A precedent-setting decision in favour of Inter Pipeline Ltd.
Published October 28, 2021
This high-stakes, multifaceted case involved several issues, including novel ones like the use of swaps in a takeover bid.
The decision before the Alberta Securities Commission
The case addressed Brookfield's use of total return swaps in its takeover bid of our client, Inter Pipeline Ltd (IPL). Brookfield challenged some of IPL's defensive tactics, including a break fee negotiated between IPL and Pembina and a second-generation shareholder rights plan.
Our team used technical and legal expertise to advise IPL on this urgent, critical case. Work included:
- Substantial legal research, assembling an evidentiary case with experts in Canada and the US.
- Litigation strategy and an evolving commercial reality while producing expedited legal briefs.
The Alberta Securities Commission ruled in IPL's favour. The Commission dismissed Brookfield's application and found that its use of and disclosure relating to the total return swaps was abusive to IPL shareholders and the capital market and, therefore, contrary to the public interest. This is the:
- Second time a Canadian securities regulator has addressed the use of swaps within the context of a takeover bid after 2016 changes to the Canadian takeover bid regime.
- First time a shareholder rights plan was allowed to remain in effect.
- First decision to find the use of swaps "clearly abusive," thereby engaging the regulator's public interest jurisdiction.
The case decision sets a precedent for securities and corporate law in Canada. It also provides important guidance on what tools are available to Boards in responding to a hostile bid.