Home Capital is making an issuer bid under a Dutch auction with a specified amount based on the closing market price at the offer expiration

Home Capital is proposing to repurchase approximately 6% of its outstanding common shares under a Dutch auction at a price of between $34.00 and $38.00 per share (or $150 million in aggregate). Most of the proceeds will be subject to deemed dividend treatment, as the paid-up capital per share is around $1.29.

Ss. 191(4) and (5) provide a safe harbour from Part VI.1 tax for repurchase amounts paid up to an amount "specified” in the repurchase agreement not exceeding the fair market value of the shares immediately before the repurchase agreement was entered into. The Offer has a stand-alone statement that “for the purposes of subsection 191(4) of the Tax Act, the ‘specified amount’ in respect of each Share will be an amount equal to the closing trading price for the Shares on the TSX on the [offer] Expiration Date.” This contrasts with the recent TransForce offer, which specified a fixed dollar amount that was in the lower part of the potential range of purchase prices to be determined under the Dutch auction.

Under Code s. 302, a U.S. shareholder whose shares are sold under the offer will be subject to sale rather than distribution treatment if such transaction (a) constitutes a "substantially disproportionate" distribution by Home Capital respecting such U.S. Holder, (b) results in "complete termination" of its equity interest in Home Capital, or (c) is "not essentially equivalent to a dividend."

Neal Armstrong. Summary of Offer of Home Capital under Other – Issuer Bids – Share Offer.