PUBLIC COMPANIES

TSX changes rules on voting for dilutive acquisitions

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TORONTO (miningweekly.com) – The Toronto Stock Exchange will require companies to get approval for acquisitions from shareholders, if their ownership will be diluted by 25% or more, the exchange announced on Friday.

The move has received the go-ahead from the Ontario Securities Commission, and the change will come into effect on November 24.

"Today's announcement is in line with many of the world's major exchanges and provides us with an even stronger platform as we work to attract new investors and capital to Toronto Stock Exchange and to Canada," said TSX equities head Kevan Cowan.

Institutional investors and corporate governance watchers have been criticising the rule allowing listed companies to acquire other public companies for shares without investor approval for years.

The issue made headlines again earlier this year when HudBay Minerals announced it would buy Lundin Mining.

HudBay planned to issue about 150-million new shares to fund the acquisition, but refused to give its own shareholders a vote on the deal.

Even though HudBay was not required by securities rules to hold a vote, outraged investors appealed to the OSC, which eventually ruled that the deal could not go ahead until approval was sought and received from HudBay shareholders.

The deal was broken off a month later.

In an earlier high-profile case, Goldcorp shareholder and founder Rob McEwen went to court three years ago to try force the company to hold a vote on its friendly takeover of Glamis Gold.

McEwan argued that Goldcorp was overpaying in the deal, which would dilute its shares by about 67%, but an Ontario court sided with Goldcorp and ruled that shareholder approval wasn't needed.

In April this year, the exchange proposed that the dilution threshold for a vote to be triggered be set at 50%, but received feedback during a public comment process that the level should be lower.

TSX-listed issuers will now be required to obtain security holder approval for public company acquisitions that result in share dilution of 25% or more of their issued and outstanding securities, the exchange announced on Friday.

The rule amendment was the result of "an extensive public consultation process and careful analysis of global trends and best practices".

Edited by: Liezel Hill