Livent)
> Clyde & Co Canada LLP (Intact)
> Davies Ward Phillips & Vineberg LLP (The Pallinghurst Group)
> Dentons Canada LLP (Livent, Chubb Insurance)
> Fasken Martineau DuMoulin LLP (Descimco Inc, ABB Inc.)
> Goodmans LLP (Bond trustee and bondholders Nordic Trustee AS)
> Gowling WLG (Grand Council of the Crees, Cree Nation Government, Eeyou Communications Network)
> Langlois Lawyers (Hydro-Quebec and Transition Énergétique Qué)
> McCarthy Tétrault LLP (debtor and former directors and officers of Nemaska Lithium)
> Miller Thomson LLP (Bird Civil & Mines Ltd., Nemaska Eenou J.V., L. Fournier et Fils ltée)
> Norton Rose Fulbright Canada LLP (Investissement Québec)
> Osler Hoskin & Harcourt LLP (potential bidder)
> Stikeman Elliott LLP (PwC as CCAA Monitor, Johnson Matthey Battery Materials Ltd)
> Torys LLP (Orion Mine Finance, OMF Fund II (N) Ltd, OMF Fund II (K) Ltd., Orion Resource Partners)
> Woods LLP (ad hoc committee of senior secured bondholders and bond trustee Nordic Trustee AS)
Recapitalization of Calfrac Well Services Ltd. and its affiliates
> Bennett Jones LLP (Calfrac)
> Borden Ladner Gervais LLP (BLG) (first-lien lenders)
> Cassels Brock & Blackwell LLP (Wilks Brothers)
> Dentons Canada LLP (Wilmington Trust National Association)
> Goodmans LLP (ad hoc committee of noteholders)
> Lenczner Slaght (G2S2 Capital Inc.)
> McCarthy Tétrault LLP (Bank of Oklahoma)
> Norton Rose Fulbright (Special Committee of the Board of Calfrac)
The pandemic wrought havoc on many parts of the economy, and both private and publicly traded companies faced unprecedented challenges. If your business was entertainment, like Cirque du Soleil, venues were closed. If you were in the energy business, the pandemic just added to the pain of a sector already suffering from the thrust and parry of oil supply and demand.
In many cases, the pandemic was enough to bring firms to the point of insolvency, although, thanks to government subsidies and patient creditors, not as much as one might think. But with insolvency comes liquidation or restructuring, depending on the circumstances.
The Canadian Law Awards’ Excellence Awardees all featured law firms at the top of their game, ready to take on the challenge of restructuring their clients’ assets so they could be reborn.
One of the more dramatic restructurings of 2021, that of Cirque du Soleil, came after the new age circus filed for bankruptcy protection under the Companies’ Creditors Arrangement Act. Due to the closing of show venues, this world-class player in the entertainment industry laid off more than 5,000 employees or 95 per cent of its workforce. The amount of the liabilities reported by the debtors at the time of its CCAA filing totalled approximately $1.9 billion. The lienholders’ credit bid transaction value was estimated at roughly $1.5 billion.
The transaction structure was a novel hybrid of a traditional insolvency asset sale coupled with a “reverse vesting” equity deal that saw excluded liabilities and transferred them to a newly formed “ExcludedCo” so that the Canadian entities could be acquired free and clear of the excluded liabilities.
The restructuring also required a CCAA and U.S. Chapter 15 filing, a proposed contested equity-sponsored stalking horse transaction and a consensual restructuring transaction with Cirque’s senior lenders.
Other restructurings featured as CLA Excellence Awardees include the $1.1-billion recapitalization of Just Energy Group Inc. according to a plan of arrangement under the Canada Business Corporations Act. The transaction resulted in a reduction of approximately $535 million in net debt and preferred shares, a new cash equity investment of $100 million and the extension of a $335-million secured credit facility by three years.
Another recapitalization plan, this one under the CBCA and not as “consensual” as the Just Energy deal, involved Calfrac Well Services Ltd. and its affiliates. Calfrac had approximately $900 million in funded debt obligations before its recapitalization, including roughly $590 million due under its senior unsecured notes. The recapitalization reduced the company’s total debt by $562 million.
The transaction was subject to sustained opposition and litigation from Wilks Brothers LLC, a shareholder and second lien noteholder. Wilks was unsuccessful in setting aside a court-ordered stay of proceedings. It later initiated a hostile takeover bid to acquire all of Calfrac’s common shares. However, unsecured noteholders and shareholders approved Calfrac’s recapitalization transaction. The Wilks’ subsequent appeals all failed, including an application for a stay pending an appeal to the Supreme Court of Canada.
The court decisions in Calfrac establish that a supervising judge has jurisdiction to grant a stay of proceedings to prevent a creditor unaffected under the arrangement from enforcing its acceleration and enforcement rights. The Alberta Court of Appeal affirmed that the CBCA provides a supervising judge with the jurisdiction to grant an order deeming all persons, including unaffected creditors who were not afforded a vote, to waive defaults arising from the implementation of a restructuring arrangement.
The cannabis sector is another area going through a period of restructuring following exponential growth after the legalization of cannabis for recreational purposes. James E. Wagner Cultivation Corporation’s proceedings under the CCAA demonstrated that it is possible to restructure an insolvent cannabis company as a going-concern asset sale, providing a template for others.
It was critical to complete the deal through a going-concern sale to preserve approximately 100 jobs and maintain customer and supply networks. Although new entrants into the cannabis sector can wait up to 12 months to receive the necessary approvals and licences, a novel structure was used that saw licences obtained and the transaction closed in less than four months. This solution involved transferring the existing licences by setting up the cancellation of the vendors’ licences with the simultaneous issuance of new licences to the purchaser.
Another novel restructuring among this year’s Excellence Awardees involved the contested use of a “reverse vesting order” in the CCAA restructuring of Nemaska Lithium. The RVO cleans the company of unwanted assets and liabilities while preserving the going concern and corporate structure.
Although the deal took place in Quebec, its impact was immediate across Canada. It was the first contested RVO transaction approved by a Canadian court, including at the appellate level, and it has since been cited by the British Columbia Supreme Court and the British Columbia Court of Appeal.
Mid-Market Deal of the Year
Canadian Law Firm Involvement (Client)
Evolution Mining acquisition of Red Lake gold mine from Newmont
> Cassels Brock & Blackwell LLP (external counsel to Newmont)
> Goodmans LLP (Newmont)
> McCarthy Tétrault LLP (Evolution Mining)
GMP Capital acquisition of Richardson GMP
> Borden Ladner Gervais LLP (BLG) (group of investment advisers)
> Goodmans LLP (GMP Capital Inc.)
> Lenczner Slaght (dissident shareholder Kevin Sullivan)
> Osler Hoskin & Harcourt LLP (Richardson Financial Group)
> Stikeman Elliott LLP (special committee of GMP Capital Inc.)
> Voorheis & Co. LLP (dissident shareholder Kevin Sullivan)
NordStar Capital acquisition of Torstar
> Blake Cassels & Graydon LLP (Torstar)
> Bennett Jones LLP (Canso Investment)
> Norton Rose Fulbright Canada LLP (NordStar)
> Torys LLP (Fairfax Financial Holdings Limited)
Northleaf Capital Partners sale of non-controlling stake to Mackenzie Financial Corporation and
> Blake Cassels & Graydon LLP (Mackenzie and IGM, parent company of Mackenzie)
> Davies Ward Phillips & Vineberg LLP (Northleaf)
Novacap acquisition of Logibec Inc.
> Fasken Martineau DuMoulin LLP (Novacap)
> Davies Ward Phillips & Vineberg LLP (Marc Brunet and Francis Trudeau)
> Lavery Lawyers (Investissement Québec)
> Stikeman Elliott LLP (GI, QuebecCo Holdings and Logibec)
From transactions in the financial sector to a mining deal in Northern Ontario to the sale of a struggling newspaper chain steeped in the history of Canadian journalism, the Excellence Awardees in the mid-market category demonstrated the ingenuity and innovation required to get deals done.
GMP Capital’s acquisition of Richardson GMP was the culmination of a two-year process to transform itself into a pure-play wealth management company that began when it sold its capital markets business to Stifel Financial. Through this transaction, GMP Capital acquired the common shares of Richardson GMP not owned by the company in exchange for shares in GMP, now renamed RF Capital.
The transaction was conducted under the terms of the shareholders’ agreement governing Richardson GMP and involved extensive negotiation with two other shareholder groups — Richardson Financial Group and Richardson GMP employees. Each owned about one-third of the target company. The deal was subject to a formal valuation and minority approval requirements.
The transaction was announced on Feb. 26, 2020, but it was renegotiated considering COVID-19. Following a proxy contest initiated by a dissident shareholder and ultimately settled, the transaction closed on Oct. 20, 2020. The deal represents an enterprise value for Richardson GMP of approximately $420 million.
The transaction was complex, involving a private M&A transaction implemented under a liquidity process set out in the shareholders’ agreement governing the target company. In addition to being a private M&A transaction under a shareholders’ agreement, the transaction incorporated tax planning and securities law since the company is public and the transaction was a related party transaction. It also turned into a shareholder activism matter as the transaction, and RF’s board became a proxy battle target with a dissident shareholder.
Another Excellence Awardee involving the financial services sector was Mackenzie Financial Corporation and Great-West Lifeco’s joint venture acquisition of a 49.9 per cent voting interest and 70 per cent economic interest in Northleaf Capital Partners. Great-West Lifeco and Mackenzie Financial Corporation (a subsidiary of IGM Financial Inc.) are both members of the Power Financial group of companies.
The transaction value was put at $245 million, but it also included additional contingent payments at the end of five years should the business achieve exceptional growth in performance measures over the period.
The transaction required unique and complex capital structure and governance arrangements to address the sale of a minority voting stake with a majority economic interest, contingent consideration and rights and obligations for future equity sales over multiple periods.
In the health-care sector, private equity firm Novacap and Investissement Québec’s acquisition of Logibec Inc. stands out, involving one of Canada’s largest health-care technology companies. The purchase price wasn’t disclosed, but the transaction brings Montreal-based Logibec back to Canadian ownership. It was formerly a GI Partners portfolio company, a California-based private investment company.
Evolution Mining’s acquisition of the Red Lake gold mine in Ontario from Newmont grabbed the mining space’s limelight. The Australian gold company paid US$375 million plus an additional amount of up to US$120 million upon a new resource discovery. (Newmont will receive US$20 million for each one million ounces of new gold resources added to the Red Lake resource base over 15 years, with payments ending after five million ounces of new resources.)
This transaction, completed during the initial COVID-19 lockdown, also featured an interim operating plan and budget that the parties agreed upon and implemented before closing. This acquisition allows Evolution to establish its first North American production hub in one of Canada’s most prolific gold districts.
In this category, the final Excellence Award is Nordstar Capital’s acquisition of Torstar, the Toronto Star owner, Canada’s largest daily newspaper, and many other media assets. Not a big deal in terms of value (about $60 million) thanks to the struggles of the print media business these days, but the twists and turns that needed to be negotiated demonstrate what it takes to get deals done.
NordStar acquired all the issued and outstanding Class A shares and Class B non-voting shares of Torstar for $0.74 per share. It raised its offer from an original price of $0.63 per share after Canadian Modern Media Holdings Inc. emerged as a potential bidder.
The deal succeeded using a plan of arrangement following a five-month auction process. However, the agreement’s approval was challenged in court by Canadian Modern Media Holdings. It asked for a stay of the court’s decision approving the transaction a few days before it was set to close on Jul. 30. The court dismissed the motion on Jul. 31 and the deal closed on Aug. 5 under the revised offer.
The deal was novel in that the two largest shareholders, Torstar Voting Trust and Fairfax Financial, switched from soft lock-ups to hard lock-ups to support the improved offer. Canadian Modern Media Holdings was unsuccessful in challenging the legitimacy of the “hard” lock-up agreements, confirming that shareholders are free to make their own decisions on whether to support a particular transaction over another.
M&A Deal of the Year
Canadian Law Firm Involvement (Client)
Berkshire Partners Investment in VetStrategy
> Borden Ladner Gervais LLP (BLG) (VetStrategy)
> Goodmans LLP (Berkshire Partners LLC)
> Osler Hoskin & Harcourt LLP (lenders)
> Torkin Manes LLP (VetStrategy)
> Torys LLP (Imperial Capital)
Equinix acquisition of Bell data centres
> Blake Cassels & Graydon LLP (Equinix)
> Stikeman Elliott LLP (Bell)
HBC going private transaction
> Blake Cassels & Graydon LLP (HBC and special committee of independent directors)
> McCarthy Tétrault LLP (Rhône Capital)
> McMillan LLP (Catalyst Capital Group)
> Stikeman Elliott LLP (HBC shareholders led by HBC governor Richard Baker)
> Torys LLP (financial adviser JP Morgan, special committee adviser Centerview Partners)
KingSett Capital and Starlight Investments acquisition of Northview Apartment REIT
> Blake Cassels & Graydon LLP (Starlight Group Property Holdings Inc.)
> Bloom Lanys PC (Starlight Group Property Holdings Inc.)
> Borden Ladner Gervais LLP (BLG) (Northview Apartment REIT)
> Cassels Brock & Blackwell LLP (mortgage lenders)
> Goodmans LLP (Special Committee of Northview Apartment REIT)
> McCarthy Tétrault LLP (syndicate of lenders co-led by CIBC, RBC, TD Securities and Scotiabank, as well as CIBC World Markets)
> Osler Hoskin & Harcourt LLP (KingSett Capital)
> Stikeman Elliott LLP (co-investors)
Kirkland Lake acquisition of Detour Gold
> Cassels Brock & Blackwell LLP (Kirkland Lake)
> Stikeman Elliott LLP (Detour)
Power Financial reorganization transaction with Power Corporation
> Blake Cassels & Graydon LLP (Power Corporation)
> Goodmans LLP (Power Corporation)
> Osler Hoskin & Harcourt LLP (Special Committee of Power Financial)
What a difference a few months can make when you’re talking mergers and acquisitions — at least when it comes to closing deals before a global pandemic sets in and when you’re right in the middle of one.
Such is the case with our Canadian Law Awards’ Excellence awardees in the M&A category. Some were able to close before the WHO declared COVID-19 a pandemic in mid-March of last year. Others closed at the end of the year, despite being announced before the pandemic changed everything. And some deals even managed to be initiated during the pandemic and complete a few weeks later.
Among the first to close before the pandemic got underway in earnest — at least in Canada — was the Jan. 31, 2020 completion of Kirkland Lake Gold Ltd.’s $4.9-billion acquisition of Detour Gold Corp. The transaction was the largest M&A transaction in the mining sector completed in 2020.
The all-stock sale of Detour Gold capped off two tumultuous years for Detour, including an activist investor campaign that resulted in a reconstituted board of directors and executive management team. The deal was structured as a plan of arrangement and required both shareholder and court approval.
Another deal that managed to close before the pandemic set in is Power Financial’s reorganization transaction with Power Corporation. It only took from Dec. 13, 2019 to Feb. 13, 2020 to go from announcement to completion.
Under the reorganization, minority shareholders of Power Financial received Power Corporation subordinate voting shares and cash consideration in exchange for Power Financial common shares. The aggregate value of the transaction is approximately $8.7 billion. After completing the deal, the TSX delisted Power Corporation’s common shares.
Power Corp. now owns all Power Financial common shares, while Power Financial preferred shares and debt securities remain outstanding. The transaction simplifies Power Corp.’s corporate structure by eliminating the dual-holding company structure.
On the heels of the Power Corporation deal closing came the Mar. 3 privatization of iconic Canadian retailer Hudson’s Bay Company, a deal valued at about $2 billion. With retailers worldwide facing challenges, HBC’s four largest shareholders proposed privatizing the company to allow it the flexibility to adapt.
The transaction took almost nine months to complete. It was subject to a complex and extensive regulatory regime under Canadian securities laws that required a formal valuation of HBC’s shares by an independent valuator and approval by a majority of the company’s shareholders, excluding insiders. Catalyst Capital Group Inc. proposed a competing offer to acquire HBC, which ended up in front of the Ontario Securities Commission.
The matter resulted in the OSC issuing additional guidance regarding a special committee’s roles and responsibilities in going-private transactions.
Our next Excellence Awardee, Boston-based Berkshire Partners’ Investment in VetStrategy, is remarkable not only for taking six weeks to complete from start to finish but also taking place in late spring and early summer in the middle of a pandemic. Berkshire Partners acquired the majority stake in VetStrategy from Imperial Capital, putting it in a prime position to take advantage of the boom in pet ownership because of the pandemic.
Valued at more than $1 billion, completion of the deal relied on teams working with a “virtual data room” and Zoom calls instead of face-to-face meetings. The acquisition means Berkshire now owns more than 160 veterinary clinics in Canada.
The largest deal in Canada in the digital infrastructure space in 2020 was the fall completion of Equinix Inc.’s $1.041-billion all-cash acquisition of 25 BCE Inc. data centres at 13 sites.
The transaction was structured by way of an asset purchase and sale transaction, except for the Ottawa-based data centre, which needed a pre-closing transaction to carve out the business from Bell. (While the majority of the deal closed Oct. 2, the Ottawa centre closed Nov. 2.)
The deal faced significant regulatory considerations and various issues raised in connection with negotiating and completing a cross-border sale amidst the evolving pandemic’s backdrop and accompanying travel restrictions.
Our last Excellence Awardee helped close out 2020 with the largest ever Canadian multi-residential REIT transaction, the largest all-cash deal of the year and the second-largest real estate deal in Canadian history.
In a transaction valued at $4.9 billion, Starlight Group and KingSett Capital acquired Northview Apartment REIT. The transaction resulted in a carve-out and spin-out of Northview real estate assets into a newly formed, closed-end fund publicly traded and listed on the Toronto Stock Exchange. It was a combination of public M&A, private equity carve-out and IPO spin-out in one complex set of transactions.
The fund properties are comprised of a geographically diversified portfolio located primarily in secondary markets within British Columbia, Alberta, Saskatchewan, Québec, New Brunswick, Newfoundland and Labrador, the Northwest Territories and Nunavut.