Private Placements By Acquisition Targets – Another Regulatory Grey Area

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On November 28, 2012, the British Columbia Securities Commission (BCSC) issued the reasons for the decision it had made following a hearing to consider an application made by Inmet Mining Corporation for certain relief in connection with its hostile take-over bid for Petaquilla Minerals Ltd. The hearing had concluded with an unsurprising order to the effect that Petaquilla’s shareholder rights plan would be cease traded on a specified date unless Petaquilla waived the plan as against Inmet’s bid. What was less predictable was that the BCSC also cease traded a proposed private placement note financing by Petaquilla, unless Inmet did not purchase any Petaquilla shares under its bid.

Petaquilla had publicly announced its intended note offering approximately seven weeks before the announcement of Inmet’s take-over bid. There was no indication in the BCSC’s reasons or in the public record that the note offering proposal had been initiated as a take-over defensive tactic. In fact, the BCSC stated that it appeared from the evidence that “the proposed offering was in the ordinary course of business. Certainly there was no evidence that it was an artificial transaction created as a purely defensive measure.”

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