Pan American/ MAG Silver
Background
The MAG shareholders have approved an acquisition of MAG by Pan American pursuant to a BC plan of arrangement.
Each MAG shareholder was given the choice of electing to receive either the “Cash Consideration” of US $20.54 per MAG share, or the (Pan American) “Share Consideration” which, in order to avoid the application of s. 85.1, included a nominal cash component of US $0.0001 per MAG share. However, this was subject to a requirement that the aggregate consideration be fixed at US $500,000,000 in cash, with the balance in Pan American shares. In fact, only around 1.71% of the MAG shares elected to receive the Cash Consideration election, so that the balance of the shares, subject to the Share Consideration option will, in fact, receive around US $4.56 per share in cash.
“Eligible Holders” (generally, Canadian taxable investors) receiving the Share Consideration will be permitted to make a joint election under ITA s. 85(1) with Pan American, provided that they submit their duly signed and completed election form to Pan American within 60 days after the effective date of the Arrangement.
MAG
MAG is a British Columbia corporation focused on advanced precious metal projects. It has a 44% minority interest in the Juanacipio mine in Mexico, which is operated by its joint venture partner, Fresnillo plc, which owns the remaining 56% interest. The MAG shares are traded on the TSX and the NYSE American. There are approximately 103.5 million MAG shares outstanding. After giving effect to the acquisition of the MAG shares, the former MAG shareholders would hold approximately 14% of the MAG shares. No major MAG shareholders are disclosed.
Pan American
Pan American is a British Columbia corporation whose shares are listed on the NYSE and the TSX. Its most material mines are located in Mexico, Peru, Brazil, Chile, and Guatemala.
Consideration and Election
MAG shareholders are provided with an election under which they have the option to receive either:
US $20.54 in cash for each MAG share held (the “Cash Consideration”); or
US $0.0001 in cash and 0.7055 of a Pan American share for each MAG share held (the “Share Consideration”);
subject to proration such that the aggregate consideration paid to all shareholders consists of US $500,000,000 in cash, with the remaining consideration paid in Pan American shares.
Pursuant to an August 28, 2025 press release, MAG announced that, based on a preliminary tally:
Shareholders holding 1.71% of the outstanding MAG shares had elected to receive the Cash Consideration;
Shareholders holding 30.55% of such shares had elected to receive the Share Consideration; and
Shareholders holding approximately 67.74% of such shares did not make an election (so that they were deemed to have elected for the Share Consideration). Accordingly, with proration, those receiving Share Consideration would receive Cash Consideration of around US$4.56 per MAG share.
BC Plan of Arrangement
- Each MAG DSU, PSU, and RSU outstanding immediately before the effective time of the Arrangement (the “Effective Time”) will be deemed to be transferred to the Company for a cash payment equal to the Cash Consideration (US$20.54 per MAG share), less applicable withholding taxes.
- Each MAG option outstanding immediately prior to the Effective Time, whether vested or unvested, shall be deemed to be vested and exercisable and will be assigned to the Company in exchange for a cash payment equal to its in-the-money value.
- Each MAG share held by a dissenting shareholder will be deemed to be transferred to Pan American in consideration for a debt claim in an amount determined under the Arrangement.
- Concurrently with the steps below and subject to proration, each MAG share for which the shareholders elected Cash Consideration will be deemed to be transferred to Pan American in consideration for the Cash Consideration.
- Each MAG share for which the shareholders elected Share Consideration, or for which no timely election was made, will be deemed to be transferred to Pan American in exchange for the Share Consideration.
Canadian Tax Considerations
The exchange of the MAG shares for Cash Consideration or Share Consideration will occur on a non-rollover basis, except to the extent that an election under subsection 85(1) of the Income Tax Act is made by an Eligible Holder where there is Share Consideration.
Any s. 85(1) election form must be provided in completed and signed form to Pan American within 60 days after the Effective Date of the Arrangement. Pan American shall, within 30 days of receiving the completed joint election form, return it to an eligible holder.
An Eligible Holder is a person other than a partnership that is a resident of Canada other than a Tax-Exempt Person (i.e., exempt from tax under Part I of the ITA) or a partnership any member of which is a resident of Canada for ITA purposes (other than a Tax-Exempt Person).
US Tax Considerations
The exchange of the MAG shares will not occur on a non-recognition basis. MAG is believed to have been a PFIC for its taxable years prior to 2020.
First Quantum/Lumina
Overview
All the shares of Lumina are to be acquired under a BC plan of arrangement by First Quantum in consideration (subject to dissenter share adjustments) for 9.67M First Quantum shares and $222M cash (with the overall consideration of $440M representing a 28% premium). Lumina shareholders are given a choice of $10.00 per share cash (the "Cash Consideration"), 0.4348 of a First Quantum share plus $0.01 of cash (the "Share Consideration") or $5.00 in cash and 0.2174 of a First Quantum share (the "Cash and Share Consideration"), subject to the overall cash/share proportion being fixed. Taxable Canadian resident shareholders may elect under s. 85. Options are surrendered under the Plan of Arrangement on a cashless basis.
Lumina
Is a TSXV-listed B.C. company with 44M outstanding common shares, owned as to approximately 25.1% by Ross Beaty (also an employee) and his personal holding company, and 2.95M outstanding options. It indirectly holds a copper developmeent project in Argentina. First Quantum puchased 2.5M shares in October 2012.
First Quantum
Is a B.C. company and an international mining company listed on the TSX and trading on the LSE with 591M outstanding common shares and market cap of $13.9B.
U.S. Securities law
The First Quantum shares will be issued in reliance on the s. 3(a)(10) exemption.
Break fee
$16.3M in some circumstances.
Plan of Arrangement
- Lumina shares of dissenters will be transferred to First Quantum, with an entitlement to be paid their fair value
- Each optionholder shall transfer to Lumina each Lumina Option held and in consideration for such transfer (and not pursuant to the Stock Option Plan), Lumina shall issue a fraction of a Lumina Share whose numerator equals the difference between 10.00 and the exercise price for such option and whose denominator is 10.00
- Each outstanding Lumina share will be transferred to First Quantum for the Cash Consideration, the Share Consideration or the Cash and Share Consideration, as elected but subject to pro-ration
Canadian tax consequences
In the absence of an s. 85 election, the exchange will occur on a non-rollover basis. The deadline for providing an. s. 85(1) or (2) election form to First Quantum is 90 days after the Effective Date of the Plan of Arrangement – with First Quantum to return within 90 days. "Eligible Holders" (not defined) for purposes of being permitted to make the election appear to be non-exempt Canadian residents and partnerships with any such member. Capital gains/loss treatment will apply to dissenters except re interest. Non-residents who do not hold their shares as taxable Canadian property will not be subject to tax on disposing of their shares.
U.S. tax consequences
Exchange. Depending on whether and how First Quantum integrates Lumina , the IRS could assert that the Arrangement constituted a reorganization for Code purposes. Subject to this point and subject to the PFIC point below, on the exchange of a Lumina share for First Quantum shares and/or cash, the U.S. Holder will recognize capital gain or loss in an amount equal to the difference between the U.S. Holder's adjusted basis in the share and the fair market value of such consideration.
PFIC rules
Lumina believes that it is currently a FPIC and has been a PFIC since 2008. First Quantum is believed not to be a PIC. On this basis and subject to the exceptions below, the amount of U.S. federal income tax on gain recognized by a U.S. Holder upon the consummation of the exchange pursuant to the Arrangement will be increased by an interest charge to compensate for tax deferral, and the amount of income tax, before the imposition of the interest charge, will be calculated as if such gain was earned ratably over the period the U.S. Holder held its Lumina Shares and was subject to U.S. federal income tax at the highest rate applicable to ordinary income for the relevant taxable years, regardless of the tax rate otherwise applicable to the U.S. Holder. However, if the U.S. Holder has made a timely and proper qualified electing fund ("QEF") election or a timely "mark-to-market" election, then the PFIC rules described above will not apply.
Loblaw/Shoppers
Overview
All the shares of TSX-listed Shoppers Drug Mart are to be acquired under a CBCA plan of arrangement by Loblaw, which is a CBCA company listed on the TSX, in consideration (subject to dissenter share adjustments) for 119.9M Loblaw shares and $6.67B cash (with the overall consideration of $12.4B representing a 29.4% premium). Shoppers Drug Mart shareholders are given a choice of $61.54 per share cash (the "Cash Consideration"), or 1.29417 of a Loblaw share plus $0.01 of cash (the "Share Consideration"), subject to the overall cash/share proportion being fixed. Following the Arrangement, former Shoppers Drug Mart shareholders, George Weston Limited and the current public Loblaw shareholders will hold 29%, 46% (reduced from 63%) and 25%, respectively, of the common shares of Loblaw.
U.S. Securities law
The Loblaw shares will be issued in reliance on the s. 3(a)(10) exemption.
Break fee
$300M in some circumstances.
Plan of Arrangement
Under the Plan of Arrangement:
• the Shoppers Drug Mart shareholder rights plan will be cancelled
• Shoppers Drug Mart shares of dissenters will be transferred to Loblaw, with an entitlement to be paid their fair value
• vested RSUs will be surrendered for cash payments; and other RSUs or DSUs will be continued so as to apply to Loblaw shares, subject to adjustments for the exchange ratio
• all outstanding options to acquire Shoppers Drug Mart shares will be exchanged for replacement options on Loblaw shares, with adjustments for the exchange ratio in accordance with s. 7(1.4)(c)
• each outstanding Shoppers Drug Mart share will be transferred to Loblaw for the Cash Consideration or Share Consideration, subject to pro-ration
Canadian tax consequences
In the absence of an s. 85 election, the exchange will occur on a non-rollover basis (with ACB averaging not occurring re Loblaw shares acquired before 1972). The deadline for providing an. s. 85(1) or (2) election form to Loblaw is 90 days after the Effective Date of the plan of arrangement – with Loblaw to return within 90 days. "Eligible Shareholders" for purposes of being permitted to make the election are non-exempt Canadian residents and partnerships with any such member. Capital gains/loss treatment will apply to dissenters except re interest. Non-residents who do not hold their shares as taxable Canadian property will not be subject to tax on disposing of their shares.