RJ, good point. I completely forgot about that. Of course.

I just skimmed through the M&A doc from Gowlings that I linked to earlier. Some very useful information. Let me skim through a second time right now and list some high points:

- Canadian M&A rules favour the acquirer. For example, poison pills and other defence strategies by a target are very limited. [My comment: let's hope that KWG has a white knight ready in the background in case a hostile takeover attempt is launched].

- Additional "early warning" disclosures for stock purchases above 10% of the float are required for accumulations of 2% of more. [My comment: does this mean that if Cliffs were to buy a small amount, raising from say 16.7 (or whatever they're at) to 18.0%, that's not a full 2% increase, so they don't need to report that immediately, although I think they still need to file through SEDAR which comes out fairly quickly anyway].

- Technically, anti-avoidance provisions prohibit persons or companies acting jointly or in concert with a bidder under any agreement, commitment, or understanding. [My comment: I'm sure that this happens occasionally and the authorities might not be effective in pursuing remedy].

- For information on case law in Canada regarding shareholder rights plans, search for "shareholder rights plans" on gowlings.

THIS IS IMPORTANT:
- A take-over bid launched by a large shareholder (10 percent or greater, ie. Cliffs) will be considered to be an "insider bid" and the consideration offered in the bid must be supported by an independent valuation UNLESS AN EXCEPTION APPLIES.

Here's where it gets tricky. Three possible exemptions:
1. Where the value of the consideration being offered is accepted and agreed to by certain other large arm's-length shareholders; [I see this as non-relevant]
2. Where the target is the subject fo an active auction, ie. another takeover bid or sale transaction is ongoing; [I see this as a risk ... a third party could put in a bid for KWG at say 10 cents and put it into play, at which point Cliffs could theoretically put in a higher bid at say 15 cents that appears NOT to trigger a third-party valuation]
3. Where the large shareholder has had no management representation or representative directors on the target's board in the last twelve months; [Again, this indicates to me that Cliffs might not need adhere to an independent third-party valuation if they launch a hostile bid].

There is some useful information within the document about how a foreign corporation can structure a Canadian shell to effect the takeover, and how different approaches can affect tax issues. In particular, there can be a risk under certain circumstances of a share swap that a capital gain/loss can be triggered at the time of the exchange, even if the shareholders who were given the new shares don't disburse.

There is quite a bit of info about the 2/3rd and 90% lines that shareholders who were in SPQ a few years ago will remember without much pleasure. I won't go into detail on those now. This is called the "squeeze out."

HOWEVER, I discovered something very interesting which may relate to the fact that Cliffs failed to pursue KWG when they were chasing KWG and SPQ. "Any securities acquired prior to the launch of a take-over bid (i) may not be counted towards the 90 percent threshold; and (ii) may not be voted by the acquirer in favour of a second-step going-private transaction that may be proposed to squeeze out minority shareholders in the even that less than 90 percent of the equity shares are tendered to a bid."

WHOA! Does this mean that Cliffs' current approx 17% toehold cannot be used in the 90% rule? Nor can it be voted if two thirds is achieved? If that's the case, then perhaps Cliffs realized that there was a significant change that they would not have been able to ever force a squeeze-out to take 100% control of KWG, because they already had the toehold at the time of the offer! I am sitting here right now wondering if that played significantly into the decision to pursue only SPQ.

There is a fair amount of information about the Investment Canada Act, which the government can use (through Industry Canada) to prohibit a takeover. Prior to 2010, there was only one case ever where a foreign company was denied permission to continue a takeover bid. It appears that Cliffs probably would not find this to be a significant stumbling block, as the chromite of the Ring Of Fire arguably does not relate directly to "national security."

There is discussion about an asset sale versus a corporate takeover. An asset sale would be deemed as equivalent to a takeover if the asset represented a significant amount or the entire amount of the target's total asset. That's probably not relevant in this situation. KWG now has two or more significant assets, so the disbursement of one would probably not be considered similar to a takeover by a non-Canadian entity that would interest Industry Canada.

All in all, some very interesting information.