Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Packaging by a Target of depreciable property in partnerships. Acquisition of control of the Target. Amalgamation of the Target with the Parent, and bump of the capital property held by the Target (including the partnership interests).
Position: Favourable rulings provided.
Reasons: In compliance with the law.
XXXXXXXXXX 2006-017857
XXXXXXXXXX
XXXXXXXXXX, 2006
Dear Sirs:
Re: Advance Income Tax Ruling
XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-noted taxpayers. We also acknowledge the information provided in your letters and e-mails of XXXXXXXXXX, and during our various telephone conversations in connection with your ruling request (XXXXXXXXXX).
We understand that to the best of your knowledge and that of the taxpayers involved, none of the issues involved in this ruling is:
(i) involved in an earlier return of the taxpayers or a related person,
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayers or a related person,
(iii) under objection by the taxpayers or a related person,
(iv) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has expired, or
(v) the subject of a ruling previously issued by the Income Tax Rulings Directorate.
Unless otherwise indicated, all references to monetary amounts are in American dollars.
DEFINITIONS
In this letter, except in Paragraph 73 and unless otherwise expressly stated, the following terms have the meanings specified herein:
"OPCO 1" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of OPCO 2.
"SUBCO 2" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of OPCO 4.
"OPCO 5C" means XXXXXXXXXX, formerly OPCO 5, a corporation continued under the CBCA.
"SUBCO 7C" means XXXXXXXXXX, formerly SUBCO 7, a corporation continued under the CBCA.
"SUBCO 8C" means XXXXXXXXXX, formerly SUBCO 8, a corporation continued under the CBCA.
"SUBCO 7" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is indirectly a wholly-owned subsidiary of OPCO 4.
"SUBCO 8" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is a wholly-owned subsidiary of OPCO 4.
"Acquisition Agreement" means the acquisition agreement dated XXXXXXXXXX, between Bidco and TARGET and any amendment thereto made in accordance with such agreement.
"Act" means the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.) C.1, as amended to the date hereof and, unless otherwise stated, every reference herein to a part, section, subsection, paragraph, subparagraph or clause refers to the relevant provision of the Act.
"Affiliate" has the meaning ascribed to it in the XXXXXXXXXX.
"arm's length" has the meaning assigned by section 251.
"Property 1" means the buildings of the BUSINESS.
"BUSINESS" means the XXXXXXXXXX which is owned by LP 1.
"Bidco" means XXXXXXXXXX, a company incorporated under the laws of the Province of XXXXXXXXXX and any successor corporation thereto.
"Bidco Amalgamation" means the amalgamation of Bidco and XXXXXXXXXX Mergeco, as described in Paragraph 69.
"SUBCO 3" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of OPCO 4.
"LP 1" means XXXXXXXXXX, a limited partnership formed under the laws of XXXXXXXXXX.
"capital property" has the meaning assigned by section 54.
"Buyco 1" means a new corporation to be incorporated under the laws of XXXXXXXXXX, as described in Paragraph 34.
"CBCA" means the Canada Business Corporations Act, R.S.C. 1985 c. C.44, as amended.
"Property 2" means the XXXXXXXXXX which is owned by OPCO 5C.
"Property 3" means the XXXXXXXXXX which is owned by OPCO 4.
"Property 4" means the XXXXXXXXXX which is owned by GP.
"Circular" means the Management Information Circular of TARGET, dated XXXXXXXXXX including the Notice of Special Meeting and all schedules, appendices and exhibits and all documents incorporated by reference herein.
"Bank" means, collectively, XXXXXXXXXX and any of their Affiliates.
"Shareholder 1" means XXXXXXXXXX, a limited liability company formed under the laws of the State of XXXXXXXXXX.
"Shareholder 1- Subco 1" means XXXXXXXXXX, a limited liability company formed under the laws of the State of XXXXXXXXXX, which is an Affiliate of XXXXXXXXXX.
"Shareholder 1- Subco 2" means XXXXXXXXXX, a limited liability company formed under the laws of the State of XXXXXXXXXX, which is an Affiliate of Shareholder 1, owning XXXXXXXXXX .
"Convertible Senior Notes" means the convertible senior notes issued by TARGET, as described in Paragraph 7.
"Court" means the XXXXXXXXXX.
"SUBCO 6" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is a wholly-owned subsidiary of OPCO 4.
"PUBCO" means XXXXXXXXXX.
"PUBCO Arrangement" means the corporate reorganization referred to in Paragraphs 2 and 3 hereof and detailed in the Arrangement Circular released by PUBCO to its shareholders, dated XXXXXXXXXX.
"OPCO 3" means XXXXXXXXXX , a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of TARGET.
"CRA" means the Canada Revenue Agency.
"SUBCO 1" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is a wholly-owned subsidiary of OPCO 4.
"Property 8" means the XXXXXXXXXX which is owned by SUBCO 1.
XXXXXXXXXX.
"Dissent Rights" means rights of dissent exercised pursuant to and in the manner set forth in section 190 of the CBCA.
"DSU" means the deferred share units granted under the DSU Plan.
"DSU Plan" means the XXXXXXXXXX for Directors of TARGET.
"Effective Date" means the date shown on the Second Certificate, provided that such date occurs on or prior to the Outside Date.
"Effective Time" means the time on the Effective Date as specified in writing by TARGET.
"XXXXXXXXXX Mergeco" means the corporation resulting from the Merger pursuant to a Court order under the CBCA, as described in Paragraph 41.
"XXXXXXXXXX Mergeco Arrangement" means an arrangement under Section 192 of the CBCA on the terms and subject to the conditions set out in the XXXXXXXXXX Mergeco Plan of Arrangement, the transactions of which are described in the Proposed Transactions.
"XXXXXXXXXX Mergeco Plan of Arrangement" means the plan of arrangement of XXXXXXXXXX Mergeco substantially in the form of Appendix XXXXXXXXXX of the Circular giving effect to the XXXXXXXXXX Mergeco Arrangement.
"FF&E" means furniture, fixtures and equipment.
"SUBCO 5" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of OPCO 4.
"WO3-SUBCO 5" means a new corporation incorporated under the CBCA, as described in Paragraph 33.
"WO4-SUBCO 5" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is indirectly a wholly-owned subsidiary of OPCO 4.
"WO1-SUBCO 5" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of SUBCO 5.
"WO1-SUBCO 5 Preferred Shares" means the Series A preferred shares issued by WO1-SUBCO 5 to SUBCO 5 as described in Paragraph 28.
"WO2-SUBCO 5" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of SUBCO 5.
"WO2-SUBCO 5 Preferred Shares" means the Series A preferred shares issued by WO2-SUBCO 5 to SUBCO 5 as described in Paragraph 28.
"OPCO 2" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of TARGET.
"OPCO 2 AMALCO" means the corporation resulting from the amalgamation of OPCO 2, OPCO 1 and OPCO 3, as described in Paragraph 47.
"TARGET" means XXXXXXXXXX, a public corporation incorporated under the CBCA.
"TARGET Convertible Note Indenture" means the indenture relating to the Convertible Senior Notes dated as of XXXXXXXXXX (as supplemented and amended in accordance with the terms thereof) between the XXXXXXXXXX, as trustee, and TARGET.
"TARGET Options" means options to purchase TARGET shares granted under any of the TARGET Stock Option Plans.
"TARGET Shares" means the issued and outstanding common shares of the capital stock of TARGET or XXXXXXXXXX Mergeco.
"TARGET Stock Option Plans" means, collectively, the Directors' Stock Option Plan of TARGET and the XXXXXXXXXX.
"First Certificate" means the certificate of arrangement giving effect to the OPCO 4 Arrangement issued pursuant to subsection 192(7) of the CBCA.
"OPCO 4" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of TARGET.
"OPCO 4 Arrangement" means an arrangement under section 192 of the CBCA on the terms and subject to the conditions set out in the OPCO 4 Plan of Arrangement, the terms of which are described in the Proposed Transactions.
"OPCO 4 Plan of Arrangement" means the joint plan of arrangement of Parent and Subsidiaries giving effect to the OPCO 4 Arrangement.
"GP-CO 5" means a new corporation incorporated under the CBCA, as described in Paragraph 32, which will be the general partner of LP 5.
"GP-CO 6" means a new corporation incorporated under the CBCA, as described in Paragraph 32, which will be the general partner of LP 6.
"GP-CO 2" means a new corporation incorporated under the CBCA, as described in Paragraph 32, which will be the general partner of LP 2.
"GP-CO 3" means a new corporation incorporated under the CBCA, as described in Paragraph 32, which will be the general partner of LP 3.
"GP-CO 7" means a new corporation incorporated under the CBCA, as described in Paragraph 32, which will be the general partner of LP 7.
"GP-Cos" means, collectively, GP-CO 2, GP-CO 3, GP-CO 6, GP-CO 7 and GP-CO 5.
"SHAREHOLDER 3" means XXXXXXXXXX.
"IPO" means initial public offering.
"SUBCO 7" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is indirectly a wholly-owned subsidiary of OPCO 4.
"LP 5" means a new limited partnership as described in Paragraph 35.
"Property 5" means the XXXXXXXXXX which is owned by OPCO 4.
"Property 6" means the XXXXXXXXXX which is owned by SUBCO 4.
"LP 6" means a new limited partnership as described in Paragraph 35.
"SHAREHOLDER 2" means XXXXXXXXXX company, the shares of which are held by HOLDCO 2 and HOLDCO 3.
"SHAREHOLDER 2-SUBCO 1" means XXXXXXXXXX company, all of the shares of which are held by SHAREHOLDER 2.
"HOLDCO 1" means XXXXXXXXXX company, all of the shares of which are held by TRUST 2.
"HOLDCO 2" means XXXXXXXXXX company, all of the shares of which are held by HOLDCO 3.
"HOLDCO 3" means XXXXXXXXXX company, all of the shares of which are held by TRUST 2.
"SHAREHOLDER 2-SUBCO 2" means XXXXXXXXXX company, all of the shares of which are held by SHAREHOLDER 2.
"FINANCECO" means XXXXXXXXXX company, XXXXXXXXXX% of the shares of which are held by HOLDCO 1 and XXXXXXXXXX% of the shares of which are held by SHAREHOLDER 2-SUBCO 1.
"TRUST 2" means XXXXXXXXXX, a non-resident trust for the benefit of SHAREHOLDER 3 XXXXXXXXXX.
"SHAREHOLDER 2-SUBCO 3" means XXXXXXXXXX, a corporation incorporated under the laws of the State of XXXXXXXXXX, which is indirectly a wholly-owned subsidiary of SHAREHOLDER 2.
"OPCO 5" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is a wholly-owned subsidiary of TARGET.
"LP 2" means a new limited partnership as described in Paragraph 35.
"TRUST 1" means XXXXXXXXXX, a trust formed under the laws of the Province of XXXXXXXXXX.
"TRUST 1 Debts" means the debts due by SUBCO 5 to XXXXXXXXXX as described in Paragraph 28.
"Lender" means Bank.
"Loss" means non-capital loss and net capital loss.
"BUYCO 2" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is an Affiliate of Shareholder 1.
"Merger" means the merger of the Parties pursuant to the OPCO 4 Plan of Arrangement.
"Merger Effective Date" means the date shown on the First Certificate.
"XXXXXXXXXX Borrowers" means SUBCO 8 and SUBCO 7.
"LP 3" means a new limited partnership as described in Paragraph 35.
"mutual fund trust" has the meaning assigned by subsection 132(6).
"net capital loss" has the meaning assigned by subsection 111(8).
"XXXXXXXXXX Amalco" means the corporation resulting from the Bidco Amalgamation, as described in Paragraph 69.
"New Partnerships" means LP 2, LP 3, LP 6, LP 7 and LP 5.
"LP 4" means a new limited partnership as described in Paragraph 36.
"LP 4Partner" means a new corporation incorporated under the CBCA, as described in Paragraph 31.
"non-capital loss" has the meaning assigned by subsection 111(8).
"non-resident" has the meaning assigned by subsection 248(1).
XXXXXXXXXX.
"SUBCO 8" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, which is indirectly a wholly-owned subsidiary of OPCO 4.
"Outside Date" has the meaning ascribed to it in the XXXXXXXXXX Mergeco Plan of Arrangement.
"Paragraph" refers to a numbered paragraph in this advance income tax rulings request.
"Parent" means, in respect of the OPCO 4 Plan of Arrangement, TARGET.
"Parties" means, collectively, in respect of the OPCO 4 Plan of Arrangement, the Parent and the Subsidiaries, and "Party" means any one of them individually.
"Predecessor Subsidiaries" means OPCO 4, OPCO 1, SUBCO 4, SUBCO 2, OPCO 5C, SUBCO 7C and SUBCO 8C.
"Proposed Transactions" means the transactions referred to in Paragraphs 41 to 71.
"public corporation" has the meaning assigned by subsection 89(1).
"XXXXXXXXXX Arrangement" means the arrangement between SUBCO 5 and TRUST 1, as described in Paragraph 28.
"related persons" has the meaning assigned by section 251.
"SUBCO 4" means XXXXXXXXXX, a corporation incorporated under the CBCA, which is a wholly-owned subsidiary of OPCO 4.
"Second Certificate" means the certificate of arrangement giving effect to the XXXXXXXXXX Mergeco Arrangement issued pursuant to subsection 192(7) of the CBCA.
"Senior Credit Facility" means a senior credit facility bearing interest provided by Bank, including both term and revolving credit facilities, in an aggregate amount of $XXXXXXXXXX.
"Shareholder Rights Plan" means the Shareholder Rights Plan Agreement dated as of XXXXXXXXXX and amended and restated as of XXXXXXXXXX between TARGET and XXXXXXXXXX, as amended from time to time.
"stated capital account" has the meaning assigned by section 26 of the CBCA.
"Subsidiaries" means, collectively, in respect of the OPCO 4 Plan of Arrangement, OPCO 4, SUBCO 4, SUBCO 2, OPCO 5C, SUBCO 7C and SUBCO 8C, and "subsidiary" means any one of them individually.
"taxable Canadian corporation" has the meaning assigned by subsection 89(1).
XXXXXXXXXX.
"Property 7" means the XXXXXXXXXX which is owned by OPCO 4.
"LP 7" means a new limited partnership as described in Paragraph 35.
"GP" means XXXXXXXXXX , a general partnership formed under the laws of XXXXXXXXXX in XXXXXXXXXX.
FACTS
Facts Relating to TARGET
1. TARGET is a public corporation and a taxable Canadian corporation. XXXXXXXXXX.
2. XXXXXXXXXX.
3. XXXXXXXXXX.
4. TARGET's authorized capital consists of an unlimited number of common shares, an unlimited number of first preferred shares and an unlimited number of second preferred shares. Only common shares have been issued and are outstanding. The TARGET Shares are listed under the symbol "XXXXXXXXXX" on the XXXXXXXXXX Stock Exchange. As of XXXXXXXXXX, the number of TARGET Shares was approximately XXXXXXXXXX. Also, under the TARGET Options, XXXXXXXXXX additional TARGET Shares could be issued. Finally, an aggregate up to XXXXXXXXXX TARGET Shares are issuable upon the conversion of the Convertible Senior Notes.
5. As at XXXXXXXXXX. exercised control and direction over XXXXXXXXXX of TARGET Shares (representing approximately XXXXXXXXXX%). As at XXXXXXXXXX. exercised control and direction over XXXXXXXXXX of TARGET Shares (representing approximately XXXXXXXXXX%). Other than XXXXXXXXXX, the directors and officers of TARGET are not aware of any person who, as at XXXXXXXXXX, beneficially owned, directly or indirectly, or exercised control or direction over 10% or more of the TARGET Shares.
In addition, as at XXXXXXXXXX exercised control and direction over XXXXXXXXXX of TARGET Shares (representing approximately XXXXXXXXXX% based on the number of shares issued by TARGET as at XXXXXXXXXX).
6. As at XXXXXXXXXX, FINANCECO, SHAREHOLDER 2-SUBCO 2 and SHAREHOLDER 2-SUBCO 3 held respectively XXXXXXXXXX TARGET Shares (representing approximately XXXXXXXXXX%), XXXXXXXXXX TARGET Shares (representing approximately XXXXXXXXXX%) and XXXXXXXXXX TARGET Shares (representing approximately XXXXXXXXXX%) or, in the aggregate, approximately XXXXXXXXXX% of the TARGET Shares.
As at XXXXXXXXXX, neither Shareholder 1 nor, to Shareholder 1's knowledge, any person not dealing at arm's length with Shareholder 1 held TARGET Shares.
7. On XXXXXXXXXX, TARGET issued $XXXXXXXXXX aggregate principal amount of XXXXXXXXXX% Convertible Senior Notes maturing XXXXXXXXXX, issued pursuant to the TARGET Convertible Note Indenture. Interest on the Convertible Senior Notes is payable semi-annually in arrears on XXXXXXXXXX and XXXXXXXXXX of each year. TARGET may call the Convertible Senior Notes in exchange for cash after XXXXXXXXXX for a price equal to XXXXXXXXXX% of the principal amount plus the accrued and unpaid interest. Holders may put the Convertible Senior Notes to TARGET in exchange for cash on XXXXXXXXXX at a purchase price equal to XXXXXXXXXX % of the principal amount plus accrued and unpaid interest. Upon the occurrence of certain prescribed events or at certain predetermined periods, holders of the Convertible Senior Notes have the right to convert them to TARGET Shares. The Convertible Senior Notes are unsecured obligations and rank equally with all existing and future unsecured and unsubordinated indebtedness of TARGET. XXXXXXXXXX, the proposed purchase price of $XXXXXXXXXX per share for the TARGET Shares gives the Convertible Senior Notes a value of $XXXXXXXXXX for each $XXXXXXXXXX of principal.
8. TARGET has granted TARGET Options under TARGET Stock Option Plans and has also granted DSU under the DSU Plan.
9. As of XXXXXXXXXX , the non-capital losses and net capital losses of TARGET and certain of its Canadian subsidiaries are as follows:
Non-Capital Net Capital
Losses Losses
(CA$XXXXXX ) (CA$XXXXXX )
TARGET XXXXXXXXX XXXXXXXXX
OPCO 4 XXXXXXXXX XXXXXXXXX
OPCO 2 XXXXXXXXX XXXXXXXXX
OPCO 1 XXXXXXXXX XXXXXXXXX
OPCO 5C XXXXXXXXX XXXXXXXXX
OPCO 3 XXXXXXXXX XXXXXXXXX
SUBCO 2 XXXXXXXXX XXXXXXXXX
TOTAL XXXXXXXXX XXXXXXXXX
Facts Relating to TARGET's Activities
10. TARGET, through its subsidiaries in Canada and elsewhere, has XXXXXXXXXX. The Canadian wholly-owned properties held by TARGET through its subsidiaries are the following:
Property Beneficial Owner
BUSINESS LP 1
Property 2 OPCO 5C
Property 4 GP
Property 5 OPCO 4
Property 3 OPCO 4
Property 6 SUBCO 4
Property 7 OPCO 4
Property 8 SUBCO 1
These Canadian wholly-owned properties have been owned as income producing properties by TARGET and its subsidiaries for a significant period of time and are treated as capital properties by their holders.
Facts Relating to OPCO 4
11. OPCO 4 is a taxable Canadian corporation. OPCO 4 owns directly three XXXXXXXXXX properties, being Property 3, Property 5 and Property 7.
12. OPCO 4 holds XXXXXXXXXX% of the units of LP 1 which were acquired in XXXXXXXXXX. More specifically, in XXXXXXXXXX, OPCO 4 transferred the Property 1 and assigned XXXXXXXXXX to LP 1 in consideration for units of LP 1. OPCO 4 retained the XXXXXXXXXX. The XXXXXXXXXX business is carried on by XXXXXXXXXX which is a wholly-owned subsidiary of OPCO 4. XXXXXXXXXX. leases the Property 1 and XXXXXXXXXX from LP 1 and the XXXXXXXXXX from OPCO 4. LP 1, through its general partner, SUBCO 3, and OPCO 4 will jointly elect, in prescribed form, to have subsection 97(2) apply to the transfer of the Property 1. XXXXXXXXXX.
OPCO 4 holds the limited partnership units of LP 1 as capital property.
13. OPCO 4 holds XXXXXXXXXX% of the units of GP. SUBCO 2 holds the other XXXXXXXXXX% of the units of GP. GP owns the beneficial interest in Property 4.
14. OPCO 4 holds all of the issued shares of the capital stock of SUBCO 4. SUBCO 4 owns Property 6.
15. OPCO 4 holds all of the issued shares of the capital stock of SUBCO 5, SUBCO 1 and SUBCO 6. It also holds, directly or indirectly, shares of the capital stock of corporations XXXXXXXXXX. Finally, OPCO 4 holds approximately XXXXXXXXXX% of TRUST 1. The remaining units of TRUST 1 are widely held by the public. The Notice of Annual Meeting and Management Information Circular indicates that, to the knowledge of the trustees of TRUST 1, as at XXXXXXXXXX, no person, other than TARGET and Affiliates of TARGET, beneficially owned or exercised control over units or voting certificates of TRUST 1 carrying 10% or more of the voting rights attached to all units and voting certificates.
On XXXXXXXXXX entered into a XXXXXXXXXX Agreement with TRUST 1 and XXXXXXXXXX.
Facts Relating to OPCO 2
16. OPCO 2 is a taxable Canadian corporation. OPCO 2 owns real estate assets, which consist XXXXXXXXXX.
17. OPCO 5C is a taxable Canadian corporation. OPCO 5C is the beneficial owner of the Property 2.
Facts Relating to SUBCO 5
18. SUBCO 5 is a taxable Canadian corporation. XXXXXXXXXX SUBCO 5 also owns the shares of the capital stock of various corporations incorporated pursuant to the laws of the United States and elsewhere that are engaged in the XXXXXXXXXX business.
Facts Relating to SUBCO 6
19. SUBCO 6 is a non-resident. SUBCO 6 holds shares of the capital stock of corporations that own XXXXXXXXXX properties situated in the United States. XXXXXXXXXX.
Facts Relating to SHAREHOLDER 2
20. XXXXXXXXXX.
21. SHAREHOLDER 2 is a non-resident. HOLDCO 2 and HOLDCO 3 hold respectively XXXXXXXXXX% and XXXXXXXXXX% of the issued and outstanding shares of the capital stock of SHAREHOLDER 2.
22. FINANCECO is a non-resident. HOLDCO 1 and SHAREHOLDER 2-SUBCO 1 hold respectively XXXXXXXXXX % and XXXXXXXXXX% of the issued and outstanding shares of the capital stock of FINANCECO. The other shareholders of FINANCECO are persons who are not related to SHAREHOLDER 3.
23. On XXXXXXXXXX, FINANCECO announced that it would launch an IPO XXXXXXXXXX As described in the offering memorandum dated XXXXXXXXXX, FINANCECO intends to use the proceeds from the IPO (approximately $XXXXXXXXXX) "to finance the expansion of [its] portfolio of XXXXXXXXXX investments through acquisitions and new developments and for other general corporate purposes." FINANCECO will not use the proceeds from the IPO to finance the acquisition of the shares of the capital stock of TARGET by Bidco.
The IPO represented approximately XXXXXXXXXX% of the issued shares of the capital stock of FINANCECO. As of XXXXXXXXXX, it does not appear from the public information available that there was any purchase of shares of the capital stock of FINANCECO by any person who is a shareholder of TARGET.
Facts Relating to Shareholder 1
24. Shareholder 1 is a non-resident and is a private international firm focusing primarily on XXXXXXXXXX. At the completion of this transaction, Shareholder 1, XXXXXXXXXX, will have invested in transactions with a gross value of more than $XXXXXXXXXX and in over XXXXXXXXXX assets through various XXXXXXXXXX transactions. The firm owns XXXXXXXXXX investments in XXXXXXXXXX.
25. Shareholder 1- Subco 2, an Affiliate of Shareholder 1, owns the XXXXXXXXXX BUYCO 2, also an Affiliate of Shareholder 1, owns the XXXXXXXXXX.
Background and Facts Relating to the Proposed Transactions
26. On XXXXXXXXXX, TARGET announced that it has entered into the Acquisition Agreement whereby Bidco would acquire from the public, pursuant to the XXXXXXXXXX Mergeco Plan of Arrangement, all of the TARGET Shares at a price of $XXXXXXXXXX per share in cash. The total value of this transaction is estimated at $XXXXXXXXXX. The transaction was unanimously approved by TARGET's Board of Directors following receipt of the recommendation of a special committee formed to analyze the offer.
27. The transaction is to be carried out by way of a statutory plan of arrangement, and was approved by TARGET's shareholders at a meeting of shareholders and by the Court. The closing is subject to certain other customary conditions, including regulatory approvals. The transaction, which is not subject to any financing condition, is expected to close in XXXXXXXXXX.
28. SUBCO 5 entered into the XXXXXXXXXX Arrangement with TRUST 1 in connection with TRUST 1's acquisition of XXXXXXXXXX. More specifically, in the course of this arrangement, SUBCO 5 borrowed $XXXXXXXXXX from XXXXXXXXXX ("TRUST 1 Debts") and used the proceeds from the borrowing to subscribe for XXXXXXXXXX of WO2-SUBCO 5 Preferred Shares in the amount of $XXXXXXXXXX and for XXXXXXXXXX WO1-SUBCO 5 Preferred Shares in the amount of $XXXXXXXXXX. WO2-SUBCO 5 and WO1-SUBCO 5, in turn, subscribed for preferred shares of the capital stock of their respective wholly-owned XXXXXXXXXX subsidiary, which used the funds received to make a loan to XXXXXXXXXX entities of the TRUST 1 Group.
PRELIMINARY TRANSACTIONS AND ENTITIES ESTABLISHED FOR THE PURPOSE OF THE PROPOSED TRANSACTIONS
29. Bidco's authorized capital consists of an unlimited number of voting and fully participating common shares.
SHAREHOLDER 2-SUBCO 2 and Shareholder 1- Subco 1 each holds 1 common share of the capital stock of Bidco. These shares were acquired for nominal cash consideration.
30. The articles of incorporation of Bidco will be amended to create one new class of an unlimited number of non-voting and fully participating common shares.
31. OPCO 4 has incorporated LP 4Partner. The authorized share capital of LP 4Partner consists of one class of an unlimited number of voting and fully participating common shares and one class of an unlimited number of non-voting redeemable and retractable preferred shares.
OPCO 4 has subscribed for XXXXXXXXXX common shares of the capital stock of LP 4Partner for a cash consideration of CA$XXXXXXXXXX.
32. OPCO 4 has incorporated the GP-Cos. The authorized share capital of each GP-Co consists of one class of an unlimited number of voting and fully participating common shares and one class of an unlimited number of non-voting redeemable and retractable preferred shares.
OPCO 4 has subscribed for XXXXXXXXXX common shares of the capital stock of each GP-Co for a cash consideration of CA$XXXXXXXXXX.
33. SUBCO 5 has incorporated WO3-SUBCO 5. The authorized share capital of WO3-SUBCO 5 consists of one class of an unlimited number of voting and fully participating common shares and one class of an unlimited number of non-voting redeemable and retractable preferred shares.
SUBCO 5 has subscribed for XXXXXXXXXX common shares of the capital stock of WO3-SUBCO 5 for a cash consideration of CA$XXXXXXXXXX.
34. SHAREHOLDER 2 and Shareholder 1 will incorporate Buyco 1. The authorized share capital of Buyco 1 will consist of one class of an unlimited number of voting and fully participating common shares and one class of an unlimited number of non-voting and fully participating common shares.
SHAREHOLDER 2 and Shareholder 1 will subscribe each for one voting common share of the capital stock of Buyco 1 for a nominal cash consideration.
35. OPCO 4, with the respective GP-Co, will form the New Partnerships under the laws of a province of Canada. The limited partner of each New Partnership will be OPCO 4.
The respective GP-Co will subscribe for one general partner unit of its New Partnership in consideration for CA$XXXXXXXXXX, and OPCO 4 will subscribe for XXXXXXXXXX limited partner units in each New Partnership for a consideration for CA$XXXXXXXXXX.
36. GP and LP 4Partner will form LP 4 under the laws of a province of Canada. The general partner and the limited partner of LP 4 will be, respectively, LP 4Partner and GP.
LP 4Partner will subscribe for one general partner unit of LP 4 in consideration for CA$XXXXXXXXXX, and GP will subscribe for XXXXXXXXXX limited partner units of LP 4 in consideration for CA$XXXXXXXXXX.
37. The Predecessor Subsidiaries will pass a resolution resolving to reduce the stated capital account of their outstanding shares to $XXXXXXXXXX (without any payment thereon).
38. LP 4Partner will subscribe for partnership units in GP for a nominal cash consideration.
39. OPCO 4, or any successor thereto, will subscribe for additional common shares of the capital stock of each GP-Co for a cash consideration. More specifically, the amount of cash consideration will be approximately as follows:
- GP-CO 2 CA$XXXXXXXXXX
- GP-CO 3 CA$XXXXXXXXXX
- GP-CO 6 CA$XXXXXXXXXX
- GP-CO 7 CA$XXXXXXXXXX
- GP-CO 5 CA$XXXXXXXXXX
40. OPCO 4, or any successor thereto, will subscribe for additional common shares of the capital stock of LP 4Partner for a cash consideration of approximately CA$XXXXXXXXXX.
PROPOSED TRANSACTIONS
OPCO 4 Plan of Arrangement
The following transaction will be undertaken on the Merger Effective Date, on or about XXXXXXXXXX, and will be effective as of the first moment of the day.
41. The OPCO 4 Plan of Arrangement was approved by the Boards of Directors of the Parties and by the Court. As of the Merger Effective Date, the Parties will merge pursuant to a Court order under the CBCA. As indicated below, for corporate law purposes, the Merger will have the same effect as if the Parties were amalgamated under section 184 and 186 of the CBCA, except that the separate legal existence of the Parent will not cease and the Parent will survive the Merger. In this regard, it is indicated in the Factum of the Director of the CBCA that the Parties acknowledge that the Merger is to have the same legal effect in respect of third party transactions as a vertical short form amalgamation under subsection 184(1) of the CBCA. In addition, the Director of the CBCA submitted that the OPCO 4 Plan of Arrangement approximates a merger of a parent corporation and its subsidiaries as could be effected under U.S. corporate statutes and this type of U.S. merger transaction is the basis for the short-form amalgamation provisions in the CBCA. The OPCO 4 Arrangement provides as follows:
XXXXXXXXXX.
Transfer of XXXXXXXXXX to New Partnerships and LP 4
The following transactions will be undertaken after the transaction described in Paragraph 41, on or about XXXXXXXXXX.
42. XXXXXXXXXX Mergeco will enter into asset purchase agreements with each of the New Partnerships whereby XXXXXXXXXX Mergeco will transfer, at the same time, its XXXXXXXXXX and related business assets to the respective New Partnership in consideration for (i) the assumption of the liabilities related to assets transferred and (ii) XXXXXXXXXX additional limited partner units of the relevant New Partnership. XXXXXXXXXX Mergeco and each New Partnership, through its general partner, will jointly elect, in prescribed form, to have subsection 97(2) apply to these transfers. It is anticipated that some or all of these transfers will be done on a partially Canadian income tax deferred basis.
The provisions of paragraph 13(7)(e) will apply where the cost of a property transferred to a New Partnership, determined without reference to that paragraph, exceeds the cost or capital cost of such property to XXXXXXXXXX Mergeco immediately before its disposition, such that the capital cost to the New Partnership of such property will be deemed to be the amount that is equal to the cost or capital cost of such property to XXXXXXXXXX Mergeco plus XXXXXXXXXX of the amount, if any, by which XXXXXXXXXX Mergeco's proceeds of disposition of such property exceed the cost or capital cost of such property to XXXXXXXXXX Mergeco.
At the time Bidco will acquire control of XXXXXXXXXX Mergeco, XXXXXXXXXX Mergeco will hold the limited partnership units received as described above as capital property.
43. Concurrently with the transaction described in Paragraph 42, each GP-Co will subscribe for one additional general partner unit of their respective New Partnership for an amount equal to the cash consideration received for the additional subscription in common shares made by OPCO 4, or any successor thereto.
44. XXXXXXXXXX Mergeco will enter into an asset purchase agreement whereby XXXXXXXXXX Mergeco will transfer to LP 1 the XXXXXXXXXX in consideration for additional limited partnership units of LP 1. XXXXXXXXXX Mergeco and LP 1, through its general partner SUBCO 3, will jointly elect, in prescribed form, to have subsection 97(2) apply to the transfer.
The provisions of paragraph 13(7)(e) will apply where the cost of a property transferred to LP 1, determined without reference to that paragraph, exceeds the cost or capital cost of such property to XXXXXXXXXX Mergeco immediately before its disposition, such that the capital cost to LP 1 of such property will be deemed to be the amount that is equal to the cost or capital cost of such property to XXXXXXXXXX Mergeco plus XXXXXXXXXX of the amount, if any, by which XXXXXXXXXX Mergeco's proceeds of disposition of such property exceed the cost or capital cost of such property to XXXXXXXXXX Mergeco.
At the time Bidco will acquire control of XXXXXXXXXX Mergeco, XXXXXXXXXX Mergeco will hold the limited partnership units of LP 1, referred to above and in Paragraph 12, as capital property.
Following the transfer of business assets described above and in Paragraph 42, XXXXXXXXXX Mergeco will not carry on directly any business and will not own any material business assets.
45. GP will enter into an asset purchase agreement with LP 4 whereby GP will transfer all of its assets XXXXXXXXXX to LP 4 in consideration for (i) the assumption of the liabilities of GP, and (ii) XXXXXXXXXX additional limited partner units of LP 4. GP, through its partners LP 4Partner and XXXXXXXXXX Mergeco, and LP 4, through its general partner LP 4Partner, will jointly elect, in prescribed form, to have subsection 97(2) apply to the transfer. It is anticipated that the transfer will be done on a partially Canadian income tax deferred basis.
The provisions of paragraph 13(7)(e) will apply where the cost of a property transferred to LP 4, determined without reference to that paragraph, exceeds the cost or capital cost of such property to GP immediately before its disposition, such that the capital cost to LP 4 of such property will be deemed to be the amount that is equal to the cost or capital cost of such property to GP plus XXXXXXXXXX of the amount, if any, by which GP's proceeds of disposition of such property exceed the cost or capital cost of such property to GP.
GP will hold the limited partnership units received as described above as capital property.
46. Concurrently with the transaction described in Paragraph 45, LP 4Partner will subscribe for one additional general partner unit of LP 4 in consideration for CA$XXXXXXXXXX.
Amalgamation of Certain Corporations
The following transaction will be undertaken before the Effective Time.
47. OPCO 2, OPCO 1 and OPCO 3 (for the purpose of this Paragraph, referred to as "predecessor corporations") will undertake a short form amalgamation under the CBCA to form OPCO 2 AMALCO, in such a manner that:
(a) all of the property (except any amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of OPCO 2 AMALCO by virtue of the amalgamation;
(b) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation, will become liabilities of OPCO 2 AMALCO by virtue of the amalgamation;
(c) the shares of the capital stock of OPCO 1 held by OPCO 2 immediately prior to the amalgamation will be cancelled by virtue of the amalgamation; and
(d) the shares of the capital stock of OPCO 2 and of OPCO 3 held by TARGET immediately prior to the amalgamation will become shares of the capital stock of OPCO 2 AMALCO, held by TARGET immediately after the amalgamation.
Reciprocal Loans Arrangement
The following transaction will be undertaken before the Effective Time.
48. SUBCO 5 will enter into a share purchase agreement with WO3-SUBCO 5 whereby SUBCO 5 will transfer the WO2-SUBCO 5 Preferred Shares and the WO1-SUBCO 5 Preferred Shares to WO3-SUBCO 5 in consideration for the assumption of the TRUST 1 Debts.
Winding-up of GP
The following transaction will be undertaken after the transaction described in Paragraph 45 but before the Effective Time.
49. GP will be dissolved in such a manner that all the property of GP (being the limited partner units of LP 4) will be distributed to its partners so that, immediately after that time, they will have an undivided interest in each such property. XXXXXXXXXX Mergeco and LP 4Partner will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 98(3) apply to the dissolution of GP.
At the time Bidco will acquire control of XXXXXXXXXX Mergeco, XXXXXXXXXX Mergeco will hold the limited partnership units received on the dissolution of GP as capital property.
Funding of Bidco
The following transactions will be undertaken before the Effective Time.
50. SHAREHOLDER 2 and Shareholder 1 will jointly contribute approximately $XXXXXXXXXX of equity to Bidco. The equity issued by Bidco will be composed of voting and non-voting common shares of Bidco. Each of SHAREHOLDER 2 and Shareholder 1 will own 50% of the voting shares of the capital stock of Bidco.
51. Bidco will borrow money from the Lender under the Senior Credit Facility.
52. SUBCO 6 will borrow approximately $XXXXXXXXXX from the Lender under the Senior Credit Facility.
53. WO4-SUBCO 5 will borrow approximately $XXXXXXXXXX from the Lender under the Senior Credit Facility.
54. WO4-SUBCO 5 will use the funds received in Paragraph 53 to (i) repay approximately $XXXXXXXXXX loan to SUBCO 5, (ii) pay a dividend to SUBCO 5 in the amount of approximately $XXXXXXXXXX, (iii) pay a dividend to SUBCO 6 in the amount of approximately $XXXXXXXXXX and (iv) make an interest-bearing demand loan to Bidco in the amount of approximately $XXXXXXXXXX
55. SUBCO 6 will use the funds received in Paragraph 52 and 54 and the net proceeds from the sale of the XXXXXXXXXX as described in Paragraph 19 to (i) refinance approximately $XXXXXXXXXX of an existing mortgage, (ii) pay approximately $XXXXXXXXXX of breakage fees, (iii) repay approximately $XXXXXXXXXX loan to XXXXXXXXXX Mergeco, (iv) on-lend approximately $XXXXXXXXXX to XXXXXXXXXX. as an interest-bearing inter-company loan, (v) pay a dividend to XXXXXXXXXX Mergeco in the amount of approximately $XXXXXXXXXX and (vi) make a non-interest bearing loan to Bidco in the amount of approximately $XXXXXXXXXX.
56. SUBCO 5 will use the funds received in Paragraph 54 to pay a dividend to XXXXXXXXXX Mergeco.
57. XXXXXXXXXX will use the funds received in Paragraph 55 to make an interest-bearing demand loan to Bidco.
58. XXXXXXXXXX Mergeco will use the funds received in Paragraphs 55 and 56, among other things, (i) to fund the cancellation of the TARGET Stock Option Plans, as described in Paragraph 62; and (ii) to make a non-interest bearing loan to Bidco.
59. The XXXXXXXXXX Borrowers will borrow approximately $XXXXXXXXXX from the Lender under the Senior Credit Facility.
60. The XXXXXXXXXX Borrowers will make a non-interest bearing loan to Bidco.
Acquisition of the Convertible Senior Notes
The following transaction will be undertaken before the Effective Time.
61. In accordance with a tender offer made by Bidco to acquire the Convertible Senior Notes, Bidco will acquire those Convertible Senior Notes validly tendered in the tender offer at a purchase price of $XXXXXXXXXX per $XXXXXXXXXX principal amount of Convertible Senior Note. The purchase price is the sum of $XXXXXXXXXX plus $XXXXXXXXXX (being an amount equal to the interest that would have accrued on the Convertible Senior Notes to the next interest payment date on XXXXXXXXXX) and plus $XXXXXXXXXX.
XXXXXXXXXX Mergeco Plan of Arrangement
62. The XXXXXXXXXX Mergeco Plan of Arrangement was approved by TARGET's shareholders at a meeting of shareholders that took place on XXXXXXXXXX and by the Court, and is subject to the receipt of all required regulatory approvals. Under the XXXXXXXXXX Mergeco Plan of Arrangement, commencing at the Effective Time, the following transactions shall occur and shall be deemed to occur, except otherwise indicated, in the following order without any further act or formality:
(a) Bidco shall be deemed, subject to having obtained any necessary regulatory relief, to have entered into an agreement with XXXXXXXXXX Mergeco pursuant to which Bidco shall at such time transfer to XXXXXXXXXX Mergeco those Convertible Senior Notes then owned by it and acquired pursuant to an offer made to all holders of Convertible Senior Notes at the same price per Convertible Senior Note as Bidco paid for the Convertible Senior Notes, and the Convertible Senior Notes that are thereby transferred to XXXXXXXXXX Mergeco shall be immediately thereafter cancelled, in each case without further act or formality. XXXXXXXXXX Mergeco may, in full and absolute satisfaction of the purchase amount of the Convertible Senior Notes, pay such purchase amount in cash or through the issuance of a demand promissory note;
(b) XXXXXXXXXX minutes following the transaction described in Section (a), the Shareholder Rights Plan shall be cancelled;
(c) concurrently with the transaction described in Section (b), all of the TARGET Options granted and outstanding immediately prior to the Effective Time shall, without any further action on behalf of any holder to TARGET Options, be transferred by the holders thereof to XXXXXXXXXX Mergeco without any act or formality on its or their part in exchange for a cash amount equal to the excess, if any, of (i) the product of the number of TARGET Shares underlying TARGET Options held by such holder and $XXXXXXXXXX over (ii) the aggregate exercise price payable under such TARGET Options by the holder to acquire the TARGET Shares underlying such TARGET Options (converted in United States dollars);
(d) concurrently with the transaction described in Section (b), with respect to each TARGET Option, the holder of such TARGET Option shall cease to be the holder of such TARGET Option and such holder's name shall be removed from the registers of TARGET Options with respect to such TARGET Options as the holder thereof;
(e) concurrently with the transaction described in Section (b), the TARGET Stock Option Plans shall be cancelled;
(f) XXXXXXXXXX minutes following the transaction described in Section (b), the TARGET Shares held by the holders who have exercised Dissent Rights which remain valid immediately before the Effective Date will be deemed to have been transferred to Bidco and be cancelled and cease to be outstanding and such holders will cease to have any rights as shareholders other than the right to be paid the fair value of their TARGET Shares;
(g) concurrently with the transaction described in Section (f), all TARGET Shares outstanding immediately prior to the Effective Time held by holders of TARGET Shares other than (i) TARGET Shares held by a holder who has exercised its Dissent Rights and is entitled to be paid the fair value of its TARGET Shares, and (ii) TARGET Shares held by Affiliates of SHAREHOLDER 2, shall be transferred by the holder to Bidco (free and clear of any liens), for $XXXXXXXXXX in cash per TARGET Share;
(h) concurrently with the transaction described in Section (f), with respect to each TARGET Share transferred to Bidco pursuant to Sections (f) and (g):
(i) the holder of each such TARGET Share shall cease to be the holder of such TARGET Share and such holder's name shall be removed from the register of TARGET Shares with respect to such TARGET Shares; and
(ii) Bidco shall be deemed to be the transferee of such TARGET Share (free and clear of any liens) and shall be entered in the register of TARGET Shares as the holder thereof;
(i) concurrently with the transaction described in Section (f), all outstanding TARGET Shares held by Affiliates of SHAREHOLDER 2 shall be transferred by the holder thereof, directly or indirectly, to Buyco 1 for shares of the capital stock of Buyco 1 (free and clear of any liens);
(j) concurrently with the transaction described in Section (f), with respect to each TARGET Share transferred to Buyco 1 pursuant to Section (i):
(i) the holder of each such TARGET Share shall cease to be the holder of such TARGET Share and such holder's name shall be removed from the register of TARGET Shares with respect to such TARGET Shares; and
(ii) Buyco 1 shall be deemed to be the transferee of such TARGET Share (free and clear of any liens) and shall be entered in the register of TARGET Shares as the holder thereof;
(k) concurrently with the transaction described in Section (f), all outstanding shares of the capital stock of Bidco held by SHAREHOLDER 2, Shareholder 1 and Affiliates of SHAREHOLDER 2 and Shareholder 1 shall be transferred by the holder thereof to Buyco 1 (free and clear of all liens) for shares of the capital stock of Buyco 1. SHAREHOLDER 2 and its Affiliates will own 50% of the voting shares of the capital stock of Buyco 1. Shareholder 1 and its Affiliates will own 50% of the voting shares of the capital stock of Buyco 1;
(l) concurrently with the transaction described in Section (f), with respect to each share of the capital stock of Bidco transferred to Buyco 1 pursuant to Section (k):
(i) the holder of each such share of Bidco shall cease to be the holder of such share and such holder's name shall be removed from the register of Bidco with respect to such shares of Bidco; and
(ii) Buyco 1 shall be deemed to be the transferee of such share of Bidco (free and clear of any liens) and shall be entered in the register of shares of Bidco as the holder thereof;
(m) XXXXXXXXXX minutes following the transaction described in Section (f), all outstanding TARGET Shares held by Buyco 1 that were acquired pursuant to Section (i) shall be transferred by the holder thereof, directly or indirectly, to BUYCO 2 (free and clear of any liens) for shares of the capital stock and convertible preferred equity certificates of BUYCO 2;
(n) concurrently with the transaction described in Section (m), with respect to each TARGET Share transferred to BUYCO 2 pursuant to Section (m):
(i) the holder of each such TARGET Share shall cease to be the holder of such TARGET Share and such holder's name shall be removed from the register of TARGET Shares with respect to such TARGET Shares; and
(ii) BUYCO 2 shall be deemed to be the transferee of such TARGET Share (free and clear of any liens) and shall be entered in the register of TARGET Shares as the holder thereof;
(o) XXXXXXXXXX minutes following the transaction described in Section (m) and notwithstanding the terms of the DSU Plan, all DSU shall be cancelled and terminated by XXXXXXXXXX Mergeco and each holder thereof shall be entitled to receive from XXXXXXXXXX Mergeco, in exchange therefor, $XXXXXXXXXX in cash per DSU;
(p) concurrently with the transaction described in Section (o), with respect to each DSU, the holder of such DSU shall cease to be the holder of such DSU and such holders' name shall be removed from the register of DSUs with respect to such DSUs as the holder thereof;
(q) concurrently with the transaction described in Section (o), the DSU Plan shall be cancelled; and
(r) XXXXXXXXXX Mergeco will file the prescribed form of election under the Act with CRA to cease to be a public corporation for the purposes of the Act.
The following transaction will be undertaken immediately after the transaction described in Section (f) of Paragraph 62.
63. Shareholder 1- Subco 2 will enter into a contribution agreement with Buyco 1 whereby Shareholder 1- Subco 2 will transfer, directly or indirectly, to Buyco 1 (i) the shares, interest free loans and preferred equity certificates of BUYCO 2 and (ii) all the XXXXXXXXXX , in consideration for shares of the capital stock of Buyco 1.
The following transaction will be undertaken concurrently with the transaction described in Section (m) of Paragraph 62.
64. Buyco 1 will enter into a contribution agreement with BUYCO 2 whereby Buyco 1 will transfer, directly or indirectly, to BUYCO 2 (i) all of the XXXXXXXXXX and (ii) the shares of the capital stock of Bidco, in consideration for additional shares of the capital stock and convertible preferred equity certificates of BUYCO 2.
The following transaction will be undertaken after the transaction described in Paragraph 64.
65. BUYCO 2 will enter into a contribution agreement with Bidco whereby BUYCO 2 will transfer to Bidco the shares of the capital stock of TARGET in consideration for additional shares of the capital stock of Bidco.
Post XXXXXXXXXX Mergeco Plan of Arrangement Transactions or Events
66. On the Effective Date but before the transaction described in Paragraph 69, Bidco will be continued under the CBCA.
67. The XXXXXXXXXX Mergeco shares will be delisted.
68. XXXXXXXXXX Mergeco will elect under subsection 256(9) in its tax return for its taxation year ending immediately before the acquisition of control not to have this subsection apply.
69. On or the day after the Effective Date, Bidco and XXXXXXXXXX Mergeco (for the purpose of this Paragraph, referred to as the "predecessor corporations") will undertake a vertical short form amalgamation under the CBCA to form New XXXXXXXXXX Amalco, in such a manner that:
(a) all of the property (except any amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of New XXXXXXXXXX Amalco by virtue of the amalgamation;
(b) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation, will become liabilities of New XXXXXXXXXX Amalco by virtue of the amalgamation;
(c) the shares of the capital stock of XXXXXXXXXX Mergeco held by Bidco immediately prior to the amalgamation will be cancelled by virtue of the amalgamation; and
(d) the shares of the capital stock of Bidco held by shareholders of Bidco immediately prior to the amalgamation will become shares of the capital stock of New XXXXXXXXXX Amalco, held by those shareholders immediately after the amalgamation.
70. WO3-SUBCO 5 will be wound-up into SUBCO 5 in such a manner that all the properties of WO3-SUBCO 5 will be acquired by SUBCO 5 and all of its liabilities of WO3-SUBCO 5 will be assumed by SUBCO 5. The provisions of subsection 88(1) will apply to the wind-up of WO3-SUBCO 5.
71. In connection with the amalgamation described in Paragraph 69 above, in its tax return for the taxation year commencing at the time of the Bidco Amalgamation, New XXXXXXXXXX Amalco will designate an amount under the provisions of subsection 87(11) and paragraph 88(1)(d) to increase, within the limits described in paragraph 88(1)(d), the cost of certain capital property (other than ineligible property) of XXXXXXXXXX Mergeco, being limited New Partnership units, LP 4 units, LP 1 units, TRUST 1 units and other capital property (that is not depreciable property), that XXXXXXXXXX Mergeco owned without interruption at and since the time Bidco last acquired control of XXXXXXXXXX Mergeco as described in Section 63(g), and that became property of New XXXXXXXXXX Amalco pursuant to the Bidco Amalgamation.
72. TARGET, SHAREHOLDER 2, Shareholder 1 and Bidco are not currently contemplating the conversion of TARGET, corporations controlled by TARGET or any successors thereto into a mutual fund trust. Furthermore, TARGET, SHAREHOLDER 2, Shareholder 1 and Bidco are not currently contemplating the transfer of all or part of the partnership interests in the New Partnerships, LP 1 and LP 4, either directly or indirectly, to a person exempt from tax under section 149, to a mutual fund trust, or to any entity controlled by such a mutual fund trust.
73. The federal business number of the taxpayer referred to herein, the location of the tax services office and taxation centre where its returns are filed, and the address of its head office are as follows:
XXXXXXXXXX .
- Business Number: XXXXXXXXXX
- Tax Services Office: XXXXXXXXXX
- Taxation Centre: XXXXXXXXXX
- Address: XXXXXXXXXX
PURPOSES OF THE PROPOSED TRANSACTIONS
The purposes of the Proposed Transactions are (i) to allow Bidco to acquire the TARGET Shares as proposed under the XXXXXXXXXX Mergeco Plan of Arrangement in the most efficient way, (ii) to avoid any US FIRPTA (the "Foreign Investment in Real Property Tax Act of 1980") issue that could arise from the combination of the Parent and of the Subsidiaries, (iii) to consolidate, before the Effective Time, the Losses of the various Canadian entities into two corporations (XXXXXXXXXX Mergeco and OPCO 2 AMALCO) which will own Canadian assets with accrued gain and recapture, and (iv) to facilitate the consolidation of TARGET's corporate structure for taxation years ending after the acquisition of control.
RULINGS GIVEN
Provided that the preceding statements constitute a complete and accurate disclosure of all relevant Facts, Preliminary Transactions, Proposed Transactions and the Purposes of the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described above, we confirm the following:
A. The provisions of section 87 will apply to the Merger pursuant to the OPCO 4 Plan of Arrangement to form XXXXXXXXXX Mergeco, as described in Paragraph 41 above.
B. The provisions of subsections 87(11) and 88(1) will apply to the vertical amalgamation of XXXXXXXXXX Mergeco and Bidco to form New XXXXXXXXXX Amalco as described in Paragraph 69 such that, for purposes of the Act, and provided that no property that became property of New XXXXXXXXXX Amalco on such amalgamation or "any property acquired by any person in substitution therefor" (within the meaning of that phrase for the purposes of clause 88(1)(c)(vi)(B)) is acquired by any person described in any of subclauses 88(1)(c)(vi)(B)(I), (II), or (III) (on the assumption that the "subsidiary" referred to in those subclauses is XXXXXXXXXX Mergeco and the "parent" is Bidco) as part of the series of transactions or events that includes the proposed transactions described herein, the cost to New XXXXXXXXXX Amalco of each property owned by XXXXXXXXXX Mergeco at the time Bidco acquired control of XXXXXXXXXX Mergeco and that became property of New XXXXXXXXXX Amalco pursuant to the amalgamation will be deemed by paragraph 88(1)(c) to be the cost amount of such property plus, provided that such property is capital property, but not depreciable property, the amount designated by New XXXXXXXXXX Amalco under paragraph 88(1)(d) in respect of the property as described in Paragraph 71.
For greater certainty, property that became property of New XXXXXXXXXX Amalco on the vertical amalgamation of XXXXXXXXXX Mergeco and Bidco will not be ineligible property for the purposes of paragraph 88(1)(c) solely as a result of any of the Facts, Preliminary Transactions or Proposed Transactions described herein.
The above rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R5 issued on May 17, 2002, and are binding on the CRA provided that the proposed transactions are completed before XXXXXXXXXX.
The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act, which if enacted, could have an effect on the rulings provided herein.
Nothing in this ruling should be construed as implying that the CRA has agreed to or reviewed any tax consequences relating to the Facts, Preliminary Transactions and Proposed Transactions described herein other than those specifically described in the rulings given above. In particular, nothing in this ruling should be construed as implying that the CRA has agreed to or reviewed:
(a) the determination of the fair market value or adjusted cost base of any property referred to herein, or the paid-up capital in respect of any share referred to herein;
(b) the undepreciated capital cost of any depreciable property referred to herein;
(c) the amount of any non-capital loss, net capital loss or any other amount of any corporation referred to herein;
(d) any provincial tax consequences of the Proposed Transactions; or
(e) any tax consequences relating to the transfer of assets to the New Partnerships, LP 1 and LP 4 as described in Paragraph 12 and Paragraphs 42 to 46 and, more particularly, the tax consequences pertaining to the latent recapture or gain on depreciable property received by such partnerships.
Furthermore, in the event that any of the limited New Partnership units, LP 1 units, or LP 4 units are disposed of by XXXXXXXXXX Mergeco or any successor thereto, either directly or indirectly, in favour of a person exempt from tax under section 149, a mutual fund trust, or any entity controlled by such a mutual fund trust, the above Ruling B will be void and will cease to be binding upon the CRA in respect of the partnership units being disposed of.
An invoice for our fees in connection with this ruling request will be forwarded to you under separate cover.
Yours truly,
XXXXXXXXXX
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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