Charger/AvenEx/Pace -- summary under Non-Triangular Amalgamations

Summary Under
Tax Topics - Public Transactions - Mergers & Acquisitions - Amalgamations - Non-Triangular Amalgamations
Amalgamation of Charger, AvenEx and Pace following share exchange
Overview

Under an Alberta Plan of Arrangement, all the non-dissenting shares of Charger and AvenEx will be exchanged for treasury shares of Pace, following which Charger and AvenEx will be amalgamated into Pace to continue as Spyglass (which will have a market cap of $344M). Charger, AvenEx and Pace are Alberta companies listed on the TSXV, TSX and TSX, respectively. The shareholders of Charger, AvenEx and Pace will hold 9%, 43% and 48%, respectively, of the shares of Spyglass.

Plan of Arrangement

Under the Plan of Arrangement:

  • each of the issued and outstanding Pace shares will be subdivided into 1.3 shares
  • AvenEx, Charger and Pace shares of dissenters will be transferred for their fair value to the respective companies
  • the stated capital of the shares of AvenEx and Charger will be reduced to $1.00
  • each Charger share will be transferred to Pace in exchange for 0.18 of a Pace share
  • each AvenEx share will be transferred to Pace in exchange for 1.00 of a Pace share
  • Charger and AvenEx will be amalgamated with Pace to continue as Spyglass (with the Pace shares continuing as Spyglass shares)
  • the stated capital of the Spyglass shares (whose pro forma equity book value is $636.2M) will being reduced to $1.00, with the reduction added to contributed surplus
Options

In-the-money Charger and Pace options will be exercised and out-of-the –money options will be surrendered for $0.001 per option.

Canadian tax consequences

Share exchange occurs under s. 85.1/rollover on amalgamation. No estimate of the quantum of deemed dividends to dissenters.

U.S. tax consequences

Charger, AvenEx and Pace believe they are not and were not PFICs. On this basis and given that the Arrangement should qualify as a tax-deferred exchange under Code s. 368(a), no gain or loss will be recognized by a U.S. holder on the exchange of Charger, AvenEx or Pace shares for Spyglass shares, provided that U.S. holders who own directly or by attribution 10% or more of the Charger, AvenEx or Pace shares or, following the amalgamation, the Spyglass shares, may be required to recognize a proportionate share of the earnings and profits of Charger, AvenEx or Pace as dividends.