CTF/FleetCor

Documents
(SEDAR filing: 28 May 2012) Circular of CTF Technologies Inc. ("CTF") for Plan of Arrangement respecting Acquisition of CTF by FleetCor Luxembourg Holding2 S. à r.l. ("FleetCor") and spin-off of FTC Cards Inc. ("FTC SpinCo") (2614 K). McMillan
Summaries
Summary Under
Tax Topics - Public Transactions - Spin-Offs & Distributions - S. 86 spin-offs - Shares for Shares and Nominal Cash
Acquisition of CTF by FleetCor: spin-off of subsidiary to parent's shareholders utilizing s. 86, and subsequent sale of parent utilizing s. 40(1)(a)(iii) reserve

Proposed acquisition of CTF (a BC company) by FleetCor (a Luxembourg subsidiary of a NYSE listed company, namely, FleetCor Technologies, Inc.) for a base purchase price of US$180 million plus adjustments payable over five years, including releases of holdbacks.

Under a BC Plan of Arrangement, the existing shares of CTF ("CTF Class A Shares") are exchanged for New CTF common shares and CTF Class C Shares, with the paid-up capital of CTF Class A Shares being allocated first to the CTF Class C Shares to the extent of the estimated value of FTC SpinCo as confirmed by the CTF board within one month of the effective date of the Plan. CTF redeems the CTF Class C Shares in consideration for the distribution of the shares of FTC SpinCo, a BC company which holds a Brazilian subsidiary. FleetCor then acquires the New CTF Shares, with a portion of the cash purchase price deemed to have been contributed on behalf of the vendor shareholders to FTC SpinCo as a contribution of capital.

Canadian taxation

The absence of a deemed dividend on the CTF Class C Share redemption is anticipated but "cannot be guaranteed" due inter aliato valuation issues. Although the s. 40(1)(a)(iii) reserve generally is available on the sale to FleetCor, there nonetheless may be recognition of capital gain faster than the receipt of proceeds due to the requirements of the rule, whose application also is uncertain in light of potential purchase price adjustments.