US: The board of directors of UrtheCast have approved the adoption of Shareholder Rights Plan that came into effect from April 5, 2016, the company announced on Wednesday. The Shareholder Rights Plan that is also known as the Rights Plan, has been conditionally accepted by the Toronto Stock Exchange ("TSX"), subject to ordinary course shareholder approval conditions.
Although effective as of April 5, 2016, the Rights Plan is subject to ratification by UrtheCast's shareholders within six months, in accordance with TSX rules. Shareholder approval will be sought at the annual general and special meeting of the shareholders on May 10, 2016 (the "AGM"). If the shareholders do not ratify the Rights Plan at the AGM, the Rights Plan and all of the rights outstanding at the time will terminate.
The Rights Plan is designed to ensure that, in the context of a bid for control of the Company through an acquisition of shares, all shareholders have an equal opportunity to participate in, and adequate time to assess, the bid. The Rights Plan is not intended to prevent take-over bids that treat shareholders equally and offer fair value. The Rights Plan expressly permits certain take-over bids, referred to as "permitted bids", that meet basic requirements intended to protect the interests of shareholders.
Under the terms of the Rights Plan, one right (a "Right") will be issued by the Company for each outstanding share. The Rights become exercisable only if a person acquires 20% or more of the shares of the Company without complying with the "permitted bid" provisions of the Rights Plan or without the approval of the Company's board of directors. Once exercisable, the Rights entitle holders (other than such acquiring person, its affiliates, associates and joint actors) to purchase shares of the Company at a substantial discount to the prevailing market price at the time that the Rights become exercisable.
The Rights Plan was not adopted in response to any specific take-over bid for the Company that has been made or that the Company is aware of. The Rights Plan is similar to plans adopted by other Canadian companies, with such amendments to take into consideration National Instrument 62-104 – Take-Over Bids and Issuer Bids (the "New Take-Over Bid Rules"), which rules are expected to come into force in May of 2016. In particular, the "permitted bid" criteria in the Rights Plan aligns with the New Take-Over Bid Rules, which require a minimum 105-day bid period, an irrevocable minimum tender condition and a 10-day bid extension period. The Rights Plan also addresses concerns that a person may acquire control of UrtheCast through market purchases of shares, known as a "creeping bid", without paying fair value for a control position or sharing a control premium equally among all shareholders.
To constitute a "permitted bid" under the Rights Plan, a bid must be made to all holders of the Company's shares and must be open for acceptance for at least 105 days (which period may be reduced in certain circumstances). If, after 105 days, at least 50% of the outstanding shares (other than those owned by the bidder, its affiliates, associates and joint actors) have been tendered and not withdrawn, the bidder may take up and pay for the shares but must extend the bid for a further 10 days to allow other shareholders to tender to the bid.