InterOil – Yukon Supreme Court indicates that all plans of arrangement must be accompanied by a fairness opinion prepared on a fixed fee basis
A decision of the Yukon Court of Appeal reversed approval of the plan of arrangement for the acquisition of InterOil by ExxonMobil on the basis inter alia that the Circular did not contain information permitting InterOil shareholders to properly assess the adequacy of contingent cash consideration to be paid to them based on the subsequently-measured size of InterOil’s natural gas resource. ExxonMobil then returned with an offer that was essentially the same, except that the contingent cash consideration was capped only once the resource size reached a quite unlikely level. The Circular disclosure was substantially improved.
In the course of giving his final approval for this revised plan, Veale J noted that, in giving interim approval, he had required that a fairness option be prepared by a reputable expert on a fixed fee (rather than “success” fee) basis and that there also be a supportive report of a Board Transaction Committee consisting of four independent directors, and stated:
In my view, these requirements provide a minimum standard for interim orders of any plan of arrangement. It is not acceptable to proceed on the basis of a Fairness Opinion which is in any way tied to the success of the arrangement.
Neal Armstrong. Summary of Re: Interoil Corp., 2017 YKSC 16 under Business Corporations Act (Ont.), s. 182(5)(c).