Denison acquisition of Fission Uranium caps the number of Denison shares to be issued so as to avoid a reverse takeover

Denison is to acquire all the shares of Fission under a CBCA Plan of Arrangement in consideration for around 487 million Denison shares and nominal cash, so that Fission resident taxable shareholders desiring rollover treatment must elect under s. 85 – with the tax elections being generated and completed using a special dedicated website. Although it is expected that the pre-combination shareholders of Denison and Fission will own approximately 51.86% and 48.4%, respectively, of Denison post-Arrangement (excluding impacts of exercises of stock options and warrants), someone felt strongly that the Fission shareholders should not become majority owners of Dension - so that the exchange ratio of 1.26 Denison shares for each Fission share is subject to a cap on the total number of Denison shares issued on the exchange equal to the current number of Denison shares outstanding, minus 100,000.

Following the exchange, Denison will transfer its Fission Shares to a wholly-owned subsidiary (Subco), and amalgamate with Subco, with Subco as the survivor.  (Such a non-continuation style amalgamation likely will qualify as an amalgamation for ITA s. 87 purposes - see 2006-0178571R3).  The transaction is stated in the Plan of Arrangement itself to be intended to qualify as a forward triangular (D) reorganization under the Code. However, as Fission and Denison are believed to be a PFIC and not a PFIC, respectively, the PFIC rules may trigger taxable gain or income subject to tax at ordinary income tax rates plus an interest charge.

Neal Armstrong. Summary of Fission Circular under Mergers & Acquisitions – Mergers – Shares for Shares and Nominal Cash.