Resolute wins again
In what can only be described as a travesty, Resolute prevailed in their quest to cease trade the warrants. They really are that dense that they could not figure out that the warrant deal was needed to counter the hard lock up which was designed to prevent competing offers. Only in Quebec could they come up with such a ridiculous judgment. The winner is the control group offering the lowest price. A mockery of securities rules and a new precedent courtesy of the Quebec court of injustice.
Perhaps a full-scale investigation is warranted by regulators to review the case and the facts. Lets hope they appeal it to the supreme court who may apply common sense. Not sure what Fibrek or Mercer will do now but it appears they need some help from regulators. Regulators need to act on behalf of minority shareholders who are left in the lurch.
NEWS >>>>
The Quebec Court of Appeal has sided with Resolute Forest Products by overturning a lower court ruling that had helped its rival in its attempt to acquire control of Fibrek Inc.
The three-judge panel decided that the Court of Quebec erred in overturning a ruling by a provincial agency that had ceased trading of special warrants that Fibrek made available to Mercer International.
Mercer (TSX:MRI.U) came forward with a friendly offer to acquire Fibrek, which is fending off a hostile takeover attempt by Resolute, the paper, pulp and lumber producer formerly known as AbitibiBowater.
The appellate court said the lower court should have "exercised the highest degree of deference" to the independent and specialized judgement of the Bureau de decision et de revision.
The appeals court said the lower court could only intervene if the bureau's decision was not "justified, transparent or intelligible," or not justified by the facts and the law.
Resolute (TSX:ABH) is aiming to neutralize 32.3 million special warrants that would give Mercer the right to buy Fibrek shares and make it more difficult for Resolute to increase its share of Fibrek.
The bureau's analysis found that the warrants were only designed as a defensive measure to dilute the shares of those supporting Resolute's offer.
"Its decision cannot be qualified as unreasonable in the circumstances," the Quebec Court of Appeal ruled.
Opponents of the Resolute offer criticized the initial bureau decision, saying it penalized minority shareholders by preventing an auction for Fibrek (TSX:FBK).
Resolute has already locked up 46.4 per cent of Fibrek shares.
It extended its $1 per share offer, which values Fibrek at $130 million, until April 2 and reduced the threshold for tendered shares to 50.01 per cent from two-thirds.
"We're pleased with the decision. The judgment and the decision from the bureau speaks for itself," Resolute spokesman Seth Kursman said in an interview.
The court's ruling could be appealed to the Supreme Court of Canada, which would likely further delay the transaction.
Quebec's securities regulator, l'Autorite des marches financiers, has backed the $1.30 per share offer from Vancouver-based Mercer, which values Fibrek at $170 million.
Fibrek, which had urged its shareholders to not take any action until the Court of Appeal rules, couldn't be reached for comment Tuesday. Officials for Vancouver-based Mercer were also unavailable.
The largest shareholder of both Fibrek and Resolute is Fairfax Financial Holdings (TSX:FFH), a Toronto-based company that primarily invests in the property and casualty and reinsurance segments of the insurance industry.
Fibrek said it has been notified by Fairfax that it has applied to the Ontario Securities Commission (OSC) to set aside the decision of the Toronto Stock Exchange to approve the issuance of the special warrants pending a hearing.
Mercer would subsequently hold 19.9 per cent of Fibrek shares. Fairfax, Pabrai Investment Funds and Oakmont Capital Inc., which have entered into lock-up agreements with Resolute, would collectively hold about 36.6 per cent.