Proposed Metro acquisition of PJC accommodates non-cash dividends by PJC Holdcos to electing Canadian shareholders
Under the proposed acquisition of The Jean Coutu Group (PJC) Inc. by Metro Inc. under a triangular amalgamation involving a subsidiary of Metro, PJC shareholders will be given a choice of cash or Metro shares, subject to proration to accommodate the intended global allocation of cash of approximately $3.377 billion and Metro shares valued at approximately $1.126 billion. Cash will be paid through the issuance of full-PUC redeemable prefs of Amalco which will be immediately redeemed. As an exception to this basic mechanic, a resident taxable PJC shareholder is given the option of rolling its PJC shares into a new single-purpose Quebec holding company, with that Holdco then being included in the amalgamation and with its shares effectively converted into Metro shares or cash in the same way. The extensive stated limitations on what a “Qualifying Holdco” is permitted to do state that it:
will not have paid any dividends or other distributions, other than an increase in stated capital, a stock dividend, a cash dividend financed with a daylight loan or a dividend paid through the issuance of a promissory note with a determined principal amount and any such promissory note issued in relation to the payment of any such dividend will have been capitalized… .
Similar planning occurred in the AIP acquisition of Canam.
Neal Armstrong. Summary of PJC Circular under Mergers & Acquisitions – Amalgamations – Triangular Amalgamations.