Probe will spin-off exploration assets in a s. 84(2) and (4.1)(a) PUC distribution, and be acquired by Goldcorp for shares and nominal cash in a forward triangular merger

Goldcorp covets Probe's Borden gold project. Probe first will distribute its common shares of a newly-formed Explorationco to its shareholders as a paid-up capital distribution (rather than using the more typical s. 86 reorg), with this step being garnished with wording taken from both the ss. 84(2) and 84(4.1)(a) safe harbours. All the Probe common shares will then be exchanged for Goldcorp common shares (together with nominal cash so as to require a joint s. 85(1) election to achieve Canadian rollover treatment).  Goldcorp will drop its Probe shares into a wholly-owned subsidiary (Subco).  Subco will be the survivor of its amalgamation with Probe (see 2006-0178571R3).  The above and other steps are deemed under the Plan of Arrangement to occur at one minute intervals, including the filing of an election of Probe with CRA to cease to be a public corporation before its amalgamation with Subco.

The share exchange and survivor amalgamation are intended to qualify as a (Code s. 368(a)(2)(D)) forward triangular merger (which may have been preferred given the distribution of the Explorationco and the more stringent boot rules applicable to reverse triangular mergers.) Probe and Goldcorp are believed to be a PFIC and non-PFIC, respectively, so that US shareholders of Probe who do not make a QEF or mark-to-market election would not receive rollover treatment under a proposed retroactive Regulation - and the disclosure indicates that they should assume that Goldcorp will not provide them with the required information to validly access a QEF election.  Although, unlike the disclosure for the Sulliden/Rio Alto merger, no statement is made that the transaction should qualify for nonrecognition if the Regulation is not finalized, it nonetheless might be anticipated that at least some U.S. shareholders will take the position that the gain recognition rule in the Code is not self implementing and, in the absence of final regulations, no gain recognition is required.

Neal Armstrong and Abe Leitner.  Summary of Probe Mines Circular under Mergers & Acquisitions – Mergers – Shares for Shares and Nominal Cash.