Asset sale by Anderson Energy of non-core gas assets is structured to also transfer $222M of tax losses

Although Anderson Energy is proposing to sell some non-core shallow gas assets to Freehold Royalties for $35M, Freehold also will be transferred $222M in non-capital losses and undepreciated capital cost. This will be accomplished by:

• The Anderson shareholders transferring all their shares to a new holding company (New Anderson)
• Anderson transferring all its core assets to New Anderson effectively as a stated capital reduction (or, to be more precise, selling those assets for New Anderson shares utilizing a s. 85 election, and then transferring the New Anderson shares to New Anderson for cancellation as a stated capital distribution)
• New Anderson selling the Anderson shares to Freehold for $35M in cash (subject to adjustment based on the level of tax attributes)

The Circular states: "By virtue of New Anderson having acquired approximately 92% of Anderson’s Canadian resource property…it is anticipated that the successor tax election [under s. 66.7(7)(e)] will allow New Anderson to also acquire the undeducted resource tax pools of Anderson, on a ‘successored’ basis… ."

Neal Armstrong. Summary of Anderson Energy Circular under Spin-Offs & Distributions – Taxable Spin-offs.