Encana proposes to somersault out of Canada
It is proposed that Encana effectively be converted from a CBCA public corporation to a Delaware public corporation. This would occur in three stages.
First, there would be a “somersault” Plan of Arrangement under which Encana would distribute common shares, having a nominal value, of a newly-incorporated CBCA corporation (“Ovintiv”) to its shareholders and they then would exchange their Encana common shares for shares of Ovintiv – except that, in the somewhat unlikely event that the Encana shares had traded up to above U.S.$6.30 a share (presumably corresponding to an estimate of the paid-up capital of the Encana shares), the shareholders would also receive U.S.$0.25 per share of an Ovintiv note, so that the exchange would occur on a non-rollover basis unless they elected with Ovintiv under s. 85.
Second, a U.S. subsidiary of Encana would be distributed out of Encana in consideration for the assumption of debt and as Encana-share redemption proceeds, and Ovintiv would then drop Encana (which previously had been converted into a B.C. ULC) into a new CBCA subsidiary of Ovintiv.
Third, Ovintiv would be continued to Delaware. The Circular does not anticipate that this would generate tax under s. 128.1(4) or 219.1 except in the unlikely event that a lot of Encana shareholders elected under s. 85.
The continuance (“domestication” from a U.S. perspective) would be an “F” reorg, meaning that it would generally not occur on a rollover basis to U.S. shareholders.
Neal Armstrong. Summary of Encana Proxy Statement and Ovintiv Prospectus under Other – Continuances/Migrations – Outbound continuances.