35% share component for Hecla acquisition of Aurizon is just shy of what's required to assure treatment as a forward triangular merger for U.S. purposes

Under a Plan of Arrangement, a B.C. "Acquireco" subsidiary of Hecla (a U.S. mining company) will first acquire all the shares of Aurizon in consideration for cash and directing the delivery of Hecla shares (with the choice between cash and Hecla shares at the Aurizon shareholders' option subject to the overall mix being 65% cash and 35% Hecla shares).  Then Acquireco and Aurizon will amalgamate.

If the share component had been higher than 40%, this transaction would have qualified as a forward triangular merger for Code purposes, so that U.S. shareholders of Aurizon would only be required to recognize gain to the extent of any cash received by them.  As the share component is only 35%, counsel for Aurizon indicated that it is not possible to determine with certainty that this treatment is available (and Hecla intends to take the position that the exchange is taxable).

The cash consideration will be paid by Hecla directly to the Aurizon shareholders, perhaps so that the Acquireco acquisition can come within the applicable wording of Code s. 368(a)(2)(D).  Presumably this will be treated as a contribution of capital to Acquireco for Canadian purposes.

Neal Armstrong.   Summary of Aurizon Circular under Cross-Border Megers - Inbound - Other.