Maple Leaf Foods is proposing to spin-off its pork assets as Canada Packers

Maple Leaf Foods (or MLF) is proposing to effect a butterfly spin-off, pursuant to a CBCA Plan of Arrangement, of 84% of the shares of the subsidiary (Subco) containing its pork operation assets to a new corporation, named Canada Packers Inc., to be held by its shareholders (with the remaining 16% of Canada Packers being held by MLF). The mechanics of the butterfly essentially entail a targeted s. 86 exchange by the MLF shareholders of their “old” MLF common shares for “new” common shares (quite similar to the old common shares) and special shares, the transfer of those special shares under s. 85.1 to a Newco for Newco common shares, the transfer by MLF of 84% of its shareholding in Subco to Newco for Newco preferred shares, the redemption of the cross-shareholdings and the amalgamation of Newco and Subco to form Canada Packers. Implementation is conditional inter alia on receipt of a CRA ruling letter and on the common shares of the Newco being conditionally listed on the TSX.

The “McCain Parties” (two individuals and McCain Capital Inc.), who hold 39.6% of the MLF common shares, entered into a Tax Matters Agreement with the corporations in which they agreed that they will not within the two years following the Arrangement engage in various listed transactions that would be problematic under, or fatal to the application of, the butterfly rules and will use commercially reasonable efforts to ensure that persons with whom they do not deal at arm’s length also so refrain.

Given uncertainty regarding whether the McCain Parties could access the s. 85.1 election, Newco will jointly elect with them under s. 85(1) regarding their transfer of their special shares of MLF to Newco for Newco common shares.

Neal Armstrong. Summary of May 1, 2025 Circular of Maple Leaf Foods Inc. under Spin-offs and Distributions – Butterfly spin-offs.