Minority shareholders transferring their shares of Power Financial Corporation to Power Corporation of Canada must elect under s. 85 to get rollover treatment
Power Corporation of Canada (“PCC”), whose subordinate voting common shares trade on the TSX, holds approximately 2/3 of the common shares of Power Financial Corporation (the “Company”), with the balance of those common shares trading on the TSX. In order to eliminate the holding company discount for this structure and to effectively privatize the Company (thereby reducing costs) it is proposed that each of the minority’s common shares be exchanged under a CBCA Plan of Arrangement for 1.05 subordinate voting common shares of PCC and $0.01 of cash. The exchanging shareholders will thereby receive, as an economic matter, an incremental 0.7% interest in the assets and liabilities of the Company they already own, plus a 36.7% interest in the non-Company assets of PCC.
Eligible (i.e., taxable) minority shareholders may provide an s. 85 election form to PCC within 120 days of the Arrangement in order to secure rollover treatment. The exchange is taxable for U.S. purposes.
Neal Armstrong. Summary of Power Financial Corporation Circular under Mergers & Acquisitions – Mergers – Privatizations.