TSX changes rules for shareholder votes in takeovers when shares are issued

TORONTO - The Toronto Stock Exchange (TSX:X) said Friday it has received approval for changes to its rules to require securityholder approval in takeover deals that result in a company increasing its share base by 25 per cent or more.

TORONTO - The Toronto Stock Exchange (TSX:X) said Friday it has received approval for changes to its rules to require securityholder approval in takeover deals that result in a company increasing its share base by 25 per cent or more.

The rule change approved by the Ontario Securities Commission came after an extensive public consultation process, the exchange said.

The new rules will be effective in 60 days on Nov. 24.

"We are focused on expanding the size and reach of Canada's capital markets, and are putting in place the right measures to maintain the confidence of investors," Kevan Cowan, president of TSX Markets and group head of equities, said in a statement.

The change comes after shareholders killed a takeover of Lundin Mining by HudBay Minerals Inc. (TSX:HBM) earlier this year after concerns the stock-swap deal would dilute the value of their shares.

The Ontario Securities Commission ruled that a vote had to be held in that deal after several of the company's shareholders - including Jaguar Financial Inc. (TSX:JFI), SRM Global Master Fund LP, the Ontario Teachers' Pension Plan and Corriente Master Fund - protested being left out of the deal.

The three-member commission panel cited "serious concerns as to the appropriateness of HudBay's governance practices and the fair treatment of HudBay shareholders."

The provincial regulator said at the time that the transaction that would more than double the number of outstanding HudBay shares without a vote by its stockholders would undermine "the quality of the marketplace."

Though Lundin shareholders voted to approve the deal, HudBay shareholders did not.

Major HudBay shareholders later forced out the company's former CEO, who had planned the Lundin deal, and made changes to the board.

The Ontario Teachers' Pension Plan, a vocal supporter of the TSX rule change, issued a statement lauding Friday's announcement.

"We are very pleased with this decision," said Wayne Kozun, the plan's senior vice-president, public equities. "Shareholders will now have the right to a meaningful say on highly dilutive deals."

"With this rule change, the TSX is aligning its governance standards with that of other major international exchanges and improving shareholder democracy, making Canadian capital markets more attractive," Kozun said, adding that it "puts Canada's leading exchange on par with New York and London on this issue."