Whiting acquisition of Kodiak relies on the most recent FAD draft legislation, does not offer exchangeable shares and uses a survivor-style amalgamation

Kodiak, which carries on its U.S. oil and gas business through U.S. subsidiaries, will be continued from the Yukon to B.C., and then will be acquired by a B.C. sub of Whiting (a Delaware corp) under a B.C. Plan of Arrangement. The Kodiak shareholders will receive Whiting common shares from Whiting sub, with the sub simultaneously issuing common shares to Whiting in consideration for such Whiting common shares.

Under the most recent (20 October 2014) version of draft amendments to s. 212.3(7), the simultaneous issuance of shares of the acquisition sub to Whiting with the acquisition of Kodiak (viewed as a "10(f)" corp) will be sufficient to absorb any deemed dividend otherwise arising to Whiting under the foreign-affiliate dumping rules – in contrast to the 16 August 2013 version of the draft amendments which generally provided for the absorption of such a deemed dividend by the paid-up capital of a cross border class of shares only "immediately before" the investment time (see Example 7-F).

The exchange by Canadian shareholders of Kodiak will occur on a non-rollover basis (and the disclosure does not waste ink mentioning the ancient outstanding Finance proposal to explore introducing a rollover).  Use of exchangeable shares (see Molycorp/Neo Material and Mamba/Champion) likely would not have been seriously considered assuming that the Canadian shareholder base is not substantial and given that the transaction as structured likely produces U.S. rollover treatment.

Following the acquisition of Kodiak, it will be amalgamated with the acquisition sub, with Kodiak as the survivor.  This type of non-continuation amalgamation helps the merger qualify as a reverse triangular "E" merger for Code purposes, rather than a forward triangular "D" merger.  Such a non-continuation style amalgamation likely will qualify as an amalgamation for ITA s. 87 purposes (see 2010-0355941R3).

Neal Armstrong and Abe Leitner.  Summary of Kodiak Oil 14A Proxy Statement under Mergers & Acquisitions  -  Cross-Border Acquisitions – Inbound – Canadian Buyco.