exv1w1
Exhibit 1.1
This document is important and
requires your immediate attention. If you are in doubt as to how
to deal with it, you should consult your investment dealer,
broker, lawyer or other professional advisor.
This Offer has not been approved
by any securities regulatory authority nor has any securities
regulatory authority passed upon the fairness or merits of the
Offer, upon the securities offered pursuant to the Offer or upon
the adequacy of the information contained in this document. Any
representation to the contrary is an offence.
Information has been
incorporated by reference in this Circular from documents filed
with securities commissions or similar authorities in Canada.
Copies of the
documents incorporated herein by reference may be obtained on
request without charge from the Executive Vice-President,
General Counsel and Secretary, The Bank of Nova Scotia, Scotia
Plaza, 44 King Street West, Toronto, Ontario M5H 1H1 or by
telephone:
(416) 866-3462,
and are also available electronically on SEDAR at
www.sedar.com.
December 15, 2010
THE BANK OF NOVA
SCOTIA
OFFER TO PURCHASE
all of the issued and
outstanding Common Shares
and
all of the issued and
outstanding Special Shares, Series C and Special Shares,
Series D
and
all of the issued and
outstanding First Preference Shares, Series X
of
DUNDEEWEALTH INC.
on the basis of 0.2497 of a
Bank Common Share plus
either 0.2 of a 3.70% Bank
Preferred Share or $5.00 in cash for each
Common Share, Special Share,
Series C or Special Share, Series D of DundeeWealth
and
on the basis of 0.2081 of a
Bank Common Share plus
either 0.1667 of a 3.70% Bank
Preferred Share or $4.17 in cash
for each First Preference
Share, Series X of DundeeWealth
The Bank of Nova Scotia (the “Bank”) hereby
offers (the “Offer”) to purchase, upon the
terms and subject to the conditions described herein, all of the
issued and outstanding common shares (the “DW Common
Shares”), Special Shares, Series C and Special
Shares, Series D (together, the “Special
Shares”) and First Preference Shares, Series X
(the “Series X Shares”, and together with
the DW Common Shares and the Special Shares, the
“Shares”) of DundeeWealth Inc.
(“DundeeWealth”), including the Shares that may
become issued and outstanding after the date of the Offer and
prior to the Expiry Time (as defined below) upon the exercise of
options or any other rights to acquire Shares (collectively, the
“Other Securities”) of DundeeWealth, other than
Shares held by the Bank. Under the Offer, each holder of DW
Common Shares and Special Shares will be entitled to receive
0.2497 of a common share of the Bank (the “Bank Common
Share”) and, at the election of the shareholder, either
$5.00 in cash or 0.2 of a $25.00 principal amount 3.70% five
year rate reset preferred share series 32 of the Bank (the
“Bank Preferred Share”, and together with the
Bank Common Share, the “Bank Shares”) for each
DW Common Share or Special Share held, and each holder of
Series X Shares will be entitled to receive 0.2081 of a
Bank Common Share and, at the election of the shareholder,
either $4.17 in cash or 0.1667 of a Bank Preferred Share for
each Series X Share held. A holder of Shares
(“Shareholder”) who does not make an election
will be deemed to have elected to receive Bank Preferred Shares.
In connection with the Offer, DundeeWealth will declare a
special cash distribution in the amount of $2.00 per share
payable to all holders of Shares and Special Shares,
Series F of DundeeWealth (“Series F
Shares”) of record on the Business Day immediately
prior to the day on which the Bank first takes up Shares
tendered to the Offer. DundeeWealth will also consummate the
distribution to its shareholders of its capital markets business
presently conducted through Dundee Securities Corporation and
operating under the Dundee Capital Markets brand, and certain
other assets. Having regard to the Valuation and Fairness
Opinion, the value of the spinout consideration is expected to
be approximately $0.50 per Share. Although DundeeWealth
will carry out these distributions in connection with the Offer,
they do not form part of the consideration payable by the Bank
pursuant to the Offer.
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Shareholders and holders of Series F Shares will receive a
cash dividend in the amount of $0.05 per share declared by the
board of directors of DundeeWealth (the “DW Board of
Directors”) on November 4, 2010 and payable on
January 4, 2011 to the holders of record as at
December 21, 2010. A further cash dividend in the amount of
$0.05 per share will be paid on February 1, 2011 to the
holders of record as at January 18, 2011.
The DW Board of Directors (with the exception of the
Interested Directors, as defined herein), upon receiving the
recommendation of an independent committee (the “DW Special
Committee”) of the DW Board of Directors and following
consultation with its financial and legal advisors, has
unanimously determined that the consideration to be received by
the holders of the DW Common Shares and Special Shares in
connection with the Offer is fair from a financial point of view
to the holders of DW Common Shares and Special Shares
(other than the Locked-Up Shareholders) and, accordingly, has
unanimously recommended that Shareholders ACCEPT the Offer and
TENDER their Shares to the Offer.
The Bank and DundeeWealth entered into a support agreement (the
“Support Agreement”) dated November 22,
2010 pursuant to which DundeeWealth has agreed to support the
Offer and not to solicit or agree to any competing acquisition
proposals. See Section 4 of the Circular, “Agreements
Relating to the Offer — Support Agreement”.
The Bank entered into a
lock-up
agreement dated November 22, 2010 (the
“Lock-Up
Agreement”) with Dundee Corporation
(“DC”) and its wholly-owned subsidiary Dundee
Capital Corporation (“DCC”), Ned Goodman and
David Goodman (together, the
“Locked-Up
Shareholders”), pursuant to which they have irrevocably
agreed to tender their Shares to the Offer, subject, in the case
of DC, to obtaining the approval of its shareholders at a
special meeting to be held on January 6, 2011. The DC board
of directors has unanimously recommended that DC shareholders
approve the sale by DC of its Shares pursuant to the Offer. As
at November 30, 2010, DC and DCC beneficially owned an
aggregate of 69,940,415 DW Common Shares and 5,453,668
Series X Shares, which represents an aggregate equity
interest in DundeeWealth of approximately 48.4% and an aggregate
voting interest of 60.5%. Pursuant to the
Lock-Up
Agreement, Ned Goodman and David Goodman have agreed to vote
their shares of DC in favour of the sale of the Shares held by
DC to the Bank. See Section 4 of the Circular,
“Agreements Relating to the Offer —
Lock-Up
Agreement”.
THE OFFER WILL BE OPEN FOR ACCEPTANCE UNTIL 12:01 A.M.
(TORONTO TIME) ON JANUARY 20, 2011, UNLESS THE OFFER IS EXTENDED
(THE “EXPIRY TIME”) OR WITHDRAWN BY THE BANK.
The Offer is subject to certain conditions described herein,
including, among other things: (a) DC obtaining the
requisite shareholder approval for the sale of its Shares
pursuant to the Offer; (b) the declaration by DundeeWealth
of the special $2.00 cash distribution; and (c) the
consummation by DundeeWealth of the distribution to its
shareholders of its capital markets business presently conducted
through Dundee Securities Corporation and operating under the
Dundee Capital Markets brand or an alternative transaction
satisfactory to the Bank, acting reasonably. See Section 4
of the Offer, “Conditions of the Offer” for more
information on these conditions and the other conditions of the
Offer. The Offer does not include a minimum condition with
respect to the number of Shares tendered other than the Shares
held by the
Locked-Up
Shareholders.
The purpose of the Offer is to enable the Bank to acquire all
outstanding Shares. Provided that the
Locked-Up
Shareholders tender their Shares to the Offer as required by the
terms of the
Lock-Up
Agreement, the Bank will have a sufficient number of Shares to
acquire all of the Shares not tendered to the Offer pursuant to
a Subsequent Acquisition Transaction (as defined herein). See
Section 22 of the Circular, “Acquisition of
Shares Not Deposited Under the Offer”.
The DW Common Shares are listed and posted for trading on the
Toronto Stock Exchange (the “TSX”) under the
symbol “DW”. The closing price of the DW Common Shares
on the TSX on November 19, 2010, the last trading day prior
to the announcement of the Bank’s intention to make the
Offer, was C$19.47.
As of December 10, 2010, the Bank beneficially owned an
aggregate 1,223,500 DW Common Shares and 27,000,000
Series F Shares, which may be converted at any time into DW
Common Shares on a one-for-one basis. Following conversion of
the Series F Shares, the Bank would have an 18% voting
interest in DundeeWealth. See Section 10 of the Circular,
“Beneficial Ownership of and Trading in
Securities — Beneficial Ownership”.
The Bank Common Shares are listed and posted for trading on the
TSX and the New York Stock Exchange (the
“NYSE”) under the symbol “BNS”. The
closing prices of the Bank Common Shares on the TSX and the NYSE
on December 10, 2010 were C$56.00 and US$55.56 (C$56.08,
converted at the exchange rate of US$1.00 = C$1.0093),
respectively. The TSX has conditionally approved the listing of
the Bank Common Shares and Bank Preferred Shares to be issued to
Shareholders in connection with the Offer. In addition, the Bank
plans to file a supplemental listing application to list those
additional Bank Common Shares on the NYSE. The Bank Preferred
Shares will be listed and posted for trading on the TSX under
the symbol “BNS.PR.Z”. These listings are subject to
the Bank fulfilling all of the listing requirements of the TSX
and the NYSE.
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The Offer is made only for Shares and is not made for any Other
Securities. Holders of Other Securities who wish to participate
in the Offer should exercise the rights under such Other
Securities to acquire Shares and tender the underlying Shares in
response to the Offer. Any such exercise must be made
sufficiently in advance of the Expiry Time to ensure that Shares
will be available for tender at or prior to the Expiry Time or
in sufficient time to comply with the procedures referred to in
Section 3 of the Offer, “Manner of Acceptance”.
Shareholders who wish to accept the Offer and tender their
Shares must properly complete and execute the accompanying
Letter of Transmittal (printed on yellow paper) and tender it or
a manually signed facsimile thereof, together with the
certificate(s) representing their Shares and all other documents
required by the Letter of Transmittal at or prior to the Expiry
Time, at any one of the offices of the Depositary in accordance
with the instructions in the Letter of Transmittal or request
their broker, investment dealer, commercial bank, trust company
or other nominee to effect the transaction on their behalf.
Alternatively, Shareholders may accept the Offer by:
(1) following the procedures for book-entry transfer of
Shares described in Section 3 of the Offer, “Manner of
Acceptance — Acceptance by Book-Entry Transfer”;
or (2) following the procedures for guaranteed delivery
described in Section 3 of the Offer, “Manner of
Acceptance — Procedure for Guaranteed Delivery”,
using the accompanying Notice of Guaranteed Delivery (printed on
green paper) or a manually signed facsimile thereof, where the
certificate(s) representing the Shares are not immediately
available, or if the certificate(s) and all of the required
documents cannot be provided to the Depositary before the Expiry
Time. Shareholders whose Shares are registered in the name of a
nominee should consult their broker, investment dealer,
commercial bank, trust company or other nominee for assistance
in tendering their Shares. Shareholders will not be required to
pay any fee or commission if they accept the Offer by tendering
their Shares directly with the Depositary.
Questions and requests for assistance may be directed to the
Depositary or the Information Agent for the Offer. Contact
details for such persons may be found on the back page of this
document. Additional copies of this document and related
materials may be obtained without charge on request from the
Depositary or the Information Agent at their respective offices
specified on the back page of this document. Copies of this
document and related materials may also be found on SEDAR at
www.sedar.com.
An investment in the Bank Shares offered pursuant to this
Offer involves certain risks. For a discussion of risk factors
you should consider in evaluating the Offer, see “Risk
Factors” in Annex A hereto.
No person has been authorized to give any information or make
any representation other than those contained in this document,
and, if given or made, that information or representation must
not be relied upon as having been authorized by the Bank.
This document does not constitute an offer or a solicitation
to any person in any jurisdiction in which such offer or
solicitation is unlawful. The Offer is not being made to, nor
will tenders be accepted from or on behalf of, Shareholders in
any jurisdiction in which the making or acceptance of the Offer
would not be in compliance with the laws of such jurisdiction.
However, the Bank may, in its sole discretion, take such action
as it may deem necessary to extend the Offer to Shareholders in
any such jurisdiction.
NOTICE TO
SHAREHOLDERS IN THE UNITED STATES
The Offer has not been approved or disapproved by any United
States securities regulatory authority, nor has any such
authority passed upon the accuracy or adequacy of the Offer or
the Circular. The Offer is made for the securities of a Canadian
issuer. The Offer is subject to applicable disclosure
requirements in Canada. Shareholders should be aware that such
requirements are different from those in the United States. The
historical information of DundeeWealth and the Bank which is
included or incorporated by reference herein is prepared in
Canadian dollars and has been prepared in accordance with
Canadian GAAP, which differ from United States generally
accepted accounting principles in certain material respects, and
is subject to Canadian auditing and auditor independence
standards and, thus, may not be comparable to financial
information presented by U.S. companies.
The enforcement by Shareholders of civil liabilities under
United States federal securities laws may be affected adversely
by the fact that each of DundeeWealth and the Bank are
incorporated or otherwise established and located outside the
United States, that most of their respective officers and
directors are non-residents of the United States, that all of
the experts named in the Circular are non-residents of the
United States, and that all or a substantial portion of the
assets of DundeeWealth and the Bank and the persons referred to
above are located outside the United States. Shareholders may
not be able to sue DundeeWealth or the Bank, or their respective
officers or directors, as applicable, in a foreign court for
violations of United States federal securities law. It may be
difficult to compel a foreign issuer and its affiliates to
subject themselves to a United States court’s jurisdiction.
Shareholders should be aware that the Bank or its affiliates,
directly or indirectly, may bid for or make purchases of Shares,
or of related securities of DundeeWealth, during the period of
the Offer, as permitted by applicable Canadian Laws or
provincial Laws or regulations. See Section 12 of the
Offer, “Market Purchases”.
This document does not address any United States federal
income tax consequences of the Offer to Shareholders in the
United States. Shareholders in the United States should be
aware that a disposition of Shares may have tax consequences
both in the United States and in Canada, which may not be
described herein. Accordingly, Shareholders in the United States
should consult their own tax advisors with respect to their
particular circumstances and tax considerations applicable to
them.
The securities to be delivered in connection with the Offer
have not been approved or disapproved by the SEC or the
securities regulatory authorities of any state nor has the SEC
or the securities regulatory authorities of any state passed
upon the adequacy or accuracy of the information contained in
the Offer or the Circular. Any representation to the contrary is
unlawful.
CURRENCY
All references to “$” or “C$” mean Canadian
dollars. References to “US$” mean United States
dollars.
i
FORWARD
LOOKING STATEMENTS
The Offer and the Circular includes or incorporates by reference
certain statements that are “forward looking
statements”. All such statements are made pursuant to the
“safe harbour” provisions of the United States
Private Securities Litigation Reform Act of 1995 and any
applicable Canadian securities legislation. Forward looking
statements may include comments with respect to the Bank’s
objectives, strategies to achieve those objectives, expected
financial results (including those in the area of risk
management), and the outlook for the Bank’s businesses and
for the Canadian, United States and global economies. Such
statements are typically identified by words or phrases such as
“believe,” “expect,” “anticipate,”
“intent,” “estimate,” “plan,”
“may increase,” “may fluctuate,” and similar
expressions of future or conditional verbs, such as
“will,” “should,” “would,” and
“could.”
By their very nature, forward looking statements involve
numerous assumptions, inherent risks and uncertainties, both
general and specific, and the risk that predictions and other
forward looking statements will not prove to be accurate. Do not
unduly rely on forward looking statements, as a number of
important factors, many of which are beyond the Bank’s
control, could cause actual results to differ materially from
the estimates and intentions expressed in such forward looking
statements. These factors include, but are not limited to: the
Bank’s ability to complete the acquisition of DundeeWealth
in accordance with the terms and conditions of the Offer; the
accuracy of the Bank’s assessment of the effects of the
successful completion of the Offer; the economic and financial
conditions in Canada, the United States and globally;
fluctuations in interest rates and currency values; liquidity;
significant market volatility and interruptions; the failure of
third parties to comply with their obligations to the Bank and
its affiliates; the effect of changes in monetary policy;
legislative and regulatory developments in Canada and elsewhere,
including changes in tax laws; the effect of changes to the
Bank’s credit ratings; amendments to, and interpretations
of, risk-based capital guidelines and reporting instructions and
liquidity regulatory guidance; operational and reputational
risks; the risk that the Bank’s risk management models may
not take into account all relevant factors; the accuracy and
completeness of information the Bank receives on customers and
counterparties; the timely development and introduction of new
products and services in receptive markets; the Bank’s
ability to expand existing distribution channels and to develop
and realize revenues from new distribution channels; the
Bank’s ability to complete and integrate acquisitions and
its other growth strategies; changes in accounting policies and
methods the Bank uses to report its financial condition and the
results of its operations, including uncertainties associated
with critical accounting assumptions and estimates; the effect
of applying future accounting changes; global capital markets
activity; the Bank’s ability to attract and retain key
executives; reliance on third parties to provide components of
the Bank’s business infrastructure; unexpected changes in
consumer spending and saving habits; technological developments;
fraud by internal or external parties, including the use of new
technologies in unprecedented ways to defraud the Bank or its
customers; consolidation in the Canadian financial services
sector; competition, both from new entrants and established
competitors; judicial and regulatory proceedings; acts of God,
such as earthquakes and hurricanes; the possible impact of
international conflicts and other developments, including
terrorist acts and war on terrorism; the effects of disease or
illness on local, national or international economies;
disruptions to public infrastructure, including transportation,
communication, power and water; and the Bank’s anticipation
of and success in managing the risks implied by the foregoing. A
substantial amount of the Bank’s business involves making
loans or otherwise committing resources to specific companies,
industries or countries. Unforeseen events affecting such
borrowers, industries or countries could have a material adverse
effect on the Bank’s financial results, businesses,
financial condition or liquidity. These and other factors may
cause the Bank’s actual performance to differ materially
from that contemplated by forward looking statements. For more
information, see the discussion in the Bank’s
management’s discussion and analysis of financial condition
and results of operations for the year ended October 31,
2010, which is incorporated by reference herein and which
outlines in detail certain key factors that may affect the
Bank’s future results.
The preceding list of important factors is not exhaustive. When
relying on forward looking statements to make decisions with
respect to the Offer, investors and others should carefully
consider the preceding factors, other uncertainties and
potential events. The Bank does not undertake to update any
forward looking statements, whether written or oral, that may be
made from time to time by or on its behalf.
ii
TABLE OF
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iii
SUMMARY
The following is a summary only and is qualified in its
entirety by the detailed provisions contained in the Offer and
Circular. You should read the Offer and Circular in their
entirety. Certain capitalized and other terms used in this
summary are defined in the Glossary.
The
Offer
The Bank hereby offers to purchase, upon the terms and subject
to the conditions of the Offer, any and all of the issued and
outstanding Shares (including any Shares which may become issued
and outstanding after the date of the Offer and prior to the
Expiry Time upon the exercise of the rights under any Other
Securities), other than Shares held by the Bank, on the basis of:
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(a)
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for each Share, other than a Series X Share, held:
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(i)
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0.2497 of one Bank Common Share; and
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(ii)
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at the election of the Shareholder, either 0.2 of one Bank
Preferred Share or $5.00 in cash; and
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(b)
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for each Series X Share held:
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(i)
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0.2081 of one Bank Common Share; and
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(ii)
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at the election of the Shareholder, either 0.1667 of one Bank
Preferred Share or $4.17 in cash.
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A Shareholder who does not make an election pursuant to (a)(ii)
or (b)(ii) above will be deemed to have elected to receive Bank
Preferred Shares.
In connection with the Offer, DundeeWealth will declare a
special cash distribution in the amount of $2.00 per DW Common
Share (and a comparable amount per share, in the case of other
Shares and Series F Shares, having regard to the ratio at
which such shares are convertible into DW Common Shares) payable
to all holders of Shares and Series F Shares of record on
the Business Day immediately prior to the day on which the Bank
takes up Shares tendered to the Offer. DundeeWealth will also
consummate the distribution to its shareholders of its capital
markets business presently conducted through Dundee Securities
Corporation and operating under the Dundee Capital Markets
brand, and certain other assets. Although DundeeWealth will
carry out these distributions in connection with the Offer, they
do not form part of the consideration payable by the Bank
pursuant to the Offer.
The closing price of the DW Common Shares on the TSX on
November 19, 2010, the last trading day prior to the
announcement of the Bank’s intention to make the Offer, was
$19.47.
The closing prices of the Bank Common Shares on the TSX and the
NYSE on December 10, 2010 were C$56.00 and US$55.56
(C$56.08, converted at the exchange rate of US$1.00 = C$1.0093),
respectively.
The
Bank
The Bank is one of North America’s premier financial
institutions and Canada’s most international bank. Through
its team of more than 70,000 employees, the Bank and its
affiliates offer a broad range of products and services,
including retail, commercial, corporate and investment banking
to more than 18.6 million customers in more than 50
countries around the world. The head office of the Bank is
located at 1709 Hollis Street, Halifax, Nova Scotia, B3J 3B7 and
its executive offices are at Scotia Plaza, 44 King Street West,
Toronto, Ontario, M5H 1H1. See Section 1 of the Circular,
“The Bank”.
The Bank beneficially owns 1,223,500 DW Common Shares and
27,000,000 Series F Shares, which may be converted any time
into DW Common Shares on a
one-for-one
basis. Following conversion of the Series F Shares into
DW Common Shares, the Bank would have an 18% voting
interest in DundeeWealth. See Section 10 of the Circular,
“Beneficial Ownership of and Trading in
Securities — Beneficial Ownership”.
DundeeWealth
DundeeWealth is a Canadian wealth management company which
provides investment management, securities brokerage, financial
planning and investment advisory services to advisors,
institutions, corporations and foundations.
1
DundeeWealth has three main businesses: (i) investment
management, which consists of creating, managing, packaging and
administering investment portfolios and providing internal and
third-party management and advisory services;
(ii) financial advisory, which consists of a network of
full service, independent financial planning and investment
professionals, who provide a wide range of wealth management
products and services to individuals and businesses across
Canada; and (iii) capital markets, comprised of
institutional sales and trading, investment banking and
investment research. DundeeWealth has approximately
$80.6 billion in fee earning assets.
DundeeWealth is incorporated under the OBCA. DundeeWealth’s
registered and head office is located at Dundee Place, 1
Adelaide Street East, 28th Floor, Toronto, Ontario, M5C
2V9. See Section 2 of the Circular,
“DundeeWealth”.
Purpose
of the Offer
The purpose of the Offer is to enable the Bank to acquire all
outstanding Shares. Provided that the
Locked-Up
Shareholders tender their Shares to the Offer as required by the
terms of the
Lock-Up
Agreement, the Bank will have a sufficient number of Shares to
acquire all of the Shares not tendered to the Offer pursuant to
a Subsequent Acquisition Transaction. See Section 7 of the
Circular, “Purpose of the Offer and Plans for
DundeeWealth”.
Conditions
of the Offer
The Offer is subject to certain conditions described herein,
including, among other things: (a) DC obtaining the
requisite shareholder approval for the sale of its Shares
pursuant to the Offer; (b) the declaration by DundeeWealth
of the special $2.00 cash distribution; and (c) the
consummation by DundeeWealth of the distribution of its capital
markets business presently conducted through Dundee Securities
Corporation and operating under the Dundee Capital Markets brand
or an alternative transaction satisfactory to the Bank, acting
reasonably. See Section 4 of the Offer, “Conditions of
the Offer” for more information on these conditions and the
other conditions of the Offer. The Offer does not include a
minimum condition with respect to the number of Shares tendered
other than the Shares held by the
Locked-Up
Shareholders.
Time for
Acceptance
The Offer is open for acceptance until the Expiry Time, being
12:01 a.m. (Toronto time) on January 20, 2011 unless
the Offer is withdrawn or extended by the Bank. The Expiry Time
may be extended at the Bank’s sole discretion. See
Section 5 of the Offer, “Extension and Variation of
the Offer”.
Manner of
Acceptance
Shareholders who wish to accept the Offer must properly complete
and execute the accompanying Letter of Transmittal and tender
it, or a manually signed facsimile thereof, together with
certificate(s) representing their Shares and any other documents
required by the Letter of Transmittal, at or prior to the Expiry
Time, at any one of the offices of the Depositary specified in
the Letter of Transmittal. Detailed rules and instructions are
contained in the Letter of Transmittal. Alternatively,
Shareholders may follow the procedure for guaranteed delivery
described in Section 3 of the Offer, “Manner of
Acceptance — Procedure for Guaranteed Delivery”
using the accompanying Notice of Guaranteed Delivery.
Shareholders whose Shares are held in an account with an
investment dealer, stockbroker, bank, trust company or other
nominee should contact their representative if they wish to
accept the Offer.
Take Up
and Payment for Deposited Shares
Upon the terms and subject to the conditions of the Offer
(including but not limited to the conditions specified in
Section 4 of the Offer, “Conditions of the
Offer”), the Bank will take up Shares validly tendered to
the Offer and not withdrawn pursuant to Section 8 of the
Offer, “Right to Withdraw Deposited Shares”, not later
than ten (10) calendar days after the Expiry Time and will
pay for the Shares taken up as soon as possible, but in any
event not later than three (3) Business Days after taking
up the Shares. Any Shares tendered to the Offer after the first
date on which Shares have been taken up by the Bank will be
taken up and paid for not later than ten (10) days after
such tender. See Section 6 of the Offer, “Take Up and
Payment for Deposited Shares”.
2
Withdrawal
of Deposited Shares
Except as otherwise provided in Section 8 of the Offer,
“Right to Withdraw Deposited Shares”, all deposits of
Shares are irrevocable.
Acquisitions
of Shares not Deposited Under the Offer
If within 120 days after the date of the Offer, the Offer
is accepted by Shareholders who in the aggregate hold not less
than 90% of the issued and outstanding Shares of any class as at
the Expiry Time, other than Shares held at the date of the Offer
by or on behalf of the Bank or an affiliate or associate (as
those terms are defined in the OBCA) of the Bank, and the Bank
acquires, or is bound to take up and pay for, such Shares
tendered to the Offer, the Bank will acquire all Shares of that
class (including DW Common Shares that may be issued as a result
of the exercise the rights under any outstanding Other
Securities) that are held by those persons who did not accept
the Offer pursuant to the provisions of Part XV of the OBCA
on the same terms and for the same consideration that is payable
under the Offer.
If the Bank acquires less than 90% of the Shares of any class
under the Offer or the right of Compulsory Acquisition described
above is not available for any reason, the Bank will acquire the
remaining Shares not tendered to the Offer pursuant to a
Subsequent Acquisition Transaction under which the consideration
payable to Shareholders will be equal in amount to and in the
same form as that payable under the Offer.
Shareholders whose Shares are acquired pursuant to a Compulsory
Acquisition or a Subsequent Acquisition Transaction will not
receive the $2.00 special dividend to be declared by
DundeeWealth or the interest in DCM to be distributed by
DundeeWealth in connection with the Offer unless they are
Shareholders of record as of the record date for such
distributions.
See Section 22 of the Circular, “Acquisition of Shares
not Deposited Under the Offer”.
Recommendation
of the DW Board of Directors
The DW Board of Directors (with the exception of the Interested
Directors), upon receiving the recommendation of the DW Special
Committee and following consultation with its financial and
legal advisors, has unanimously determined that the
consideration to be received by the holders of the DW Common
Shares and Special Shares in connection with the Offer is fair
from a financial point of view to the holders of DW Common
Shares and Special Shares (other than the Locked-Up
Shareholders) and, accordingly, has unanimously recommended that
Shareholders accept the Offer. For further information on the
deliberations of the DW Board of Directors and related
matters, see the Directors’ Circular accompanying the
Offer. For a copy of the Valuation and Fairness Opinion prepared
by the financial advisors to the DW Special Committee, see
Annex B to the Circular.
Support
Agreement
On November 22, 2010, the Bank agreed to make, and
DundeeWealth agreed to support, the Offer, subject to the
conditions set forth in the Support Agreement. Under the terms
of the Support Agreement, DundeeWealth has agreed to take all
commercially reasonable action to support the Offer and not to
solicit or agree to any Acquisition Proposal. The DW Board of
Directors retains the right to change its recommendation in the
event of a Superior Proposal, but in that event DundeeWealth
will remain bound by its obligations under the Support Agreement
and will not be entitled to enter into an agreement for, or
otherwise support, the Superior Proposal. See Section 4 of
the Circular, “Agreements Related to the Offer —
Support Agreement”.
Lock-Up
Agreement
The Bank has entered into the
Lock-Up
Agreement with DC, DCC, Ned Goodman and David Goodman, pursuant
to which they have irrevocably agreed to tender their Shares to
the Offer, subject, in the case of DC, to obtaining the approval
of its shareholders at a special meeting to be held on
January 6, 2011. The DC board of directors has unanimously
recommended that DC shareholders approve the sale by DC of its
Shares pursuant to the Offer. The DC board of directors retains
the right to change its recommendation in the event of a
Superior Proposal, but in that event DC will remain bound by its
obligations under the
Lock-Up
Agreement. Pursuant to the
Lock-Up
Agreement, Ned Goodman, controlling shareholder of DC, and David
Goodman, DundeeWealth President and CEO, have agreed to vote
their shares of DC in
3
favour of the sale of the Shares held by DC to the Bank. See
Section 4 of the Circular, “Agreements Relating to the
Offer —
Lock-Up
Agreement”.
The
Spinout Transaction
DundeeWealth will consummate the Spinout Transaction, pursuant
to which its capital markets business presently conducted
through Dundee Securities Corporation and operating under the
brand of “Dundee Capital Markets”, including the
corporate advisors and the CMP/CDR flow through business and CMP
Gold Trust, will be spun out to all holders of Shares and
Series F Shares. See Section 6 of the Circular,
“The Spinout Transaction”.
Regulatory
Matters
The Bank’s obligation to take up and pay for Shares
tendered under the Offer is conditional upon all Appropriate
Regulatory Approvals having been obtained on terms satisfactory
to the Bank, acting reasonably. See Section 21 of the
Circular, “Regulatory Matters”. These approvals
include the approval of the Minister of Finance (Canada), the
approval of the Office of the Superintendent of Financial
Institutions, the Competition Act Approval and the approval of
the Canadian Securities Administrators.
Valuation
and Fairness Opinion
The Offer is an “insider bid” within the meaning of MI
61-101. As a
result, MI
61-101
requires that a formal valuation of the DW Common Shares be
prepared at the expense of the Bank by a valuator who is
independent of DundeeWealth. In accordance with MI
61-101, the
DW Special Committee engaged TD Securities to prepare a
formal valuation of the DW Common Shares.
Based upon and subject to the analyses, assumptions,
qualifications and limitations set out in the Valuation and
Fairness Opinion, TD Securities is of the opinion that as
of November 21, 2010, the fair market value of the DW
Common Shares is in the range of $19.50 to $23.50 per DW Common
Share. Furthermore, TD Securities is of the opinion that,
as of November 21, 2010, the value of the consideration for
each DW Common Share in connection with the Offer is in the
range of $21.00 to $21.25 per DW Common Share. As such, the
value of the Offer Consideration (when combined the Distribution
and Spinout Consideration) to be received by holders of DW
Common Shares in connection with this Offer is within the range
of fair market value of the DW Common Shares as at
November 21, 2010. As of November 21, 2010,
TD Securities is of the opinion that, based upon and
subject to the analysis, assumptions, qualifications and
limitations discussed in the Valuation and Fairness Opinion, the
Offer Consideration (when combined with the Distribution and
Spinout Consideration) is fair, from a financial point of view,
to the holders of DW Common Shares and Special Shares other
than the Locked-Up Shareholders.
A copy of the Valuation and Fairness Opinion is attached as
Annex B to the Circular. See Section 11 of the
Circular, “Valuation and Fairness Opinion”.
Certain
Canadian Federal Income Tax Considerations
The Special Distribution and the dividend in connection with the
Spinout Transaction (both as defined herein) will be a taxable
dividend for Canadian federal income tax purposes, the tax
consequences of which are described in Section 23 of the
Circular, “Certain Canadian Federal Income Tax
Considerations”.
The Offer is made on the basis that a portion of each Share will
be exchanged exclusively for a portion of a Bank Common Share
and the remaining portion of each Share will be exchanged
exclusively for either (a) cash or (b) a portion of a
Bank Preferred Share, as the case may be. A Shareholder who
disposes of Shares pursuant to the Offer will realize a capital
gain (or capital loss) in respect of any portion of a Share that
is disposed of for cash to the extent that the amount of cash
received for such portion of a Share exceeds (or is exceeded by)
the aggregate of the adjusted cost base to the Shareholder of
such portion of a Share and any reasonable costs of disposition.
In respect of any portion of a Share that is disposed of for a
portion of a Bank Common Share, or any portion of a Share that
is disposed of for a portion of a Bank Preferred Share, as the
case may be, unless the Shareholder includes any part of the
capital gain or capital loss otherwise determined in respect of
such disposition in computing the Shareholder’s income for
the taxation year in which the disposition occurs, the
Shareholder will be deemed under the Tax Act (as defined herein)
to have disposed of such portion of a Share for proceeds of
disposition equal to the Shareholder’s adjusted cost base
of such portion immediately before the disposition and will be
deemed to have acquired the portion of the Bank Common Share or
the Bank Preferred Share, as
4
the case may be, received in exchange therefore at a cost equal
to such proceeds of disposition. The Bank will not make joint
elections under Section 85 of the Tax Act with any
Shareholders in connection with the Offer. See Section 23
of the Circular, “Certain Canadian Federal Income Tax
Considerations”.
Shareholders should consult their own tax advisors for advice
with respect to the tax consequences to them of receiving the
Special Distribution and the dividend in connection with the
Spinout Transaction (both as defined herein) and of disposing
Shares pursuant to the Offer or any Compulsory Acquisition or
Subsequent Acquisition Transaction.
Depositary
and Information Agent
The Bank has engaged Computershare Investors Services Inc. to
act as the Depositary for the Offer. The Depositary may contact
Shareholders by mail, telephone and facsimile and may request
banks, brokers, investment dealers and other nominees to forward
materials relating to the Offer to beneficial owners of Shares.
The Depositary will facilitate book-entry only transfers of
Shares tendered under the Offer. The Depositary will receive
reasonable and customary compensation from the Bank for its
services in connection with the Offer, will be reimbursed for
certain
out-of-pocket
expenses and will be indemnified against certain liabilities and
expenses in connection with the Offer.
The Bank has also retained Kingsdale Shareholder Services Inc.
to act as Information Agent in connection with the Offer. The
Information Agent will receive reasonable and customary
compensation from the Bank for its services in connection with
the Offer, will be reimbursed for certain
out-of-pocket
expenses and will be indemnified against certain liabilities and
expenses in connection with the Offer.
Questions and requests for assistance may be directed to the
Information Agent for the Offer, Kingsdale Shareholder Services
Inc., at 1-866-851-9601 toll free in North America, or at
416-867-2272
outside of North America, or by
e-mail at
contactus@kingsdaleshareholder.com.
5
THE
OFFER
December 15,
2010
TO: THE
HOLDERS OF SHARES OF DUNDEEWEALTH INC.
The Bank hereby offers to purchase, upon the terms and subject
to the conditions of the Offer, any and all of the issued and
outstanding Shares (including any Shares which may become issued
and outstanding after the date of the Offer and prior to the
Expiry Time upon the exercise of rights under any Other
Securities), other than Shares held by the Bank, on the basis of:
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(a)
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for each Share, other than a Series X Share, held:
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(i)
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0.2497 of one Bank Common Share; and
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(ii)
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at the election of the Shareholder, either 0.2 of one Bank
Preferred Share or $5.00 in cash; and
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(b)
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for each Series X Share held:
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(i)
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0.2081 of one Bank Common Share; and
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(ii)
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at the election of the Shareholder, either 0.1667 of one Bank
Preferred Share or $4.17 in cash
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(together, the “Offer Consideration”).
If a Shareholder does not make an election pursuant to (a)(ii)
or (b)(ii) above, such Shareholder will be deemed to have
elected to receive Bank Preferred Shares.
In connection with the Offer, DundeeWealth will:
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(a)
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declare a special distribution in the amount of $2.00 in cash
per DW Common Share (and a comparable amount in cash per share,
in the case of other Shares and Series F Shares, having
regard to the ratio at which such shares are convertible into DW
Common Shares) payable to holders of Shares and Series F
Shares of record on the Business Day immediately prior to the
Effective Date (the “Special
Distribution”); and
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(b)
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consummate the distribution to its shareholders of the capital
markets business presently conducted through Dundee Securities
Corporation and operating under the “Dundee Capital
Markets” brand, and certain other assets as described in
Schedule B to the Support Agreement (the “Spinout
Transaction”).
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Although DundeeWealth will carry out these distributions in
connection with the Offer, they do not form part of the
consideration payable by the Bank pursuant to the Offer.
The closing price of the DW Common Shares on the TSX on
November 19, 2010, the last trading day prior to the
announcement of the Bank’s intention to make the Offer, was
$19.47.
The closing prices of the Bank Common Shares on the TSX and the
NYSE on December 10, 2010 were C$56.00 and US$55.56
(C$56.08, converted at the exchange rate of US$1.00 = C$1.0093),
respectively.
In no event shall any Shareholder be entitled to a fractional
Bank Share. Where the aggregate number of Bank Common Shares or
Bank Preferred Shares to be issued to a Shareholder as
consideration under the Offer would result in a fraction of a
Bank Share being issuable, the number of Bank Common Shares or
Bank Preferred Shares to be received by such Shareholder shall
be rounded down to the nearest whole Bank Common Share or Bank
Preferred Share and such Shareholder will receive: (a) in
lieu of a fractional Bank Common Share, a cash payment in
Canadian dollars (rounded down to the nearest cent) determined
on the basis of an amount equal to (i) the volume weighted
average trading price on the TSX of the Bank Common Share over
the five (5) Business Days ending one (1) Business Day
before the date that the Bank first takes up and pays for Shares
under the Offer multiplied by (ii) the fractional share
amount; and (b) in lieu of a fractional Bank Preferred
Share, a cash payment in Canadian dollars (rounded down to the
nearest cent) determined on the basis of $25.00 for each whole
Bank Preferred Share.
6
The Offer is made only for Shares and not for any Other
Securities. Any holder of Other Securities who wishes to accept
the Offer must exercise the rights under such Other Securities
in order to acquire Shares and then tender those Shares to the
Offer.
The Offer is made on the basis that a portion of each Share will
be exchanged exclusively for a portion of a Bank Common Share
and the remaining portion of each Share will be exchanged
exclusively for either (a) cash or (b) a portion of a
Bank Preferred Share, as the case may be. The portion of each
Share that will be exchanged for a portion of a Bank Common
Share is equal to the quotient obtained by dividing the fair
market value of the portion of a Bank Common Share received by
the Shareholder by the sum of the fair market value of such
portion of a Bank Common Share plus the fair market value of the
portion of a Bank Preferred Share, if any, received by the
Shareholder plus the amount of cash, if any, received by the
Shareholder (excluding any cash received in lieu of a fraction
of a Bank Share). The remaining portion of each Share will be
exchanged for cash or for a portion of a Bank Preferred Share,
as the case may be.
The accompanying Circular, Letter of Transmittal and Notice
of Guaranteed Delivery which are incorporated into and form part
of the Offer, contain important information that should be read
carefully before making a decision with respect to the Offer.
The Offer is open for acceptance until the Expiry Time, being
12:01 a.m. (Toronto time) on January 20, 2011 unless
the Offer is withdrawn or extended by the Bank. The Expiry Time
may be extended at the Bank’s sole discretion pursuant to
Section 5 of this Offer, “Extension and Variation of
the Offer”.
Letter
of Transmittal
The Offer may be accepted by Shareholders by depositing the
following documents with the Depositary at any one of the
offices specified in the Letter of Transmittal no later than the
Expiry Time:
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(a)
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certificate(s) representing the Shares for which the Offer is
accepted;
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(b)
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an executed copy of the Letter of Transmittal, in the form
accompanying the Offer, or a manually signed facsimile
thereof; and
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(c)
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any other relevant documents required by the rules set out in
the Letter of Transmittal.
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Participants in CDS should contact the Depositary with respect
to the tender of their Shares under the Offer. CDS will be
issuing instructions to its participants as to the method of
tendering such Shares to the Offer. No fee or commission will be
payable by Shareholders who tender their Shares to the Offer
directly to the Depositary.
The Offer will be deemed to be accepted only if the Depositary
has actually received these documents at or before the Expiry
Time at one of the addresses for the Depositary indicated on the
Letter of Transmittal.
Shareholders who cannot comply on a timely basis with these
procedures for deposit of the requisite certificate(s) for
Shares may deposit certificate(s) representing Shares pursuant
to the procedure for guaranteed delivery described below.
Signature
Guarantees
No signature guarantee is required on the Letter of Transmittal
if:
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(a)
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the Letter of Transmittal is signed by the registered owner of
the Shares exactly as the name of the registered Shareholder
appears on the share certificate(s) deposited therewith, and the
Offer Consideration is to be delivered directly to such
registered Shareholder; or
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(b)
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Shares are tendered for the account of an Eligible Institution.
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In all other cases, all signatures on the Letter of Transmittal
must be guaranteed by an Eligible Institution. If a certificate
representing Shares is registered in the name of a person other
than a signatory of a Letter of Transmittal or if the Offer
Consideration is to be delivered to a person other than the
registered owner, the certificate must be endorsed or
accompanied by an appropriate power of attorney, in either case,
signed exactly as the name of the registered owner appears on
the certificate with the signature on the certificate or power
of attorney guaranteed by an Eligible Institution.
7
Method
of Delivery
The method of delivery of Shares, the Letter of Transmittal, the
Notice of Guaranteed Delivery and all other required documents
is at the option and risk of the tendering Shareholder. The Bank
recommends that those documents be delivered by hand to the
Depositary and that a receipt be obtained or, if certificate(s)
for Shares and the other documents are to be sent by mail,
registered mail with return receipt requested, properly insured,
is recommended, and it is suggested that the mailing be made
sufficiently in advance of the Expiry Time to permit delivery to
the Depositary on or prior to such time. Delivery will only be
effective upon actual receipt of certificate(s) for such Shares
by the Depositary.
A Shareholder who wishes to tender Shares to the Offer and whose
Shares are registered in the name of a broker, investment
dealer, commercial bank, trust company or other nominee should
immediately contact such nominee in order to take the necessary
steps to be able to tender such Shares to the Offer.
Procedure
for Guaranteed Delivery
If a Shareholder wishes to accept the Offer and either:
(i) the certificate(s) representing such Shareholder’s
Shares are not immediately available; or (ii) such
Shareholder cannot deliver the certificate(s) and Letter of
Transmittal to the Depositary by the Expiry Time, those Shares
may nevertheless be tendered to the Offer provided that all of
the following conditions are met:
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(a)
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such tender is made only at the principal office of the
Depositary in Toronto, Ontario, by or through an Eligible
Institution;
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(b)
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a Notice of Guaranteed Delivery (or a manually signed facsimile
thereof), properly completed and duly executed, including a
guarantee to deliver by an Eligible Institution in the form set
out in the Notice of Guaranteed Delivery, is received by the
Depositary at its principal office in Toronto, Ontario, at or
before the Expiry Time; and
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(c)
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the certificate(s) representing the Deposited Shares, in proper
form for transfer, together with a properly completed and duly
signed Letter of Transmittal (or a manually signed facsimile
thereof), relating to such Shares, with signatures guaranteed if
so required in accordance with the Letter of Transmittal, and
all other documents required by such Letter of Transmittal, are
received at the Toronto, Ontario, office of the Depositary by
5:00 p.m. (Toronto time) on the third trading day on the
TSX after the Expiry Time.
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The Notice of Guaranteed Delivery may be delivered by hand or
couriered or transmitted by facsimile or mailed to the
Depositary only at its principal office in Toronto, Ontario, and
must include a signature guarantee by an Eligible Institution in
the form set forth in the Notice of Guaranteed Delivery.
Delivery of the Notice of Guaranteed Delivery and the Letter of
Transmittal and accompanying certificate(s) and other required
documents to any office other than the Toronto, Ontario office
of the Depositary does not constitute delivery for the purpose
of satisfying the guaranteed delivery.
Acceptance
by Book-Entry Transfer
Shareholders may accept the Offer by following the procedures
for a book-entry transfer established by CDS, provided that a
Book-Entry Confirmation through CDSX is received by the
Depositary at its office in Toronto, Ontario prior to the Expiry
Time. The Depositary has established an account at CDS for the
purpose of the Offer. Any financial institution that is a
participant in CDS may cause CDS to make a book-entry transfer
of a Shareholder’s Shares into the Depositary’s
account in accordance with CDS procedures for such transfer.
Delivery of Shares to the Depositary by means of a book-entry
transfer will constitute a valid tender under the Offer.
Shareholders, through their respective CDS Participants, who use
CDSX to accept the Offer through a book-entry transfer of their
holdings into the Depositary’s account with CDS shall be
deemed to have completed and submitted a Letter of Transmittal
and to be bound by the terms thereof and therefore such
instructions received by the Depositary are considered a valid
tender in accordance with the terms of the Offer.
Shareholders whose Shares are registered in the name of an
investment dealer, stock broker, bank, trust company or other
nominee should immediately contact that nominee for assistance
if they wish to accept the Offer.
Shareholders who wish to accept the Offer by Book-Entry
Confirmation should contact the Depositary for assistance.
Contact details for the Depositary may be found on the last page
of the Circular.
8
Determination
of Validity
All questions as to the form of documents and the validity,
eligibility (including time of receipt) and acceptance for
exchange of any deposit of Shares will be determined by the Bank
in its sole discretion, which determination will be final and
binding on all parties. The Bank reserves the absolute right to
reject any and all deposits of Shares determined by it not to be
in proper form, or the issue of Bank Shares and payment of cash
in respect of which may, in the opinion of the Bank’s
counsel, be unlawful. The Bank also reserves the absolute right
to waive: (i) any of the conditions of the Offer; or
(ii) any defect or irregularity in any deposit of Shares.
No deposit of Shares will be deemed to be properly made until
all defects and irregularities have been cured or waived. None
of the Bank, the Depositary or any other person will be under
any duty to give notification of any defect or irregularity in
deposits or incur any liability for failure to give any such
notice. The Bank’s interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and
the Notice of Guaranteed Delivery) will be final and binding on
all parties. The Bank reserves the right to permit the Offer to
be accepted in a manner other than as set forth herein.
Under no circumstances will any amount be paid by the Bank or
the Depositary by reason of any delay in exchanging any Shares
or in making payments to any person on account of Shares
accepted for exchange pursuant to the Offer.
Dividends
and Distributions; Liens
Subject to the terms and conditions of the Offer and subject, in
particular, to Shares being validly withdrawn by or on behalf of
a depositing Shareholder, and except as provided below, by
accepting the Offer pursuant to the procedures set forth above,
a Shareholder irrevocably assigns to the Bank, free and clear of
all liens, restrictions, charges, encumbrances, claims, adverse
interests, equities and rights of others, all of the rights and
benefits of a Shareholder in and to the Shares identified in the
Letter of Transmittal delivered to the Depositary (the
“Deposited Shares”) and in and to all rights
and benefits arising from such Deposited Shares including any
and all dividends, distributions, payments, securities, property
or other interests excluding Permitted Distributions
(collectively, “Distributions”), which may be
declared, paid, accrued, issued, distributed, made or
transferred on or in respect of the Deposited Shares or any of
them on and after November 22, 2010, including any
dividends, distributions or payments on such Distributions.
If, notwithstanding such assignment, any Distributions are
received by or made payable to or to the order of a Shareholder,
then: (i) in the case of any cash dividend, distribution or
payment (other than a Permitted Distribution), the amount of the
dividend, distribution or payment shall be received and held by
a Shareholder for the account of the Bank until the Bank pays
for such Shares and to the extent that such dividend,
distribution or payment does not exceed the cash consideration
per Share payable by the Bank pursuant to the Offer, the cash
consideration per Share pursuant to the Offer will be reduced by
the amount of any such dividend, distribution or payment;
(ii) in the case of any non-cash dividend, distribution,
payment, right or other interest, the whole of any such non-cash
dividend, distribution, payment, right or other interest shall
be received and held by such Shareholder for the account of the
Bank and shall be promptly remitted and transferred by the
Shareholder to the Depositary for the account of the Bank,
accompanied by appropriate documentation of transfer; and
(iii) in the case of any cash dividend, distribution or
payment in an amount that exceeds the cash consideration per
Share payable by the Bank pursuant to the Offer, the whole of
any such cash dividend, distribution or payment shall be
received and held by a Shareholder for the account of the Bank
and shall be promptly remitted and transferred by the
Shareholder to the Depositary for the account of the Bank,
accompanied by appropriate documentation of transfer. The
declaration or payment of any such dividend or distribution may
have tax consequences not discussed in Section 23 of the
Circular, “Certain Canadian Federal Income Tax
Considerations”.
Power
of Attorney
An executed Letter of Transmittal (or, in the case of Shares
deposited by book-entry transfer by the making of a book-entry
transfer into the Depositary’s accounts with CDS)
irrevocably approves, constitutes and appoints, effective on and
after the date that the Bank takes up and pays for the Deposited
Shares covered by the Letter of Transmittal or book-entry
transfer (which Shares upon being taken up and paid for are,
together with any Distributions thereon, hereinafter referred to
as the “Purchased Securities”), each officer of
the Depositary and each officer of the Bank and any other person
designated by the Bank in writing (each an
“Appointee”) as the true and lawful agents,
attorneys and attorneys-in-fact and proxies, with full power of
substitution and resubstitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), of
the depositing Shareholder with respect to the Purchased
Securities. The Letter of Transmittal or the making of a
book-entry transfer authorizes an Appointee, in the name and on
behalf of such
9
Shareholder: (i) to register or record the transfer
and/or
cancellation of such Purchased Securities (to the extent
consisting of securities) on the appropriate register maintained
by or on behalf of DundeeWealth; (ii) for so long as any
Purchased Securities are registered or recorded in the name of
such Shareholder (whether or not they are now so registered or
recorded), to exercise any and all rights of such Shareholder
including the right to vote, to execute and deliver any and all
instruments of proxy, authorizations or consents in form and on
terms satisfactory to the Bank in respect of any or all
Purchased Securities, to revoke any such instrument,
authorization or consent, and to designate in such instrument,
authorization or consent any person or persons as the proxy of
such Shareholder in respect of the Purchased Securities for all
purposes including in connection with any meeting or meetings
(whether annual, special or otherwise or any adjournment
thereof, including any meeting to consider a Subsequent
Acquisition Transaction) of holders of relevant securities of
DundeeWealth; (iii) to execute, endorse and negotiate, for
and in the name of and on behalf of such Shareholder, any and
all cheques or other instruments representing any Distribution
payable to or to the order of, or endorsed in favour of, such
Shareholder; and (iv) to exercise any other rights of a
holder of Purchased Securities.
A Shareholder accepting the Offer under the terms of the Letter
of Transmittal revokes any and all other authority, whether as
agent, attorney-in-fact, attorney, proxy or otherwise,
previously conferred or agreed to be conferred by the
Shareholder at any time with respect to the Deposited Shares or
any Distributions. The Shareholder accepting the Offer agrees
that no subsequent authority, whether as agent,
attorney-in-fact, attorney, proxy or otherwise will be granted
with respect to the Deposited Shares or any Distributions by or
on behalf of the depositing Shareholder unless the Deposited
Shares are not taken up and paid for under the Offer. A
Shareholder accepting the Offer also agrees not to vote any of
the Purchased Securities taken up and paid for under the Offer
at any meeting (whether annual, special or otherwise or any
adjournment or postponement thereof) of holders of relevant
classes of Shares and not to exercise any or all of the other
rights or privileges attached to such Purchased Securities, or
otherwise act with respect thereto. The Shareholder accepting
the Offer agrees to execute and deliver to the Bank, at any time
and from time to time, as and when requested by, and at the
expense of, the Bank, any and all instruments of proxy,
authorization or consent, in form and on terms satisfactory to
the Bank, in respect of any such Purchased Securities. Such
Shareholder further agrees to designate in any such instruments
of proxy the person or persons specified by the Bank as the
proxyholder of the Shareholder in respect of all or any such
Purchased Securities.
Further
Assurances
A Shareholder accepting the Offer covenants under the terms of
the Letter of Transmittal to execute, upon request of the Bank,
any additional documents, transfers and other assurances as may
be necessary or desirable to complete the sale, assignment and
transfer of the Purchased Securities to the Bank. Each authority
therein conferred or agreed to be conferred may be exercised
during any subsequent legal incapacity of such holder and shall,
to the extent permitted by law, survive the death or incapacity,
bankruptcy or insolvency of the holder and all obligations of
the holder therein shall be binding upon the heirs, executors,
administrators, attorneys, personal representatives, successors
and assigns of such Shareholder.
Binding
Agreement
The acceptance of the Offer pursuant to the procedures set forth
above constitutes a binding agreement between a depositing
Shareholder and the Bank, effective immediately following the
Bank taking up Shares deposited by such Shareholder, in
accordance with the terms and conditions of the Offer. This
agreement includes a representation and warranty by the
depositing Shareholder that: (i) the person signing the
Letter of Transmittal or on whose behalf a book-entry transfer
is made owns the Deposited Shares and has full power and
authority to deposit, sell, assign and transfer the Deposited
Shares and any Distributions being tendered to the Offer;
(ii) the Deposited Shares and Distributions have not been
sold, assigned or transferred, nor has any agreement been
entered into to sell, assign or transfer any of the Deposited
Shares and Distributions, to any other person; (iii) the
deposit of the Deposited Shares and Distributions complies with
applicable Laws; and (iv) when the Deposited Shares and
Distributions are taken up and paid for by the Bank, the Bank
will acquire good title thereto, free and clear of all liens,
restrictions, charges, encumbrances, claims and rights of others.
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4.
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CONDITIONS
OF THE OFFER
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Subject to the provisions of the Support Agreement, the Bank
shall have the right to withdraw the Offer (or extend the Offer
to postpone taking up and paying for any Shares tendered to the
Offer) and shall not be required to take up, purchase
10
or pay for, any Shares tendered to the Offer unless all of the
following conditions are satisfied or waived by the Bank at or
prior to the Expiry Time:
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(a)
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the Appropriate Regulatory Approvals shall have been obtained on
terms satisfactory to the Bank, acting reasonably;
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(b)
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the Bank shall have determined in its reasonable judgment that:
(1) no act, action, suit or proceeding shall have been
taken, commenced or threatened before or by any Governmental
Entity or by any elected or appointed public official or private
Person (including any individual, corporation, firm, group or
other entity) in Canada or elsewhere, whether or not having the
force of Law; and (2) no Law shall have been proposed,
enacted, promulgated or applied, in either case:
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(i)
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to cease trade, enjoin, prohibit or impose material and adverse
limitations, damages or conditions on the purchase by or the
sale to the Bank of the Shares or the right of the Bank to own
or exercise full rights of ownership of the Shares;
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(ii)
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which, if the Offer were consummated, would reasonably be
expected to have a Material Adverse Effect on
DundeeWealth; or
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(iii)
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seeking to prohibit or limit the ownership or operation by the
Bank of any material portion of the business or assets of
DundeeWealth or its Subsidiaries or to compel the Bank or its
Subsidiaries to dispose of or hold separate any material portion
of the business or assets of DundeeWealth or any of its
Subsidiaries as a result of the Offer (or any Compulsory
Acquisition or Subsequent Acquisition Transaction);
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(c)
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the Bank shall not have become aware after November 22,
2010 of any untrue statement of a material fact, or an omission
to state a material fact that is required to be stated or that
is necessary to make a statement not misleading in the light of
the circumstances in which it was made (after giving effect to
all subsequent filings in relation to all matters covered in
earlier filings), in any DundeeWealth Public Document filed by
or on behalf of DundeeWealth with any Securities Regulatory
Authority in Canada or elsewhere on or before November 22,
2010;
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(d)
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all representations and warranties of DundeeWealth set forth in
the Support Agreement shall be true and correct in all respects,
unless the failure of such representations and warranties to be
true and correct, individually or in the aggregate, would not
constitute a Material Adverse Effect with respect to
DundeeWealth;
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(e)
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DundeeWealth shall have complied with all covenants and
obligations in all material respects that are to be complied
with under the Support Agreement at or prior to the Expiry Time
unless the failure of DundeeWealth to comply with such covenants
or obligations, individually or in the aggregate, would not
constitute a Material Adverse Effect with respect to
DundeeWealth;
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(f)
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all representations and warranties of the
Locked-Up
Shareholders set forth in the
Lock-Up
Agreement shall be true and correct in all material respects, as
if made on and as of the Expiry Time (except to the extent that
such representations and warranties speak to an earlier date, in
which event such representations and warranties shall be true
and correct as of such earlier date);
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(g)
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the
Locked-Up
Shareholders shall have complied in all material respects with
all covenants set forth in the
Lock-Up
Agreement that are to be complied with at or before the Expiry
Time;
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(h)
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a Material Adverse Effect shall not have occurred with respect
to DundeeWealth;
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(i)
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DundeeWealth shall have made arrangements to complete the
Spinout Transaction or an alternative transaction satisfactory
to the Bank, acting reasonably, and shall have declared the
Special Distribution;
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(j)
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the DC Shareholder Approval by way of special resolution of the
sale of the Shares by DC to the Bank shall have been obtained
and the board of directors of DC shall not have determined
subsequent to such DC Shareholder Approval not to proceed with
the sale of such Shares;
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(k)
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the Shares held by the
Locked-Up
Shareholders shall have been validly tendered and not withdrawn
by the
Locked-Up
Shareholders under the Offer; and
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(l)
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neither the Support Agreement nor the
Lock-Up
Agreement shall have been terminated, and no event shall have
occurred that, with notice or lapse of time or both, gives the
Bank the right to terminate the Support Agreement or the
Lock-Up
Agreement.
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The foregoing conditions are for the exclusive benefit of the
Bank and may be asserted by the Bank regardless of the
circumstances giving rise to any such condition. The Bank may,
in the Bank’s sole discretion, waive any of the foregoing
conditions, in whole or in part, at any time and from time to
time, both before and after the Expiry Time, without prejudice
to any other rights which the Bank may have. Failure by the Bank
at any time to exercise any of the foregoing rights will not be
deemed to be a waiver of any such right and each such right
shall be deemed to be an ongoing right which may be asserted at
any time and from time to time.
Any waiver of a condition or the withdrawal of the Offer shall
be effective upon written notice, or other communication
confirmed in writing by the Bank to that effect, to the
Depositary at its principal office in Toronto, Ontario. The
Bank, forthwith after giving any such notice, will make a public
announcement of such waiver or withdrawal and provide a copy of
such notice to the TSX, and to the extent required by applicable
Laws, cause the Depositary as soon as is practicable thereafter
to notify the Shareholders and holders of Other Securities in
the manner set forth in Section 9 of this Offer,
“Notice and Delivery”. If the Offer is withdrawn, the
Bank will not be obligated to take up, accept for payment or pay
for any Shares tendered to the Offer.
Any determination by the Bank concerning any event or other
matter described in the foregoing conditions of this
Section 4 will be final and binding upon all parties.
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5.
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EXTENSION
AND VARIATION OF THE OFFER
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The Offer is open for acceptance until the Expiry Time, unless
the Offer is withdrawn or is extended by the Bank.
Subject to the limitations described below, the Bank expressly
reserves the right, in its sole discretion, at any time and from
time to time while the Offer is open for acceptance, to vary the
terms of the Offer or extend the Expiry Time (but in any case,
not beyond the Outside Date), in accordance with applicable
Laws, by giving notice in writing to the Depositary at its
principal office in Toronto, Ontario. Also, if at any time
before the Expiry Time, or at any time after the Expiry Time,
but before the expiry of all rights of withdrawal with respect
to the Offer, a change occurs in the information contained in
this Offer and Circular, as amended from time to time, that
would reasonably be expected to affect the decision of a
Shareholder to accept or reject the Offer (other than a change
that is not within the control of the Bank or a Subsidiary of
the Bank, unless it is a change in a material fact relating to
the Bank Shares), the Bank will give written notice of such
change to the Depositary at its principal office in Toronto,
Ontario. Upon the giving of such notice to the Depositary, the
Expiry Time or withdrawal rights, as applicable, will be deemed
to be extended to the date specified in such notice or as
required by applicable Law, or in the case of a variation, the
Offer will be deemed to be varied in the manner described in
such notice, as the case may be. The Bank will, as soon as
practicable after giving any such notice to the Depositary,
publicly announce the extension, variation or change and, if
required by applicable Law, cause the Depositary to mail a copy
of any such notice to Shareholders as required by applicable
securities legislation at their respective addresses appearing
in the share register of DundeeWealth. In addition, the Bank
will provide a copy of such notice to the TSX and the applicable
Securities Regulatory Authorities. Any notice of extension,
variation or change will be deemed to have been given and be
effective on the day on which it is delivered or otherwise
communicated to the Depositary at its principal office in
Toronto, Ontario. The Support Agreement and the
Lock-Up
Agreement restrict the Bank’s ability to amend certain
terms and conditions of the Offer without the prior written
consent of DundeeWealth and the Locked-Up Shareholders. See
Section 4 of the Circular, “Agreements Relating to the
Offer — Support Agreement” and “Agreements
Relating to the Offer —
Lock-Up
Agreement”.
During any extension of the Offer, all Shares previously
tendered and not withdrawn will remain subject to the Offer and
may be accepted for purchase by the Bank in accordance with the
terms of the Offer, subject to Section 8 of this Offer,
“Right to Withdraw Deposited Shares”. An extension of
the Expiry Time will not, in and of itself, constitute a waiver
by the Bank of any of its rights under Section 4 of this
Offer, “Conditions of the Offer”.
Under applicable Securities Laws, if there is a variation in the
terms of the Offer, the period during which Shares may be
tendered to the Offer will not expire before ten (10) days
after the date that the notice of variation has been delivered.
If, before the Expiry Time, the Bank in its sole discretion
elects to increase the Offer Consideration, such increase will
be applicable to all holders whose Shares are taken up under the
Offer.
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6.
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TAKE
UP AND PAYMENT FOR DEPOSITED SHARES
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Upon the terms and subject to the conditions of the Offer
(including but not limited to the conditions specified in
Section 4 of this Offer, “Conditions of the
Offer”), the Bank will take up Shares validly tendered to
the Offer and not withdrawn pursuant to Section 8 of this
Offer, “Right to Withdraw Deposited Shares”, not later
than ten (10) calendar days after the Expiry Time and will
pay for the Shares taken up as soon as possible, but in any
event not later than three (3) Business Days after taking
up the Shares. Any Shares tendered to the Offer after the first
date on which Shares have been taken up by the Bank will be
taken up and paid for not later than ten (10) days after
such tender.
Subject to Law, the Bank expressly reserves the right in its
sole discretion to delay taking up and paying for any Shares or
to terminate the Offer and not take up or pay for any Shares
pursuant to the Offer if any condition specified in
Section 4 of this Offer, “Conditions of the
Offer” is not satisfied or waived, by giving written notice
thereof or other communication confirmed in writing to the
Depositary at its principal office in Toronto, Ontario. The Bank
also expressly reserves the right, in its sole discretion and
notwithstanding any other condition of the Offer, to delay
taking up and paying for Shares in order to comply, in whole or
in part, with any Law.
For the purposes of the Offer, the Bank will be deemed to have
taken up and accepted for payment Shares validly tendered and
not validly withdrawn pursuant to the Offer if, as and when the
Bank gives written notice or other communication confirmed in
writing to the Depositary of its acceptance for payment of such
Deposited Shares pursuant to the Offer at its principal office
in Toronto, Ontario.
The Bank will pay for Shares validly tendered to the Offer and
not withdrawn by providing the Depositary with the cash
component of the Offer Consideration in the form of sufficient
funds (for fractional Bank Shares and the cash portion of the
Offer Consideration) for transmittal to Persons who have
tendered Shares to the Offer. The Depositary will act as the
agent of the Persons who have tendered Shares in acceptance of
the Offer for the purposes of receiving the Offer Consideration
from the Bank and transmitting such Offer Consideration to such
Persons. Receipt of the cash representing the Offer
Consideration by the Depositary will be deemed to constitute
receipt of payment by Persons depositing Shares pursuant to the
Offer. Under no circumstances will interest accrue or be paid by
the Bank or the Depositary, to Persons depositing Shares, on the
purchase price of Shares purchased by the Bank, regardless of
any delay in making such payment.
No physical certificate(s) for Bank Shares will be issued to
Shareholders. A Direct Registration System statement (a
“DRS Statement”) will be delivered by the
Depositary along with a cheque, if applicable, for any cash
portion of the Offer Consideration. Bank Shares will be held in
the name of the applicable Shareholders and registered
electronically in the Bank’s records.
Settlement with each Shareholder who has validly tendered and
not validly withdrawn Shares under the Offer will be made upon
the Depositary forwarding:
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•
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the DRS Statement(s) for the Bank Shares to which such
Shareholder is entitled; and
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•
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if applicable, a cheque for an amount in Canadian dollars to
which such Shareholder is entitled (in satisfaction of the
optional cash payment of $5.00 per DW Common Share or Special
Share and $4.17 per Series X Share and any fractional Bank
Shares).
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Subject to the foregoing and unless otherwise directed by the
Letter of Transmittal, the DRS Statement(s) and cheque will be
issued in the name of the registered Shareholder of the Shares
so tendered. Unless the person depositing the Shares instructs
the Depositary to hold the DRS Statement(s) representing the
Bank Shares and cheques for
pick-up by
checking the appropriate box in the Letter of Transmittal, the
DRS Statement(s) and cheque will be forwarded by first class
insured mail to such person at the address specified in the
Letter of Transmittal. If no such address is specified, the DRS
Statement(s) and cheque will be sent to the address of the
Shareholder as shown on the securities register maintained by or
on behalf of DundeeWealth. DRS Statements and cheques mailed in
accordance with this paragraph will be deemed to be delivered at
the time of mailing.
If any Deposited Shares are not accepted for payment pursuant to
the terms and conditions of the Offer for any reason, or if
certificates are submitted for more Shares than are tendered,
certificate(s) for unpurchased Shares will be returned, at the
Bank’s expense, to the Depositing Shareholder as soon as it
is practicable following the Expiry Time or withdrawal or early
termination of the Offer. Unless otherwise directed in the
Letter of Transmittal, certificate(s)
13
representing unpurchased Shares will be forwarded to the address
of the registered Shareholder as shown on the securities
register maintained by or on behalf of DundeeWealth.
Pursuant to rules of the Canadian Payments Association, a
$25 million ceiling has been established on cheques, bank
drafts and other paper-based payments processed through
Canada’s clearing system. As a result, any payment to a
Shareholder in excess of $25 million will be effected by
the Depositary by wire transfer in accordance with the Large
Value Transfer System Rules established by the Canadian Payments
Association. Accordingly, settlement with a Shareholder
involving a payment in excess of $25 million will be made
only in accordance with wire transfer instructions provided by
the Shareholder to the Depositary in writing. In the event wire
transfer instructions are required as set out above, the
Depositary will contact the Shareholder promptly following the
Expiry Time for the purposes of obtaining wire transfer
instructions. Any delay in payment by the Depositary resulting
from the provision by the Shareholder of wire transfer
instructions will not entitle the Shareholder to interest or
other compensation in addition to the amounts to which the
Shareholder is entitled pursuant to the Offer.
Shareholders tendering Shares will not be required to pay any
fee or commission if they accept the Offer by tendering their
Shares directly with the Depositary.
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7.
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RETURN
OF DEPOSITED SHARES
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If any Deposited Shares are not taken up and paid for pursuant
to the terms and conditions of the Offer for any reason, they
will be returned, at the Bank’s expense, to the Depositing
Shareholder as soon as is practicable following the early
termination, Expiry Time or withdrawal of the Offer and
certificates representing unpurchased Shares will be forwarded
to the address of the registered Shareholder as shown on
DundeeWealth’s securities register (unless otherwise
directed in the Letter of Transmittal) or by crediting the
securities ledger position of the ledger account maintained by
the applicable CDS Participant in the amount of the unpurchased
Shares.
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8.
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RIGHT
TO WITHDRAW DEPOSITED SHARES
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Except as otherwise stated in this Section 8, all deposits
of Shares pursuant to the Offer are irrevocable. Unless
otherwise required or permitted by applicable Laws, any Shares
tendered in acceptance of the Offer may be withdrawn by or on
behalf of the Depositing Shareholder:
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(a)
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at any time before the Shares have been taken up by the Bank;
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(b)
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at any time before the expiration of ten (10) calendar days
from the date upon which either:
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(i)
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a notice of change relating to a change which has occurred in
the information contained in the Offer or the Circular, which
change is one that would reasonably be expected to affect the
decision of a Shareholder to accept or reject the Offer (other
than a change that is not within the control of the Bank or a
Subsidiary of the Bank unless it is a change in a material fact
relating to the Bank Shares) in the event that such change
occurs before the Expiry Time or after the Expiry Time but
before the expiry of all rights of withdrawal in respect of the
Offer; or
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(ii)
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a notice of variation concerning a variation in the terms of the
Offer (other than a variation consisting solely of an increase
in the consideration offered for the Shares pursuant to the
Offer where the Offer is not extended for a period greater than
ten (10) calendar days);
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is mailed, delivered, or otherwise properly communicated, but
subject to abridgment of that period pursuant to such order or
orders as may be granted by applicable courts or securities
regulatory authorities and only if such Deposited Shares have
not been taken up by the Bank at the date of the notice; or
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(c)
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at any time after three (3) Business Days from the date the
Bank takes up the Shares, if such Shares have not been paid for
by the Bank.
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For a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be received in a timely
manner by the Depositary at the place of deposit of the relevant
Shares. Any such notice of withdrawal must: (i) be made by
a method, including a manually signed facsimile transmission,
that provides the Depositary with a written or printed copy;
(ii) be signed by or on behalf of the person who signed the
Letter of Transmittal (or Notice of Guaranteed Delivery) that
accompanied the Shares to be withdrawn; (iii) specify the
number of Shares to be withdrawn, the name of the
14
registered Shareholder and the certificate number shown on the
share certificate(s) representing each Share to be withdrawn;
and (iv) must be actually received by the Depositary at the
place of deposit for the applicable Shares (or Notice of
Guaranteed Delivery in respect thereof). No signature guarantee
is required on a notice of withdrawal if the notice of
withdrawal is signed by the registered Shareholder exactly as
the name of the registered Shareholder appears on the
certificate(s) representing Shares deposited with the Letter of
Transmittal or if the Shares were deposited for the account of
an Eligible Institution. In all other cases, the signature on a
notice of withdrawal must be guaranteed by an Eligible
Institution. The withdrawal will take effect upon actual receipt
by the Depositary of the properly completed notice of
withdrawal. A withdrawal of Shares tendered to the Offer can
only be accomplished in accordance with the foregoing procedure.
The withdrawal will take effect only upon actual receipt by the
Depositary of the properly completed and executed written or
facsimile notice of withdrawal.
Alternatively, if Shares have been deposited pursuant to the
procedures for book-entry transfer, as set forth in
Section 3 of this Offer, “Manner of
Acceptance — Acceptance by Book-Entry Transfer”,
any notice of withdrawal must specify the name and number of the
account at CDS to be credited with the withdrawn Shares and
otherwise comply with the procedures of CDS.
All questions as to form and validity (including time of
receipt) of notices of withdrawal will be determined by the Bank
in its sole discretion and such determination will be final and
binding. There will be no duty or obligation on the Bank, the
Depositary or any other person to give notice of any defect or
irregularity in any notice of withdrawal, and no liability will
be incurred by any of them for failure to give such notice.
Withdrawals may not be rescinded and any Shares properly
withdrawn will thereafter be deemed not validly deposited for
the purposes of the Offer. However, withdrawn Shares may be
re-deposited at any subsequent time prior to the Expiry Time by
again following any of the procedures described in
Section 3 of this Offer, “Manner of Acceptance”.
If the Bank extends the period of time during which the Offer is
open, is delayed in taking up or paying for the Shares or is
unable to take up or pay for Shares for any reason, then,
without prejudice to the Bank’s other rights under the
Offer, the Depositary may, subject to applicable Laws, retain on
behalf of the Bank all Deposited Shares and Distributions, and
such Shares may not be withdrawn except to the extent that
depositing Shareholders are entitled to withdrawal rights as set
forth in this Section 8 or pursuant to applicable Laws.
Without limiting any other lawful means of giving notice, any
notice which the Bank or the Depositary may give or cause to be
given under the Offer will be deemed to have been properly given
to registered Shareholders if it is mailed by prepaid first
class mail to the registered Shareholders at their respective
addresses appearing in the appropriate registers maintained by
DundeeWealth in respect of the Shares and will be deemed, unless
otherwise specified by applicable Laws, to have been received on
the first Business Day following the date of mailing. These
provisions apply notwithstanding any accidental omission to give
notice to any one or more Shareholders and notwithstanding any
interruption of mail service in Canada following mailing. Except
as otherwise required or permitted by Law, in the event of any
interruption of mail service in Canada, the Bank intends to make
reasonable efforts to disseminate the notice by other means such
as publication. Except as otherwise required or permitted by
Law, if post offices are not open for the deposit of mail, or
there is reason to believe that there is or could be a
disruption in all or any part of the postal service, any notice
which the Bank or the Depositary may give or cause to be given
under the Offer will be deemed to have been properly given and
to have been received by Shareholders if: (i) it is given
to the TSX for dissemination through its facilities;
(ii) if it is published once in the National Edition of
The Globe and Mail or the National Post; or
(iii) it is given to the Marketwire News Wire Service for
dissemination through its facilities.
Unless post offices are not open for the deposit of mail, the
Offer, the Circular, the Letter of Transmittal and the Notice of
Guaranteed Delivery will be mailed to registered Shareholders by
first class mail, postage prepaid or made available in such
other manner as is permitted by applicable regulatory
authorities and the Bank will use its reasonable efforts to
furnish such documents to brokers, banks and similar persons
whose names, or the names of whose nominees, appear on the
security holder list of DundeeWealth, or, if applicable, who are
listed as participants in a clearing agency’s security
position listing, for subsequent transmission to beneficial
owners of Shares when such list or listing is received.
Wherever the Offer calls for documents to be delivered to the
Depositary, those documents will not be considered delivered
unless and until they have been physically received at one of
the addresses listed for the
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Depositary in the Letter of Transmittal or the Notice of
Guaranteed Delivery, as applicable. Wherever the Offer calls for
documents to be delivered to a particular office of the
Depositary, those documents will not be considered delivered
unless and until they have been physically received at the
particular office at the address listed in the Letter of
Transmittal or Notice of Guaranteed Delivery, as applicable.
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10.
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CHANGES
IN CAPITALIZATION
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If, on or after the date of the Offer, DundeeWealth should
divide, combine, reclassify, consolidate, convert or otherwise
change any of the Shares or its capitalization, or should
disclose that it has taken or intends to take any such action,
then the Bank may, in its sole discretion and without prejudice
to its rights under Section 4 of this Offer,
“Conditions of the Offer”, make such adjustments to
the Offer Consideration or other terms of the Offer (including
the type of securities offered to be purchased and the
consideration payable therefor) as it deems appropriate to
reflect such division, combination, reclassification,
consolidation, conversion or other change.
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11.
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SHARES NOT
DEPOSITED UNDER THE OFFER
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The purpose of the Offer is to enable the Bank to acquire all
outstanding Shares. Provided that the
Locked-Up
Shareholders tender their Shares to the Offer as required by the
terms of the
Lock-Up
Agreement, the Bank will have a sufficient number of Shares to
acquire all of the Shares not tendered to the Offer pursuant to
a Subsequent Acquisition Transaction, as discussed in
Section 22 of the Circular, “Acquisition of
Shares Not Deposited Under the Offer”.
As of the date hereof, the Bank does not intend to acquire, or
make or enter into any agreement, commitment or understanding to
acquire beneficial ownership of any Shares other than under the
terms of the Offer. However, under Section 2.2(3) of MI
62-104 and
Section 2.1 of OSC
Rule 62-504,
as applicable, the Bank may purchase Shares other than under the
terms of the Offer provided:
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(a)
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such intention is stated in a news release issued and filed at
least one (1) Business Day prior to making such purchases;
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(b)
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the aggregate number of Shares beneficially acquired does not
exceed 5% of the outstanding Shares as of the date of the Offer;
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(c)
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the purchases are made in the normal course through the
facilities of the TSX;
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(d)
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the Bank issues and files a news release containing the
information required under Section 2.2(3) of MI
62-104 and
Section 2.1 of OSC
Rule 62-504,
as applicable, immediately after the close of business of the
TSX on each day in which Shares have been purchased; and
|
|
|
(e)
|
the broker involved in such trades provides only customary
broker services and receives only customary fees or commissions,
and no solicitation is made by the Bank, the seller or their
respective agents.
|
In no event will the Bank make any such purchases of Shares
through the facilities of the TSX until the third clear trading
day following the date of the Offer.
Pursuant to the Shareholders’ Agreement, the Bank has
agreed to customary “standstill” restrictions that
prohibit the Bank’s acquisition of more than a 20% interest
in DundeeWealth. Such restrictions do not apply to the
acquisition of Shares pursuant to the Offer.
Although the Bank has no present intention to sell Shares taken
up under the Offer, the Bank reserves the right to make or enter
into arrangements, commitments or understandings at or prior to
the Expiry Time to sell any of such Shares after the Expiry
Time, subject to compliance with Section 2.7(2) of MI
62-104 and
Section 93.4(2) of the Securities Act, as applicable.
For the purposes of this Section 12, the
“Bank” includes the Bank and any Person acting
jointly or in concert with the Bank.
16
|
|
13.
|
OTHER
TERMS OF THE OFFER
|
The Bank reserves the right to transfer or assign, in whole or
from time to time in part, to one or more Persons designated by
or affiliated with the Bank, the right to purchase all or any
portion of the Shares tendered to the Offer, but any such
transfer will not relieve the Bank of its obligations under the
Offer or prejudice the rights of Depositing Shareholders to
receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
No broker, investment dealer or other Person (including the
Depositary) has been authorized to make any representation or
warranty on behalf of the Bank or any of its Subsidiaries in
connection with the Offer other than as contained in the Offer
and, if any such representation or warranty is given or made, it
must not be relied upon as having been authorized. No broker,
investment dealer or other Person shall be deemed to be the
agent of the Bank or any of its Subsidiaries or the Depositary
for the purposes of the Offer.
The Offer and all contracts resulting from the acceptance of the
Offer shall be governed by and construed in accordance with the
Laws of the Province of Ontario and the federal Laws of Canada
applicable therein. Each party to any agreement resulting from
the acceptance of the Offer unconditionally and irrevocably
attorns in respect thereof to the non-exclusive jurisdiction of
the courts of the Province of Ontario.
This document does not constitute an offer or a solicitation to
any Person in any jurisdiction in which such offer or
solicitation is unlawful. The Offer is not being made to (nor
will deposits of Shares be accepted from or on behalf of)
Shareholders residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance
with the Laws of such jurisdiction. The Bank may, in its sole
discretion, take such action as it may deem necessary to make
the Offer in any such jurisdiction and extend the Offer to
Shareholders in any such jurisdiction.
The Bank, in its sole discretion, shall be entitled to make a
final and binding determination of all questions relating to the
Offer, the Circular and the Letter of Transmittal and the Notice
of Guaranteed Delivery, the validity of any acceptance of the
Offer and the validity of any withdrawal of Shares.
The provisions of the Circular, the Letter of Transmittal and
the Notice of Guaranteed Delivery accompanying the Offer,
including the instructions contained therein, are incorporated
into and form part of the terms and conditions of the Offer.
Where the Offer provides that the time for the taking of any
action, the doing of any thing or the end of any period, expires
or falls upon a day that is not a Business Day, the time shall
be extended and action may be taken, the thing may be done or
the period shall end as the case may be, on the next Business
Day.
The Offer and the accompanying Circular together constitute the
take-over bid circular required under Canadian provincial
securities legislation with respect to the Offer. Shareholders
are urged to refer to the accompanying Circular for additional
information relating to the Offer.
Dated: December 15,
2010
THE BANK OF NOVA SCOTIA
(signed)
Richard E.
Waugh
President and Chief Executive Officer
17
CIRCULAR
This Circular is furnished in connection with the Offer dated
December 15, 2010 by the Bank to purchase, upon the terms
and subject to the conditions described therein, any and all of
the issued and outstanding Shares, including those Shares that
may become outstanding upon the exercise or conversion of Other
Securities, other than Shares held by the Bank. The terms and
provisions of the Offer, Letter of Transmittal and Notice of
Guaranteed Delivery are incorporated into and form part of this
Circular. Terms defined in the Offer and the Glossary and not
otherwise defined in this Circular shall have the respective
meanings given thereto in the Offer and the Glossary unless the
context otherwise requires. Unless otherwise indicated,
information concerning DundeeWealth and the Bank is given as at
December 10, 2010.
The Bank is one of North America’s premier financial
institutions and Canada’s most international bank. Through
its team of more than 70,000 employees, the Bank and its
affiliates offer a broad range of products and services,
including retail, commercial, corporate and investment banking
to more than 18.6 million customers in more than 50
countries around the world. The head office of the Bank is
located at 1709 Hollis Street, Halifax, Nova Scotia, B3J 3B7 and
its executive offices are at Scotia Plaza, 44 King Street West,
Toronto, Ontario, M5H 1H1.
For the year ended October 31, 2010, the Bank had total
revenues of approximately $15.5 billion and net income of
approximately $4.2 billion. At October 31, 2010, total
shareholders’ equity was approximately $27.6 billion.
As a Canadian Schedule I Bank, the Bank’s activities
in Canada are governed by the Bank Act. Upon successful
completion of the Offer, Shareholders of DundeeWealth (whose
rights are currently governed by the OBCA) will become
shareholders of the Bank. Further information relating to the
rights of shareholders of the Bank under the Bank Act and
additional information with respect to the Bank and the Bank
Shares is set forth in Annex A, which is incorporated into
and forms part of this Circular.
Authorized
and Outstanding Share Capital
The authorized common share capital of the Bank consists of an
unlimited number of Bank Common Shares.
As of December 10, 2010, the Bank had outstanding
1,043,245,513 Bank Common Shares and options to purchase
24,113,459 Bank Common Shares.
The authorized preferred share capital of the Bank consists of
an unlimited number of preferred shares without nominal or par
value issuable in series.
See Annex A for a description of the rights, privileges,
restrictions and conditions attaching to the Bank Shares,
details regarding the number of authorized and outstanding
preferred shares of the Bank and the price range and trading
volume of the preferred shares of the Bank.
18
Price
Range and Trading Volume
The Bank Common Shares are listed and traded under the stock
symbol “BNS” on the TSX and the NYSE.
The following table sets forth, for the periods indicated, the
high and low trading prices in Canadian dollars and trading
volumes of the Bank Common Shares on Canadian exchanges,
including the TSX, (as reported by Bloomberg) for the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price Range
|
|
Year
|
|
|
Period
|
|
High
|
|
|
Low
|
|
|
Volume
|
|
|
|
|
|
|
C$
|
|
|
C$
|
|
|
|
|
|
|
2009
|
|
|
December
|
|
|
49.72
|
|
|
|
47.45
|
|
|
|
69,767,978
|
|
|
2010
|
|
|
January
|
|
|
48.93
|
|
|
|
44.60
|
|
|
|
60,817,872
|
|
|
|
|
|
February
|
|
|
48.01
|
|
|
|
44.84
|
|
|
|
48,390,682
|
|
|
|
|
|
March
|
|
|
51.82
|
|
|
|
48.26
|
|
|
|
75,015,269
|
|
|
|
|
|
April
|
|
|
52.18
|
|
|
|
50.00
|
|
|
|
70,696,878
|
|
|
|
|
|
May
|
|
|
52.69
|
|
|
|
48.02
|
|
|
|
71,838,604
|
|
|
|
|
|
June
|
|
|
51.55
|
|
|
|
48.69
|
|
|
|
67,955,873
|
|
|
|
|
|
July
|
|
|
52.44
|
|
|
|
47.85
|
|
|
|
61,396,625
|
|
|
|
|
|
August
|
|
|
52.03
|
|
|
|
49.25
|
|
|
|
69,253,549
|
|
|
|
|
|
September
|
|
|
54.92
|
|
|
|
51.25
|
|
|
|
72,656,163
|
|
|
|
|
|
October
|
|
|
55.52
|
|
|
|
53.88
|
|
|
|
50,033,006
|
|
|
|
|
|
November
|
|
|
54.70
|
|
|
|
52.63
|
|
|
|
72,245,593
|
|
|
|
|
|
December 1 to 9
|
|
|
56.12
|
|
|
|
53.97
|
|
|
|
31,938,828
|
|
The following table sets forth, for the periods indicated, the
high and low trading prices in U.S. dollars and trading
volumes of the Bank Common Shares on U.S. exchanges,
including the NYSE, (as reported by Bloomberg) for the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price Range
|
|
Year
|
|
|
Period
|
|
High
|
|
|
Low
|
|
|
Volume
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
2009
|
|
|
December
|
|
|
47.46
|
|
|
|
44.68
|
|
|
|
7,052,553
|
|
|
2010
|
|
|
January
|
|
|
46.84
|
|
|
|
42.10
|
|
|
|
8,796,510
|
|
|
|
|
|
February
|
|
|
46.10
|
|
|
|
41.84
|
|
|
|
6,899,894
|
|
|
|
|
|
March
|
|
|
50.59
|
|
|
|
46.26
|
|
|
|
8,281,991
|
|
|
|
|
|
April
|
|
|
52.08
|
|
|
|
49.79
|
|
|
|
6,802,163
|
|
|
|
|
|
May
|
|
|
52.19
|
|
|
|
45.66
|
|
|
|
14,439,999
|
|
|
|
|
|
June
|
|
|
50.28
|
|
|
|
46.02
|
|
|
|
14,454,408
|
|
|
|
|
|
July
|
|
|
50.38
|
|
|
|
45.48
|
|
|
|
10,019,403
|
|
|
|
|
|
August
|
|
|
50.85
|
|
|
|
46.87
|
|
|
|
7,892,050
|
|
|
|
|
|
September
|
|
|
53.30
|
|
|
|
48.72
|
|
|
|
9,396,985
|
|
|
|
|
|
October
|
|
|
54.45
|
|
|
|
52.73
|
|
|
|
6,690,644
|
|
|
|
|
|
November
|
|
|
54.55
|
|
|
|
51.32
|
|
|
|
7,138,129
|
|
|
|
|
|
December 1 to 9
|
|
|
55.87
|
|
|
|
53.27
|
|
|
|
4,212,524
|
|
The closing prices of the Bank Common Shares on the TSX and the
NYSE on December 10, 2010 were C$56.00 and US$55.56
(C$56.08, converted at the exchange rate of US$1.00 = C$1.0093),
respectively. The TSX has conditionally approved the listing of
the Bank Common Shares and Bank Preferred Shares to be issued
pursuant to the Offer. In addition, the Bank plans to file a
supplemental listing application to list those additional Bank
Common Shares on the NYSE. The Bank Preferred Shares will be
listed and posted for trading on the TSX under the symbol
“BNS.PR.Z”.
DundeeWealth is a Canadian wealth management company which
provides investment management, securities brokerage, financial
planning and investment advisory services to advisors,
institutions, corporations and foundations. DundeeWealth has
three main businesses: (i) investment management, which
consists of creating, managing, packaging and administering
investment portfolios and providing internal and third-party
management and advisory services;
19
(ii) financial advisory, consisting of a network of full
service, independent financial planning and investment
professionals, who provide a wide range of wealth management
products and services to individuals and businesses across
Canada; and (iii) capital markets, comprised of
institutional sales and trading, investment banking and
investment research. DundeeWealth has approximately
$80.6 billion in fee earning assets.
DundeeWealth is incorporated under the OBCA. DundeeWealth’s
registered and head office is located at Dundee Place, 1
Adelaide Street East, 28th Floor, Toronto, Ontario, M5C 2V9.
Authorized
and Outstanding Share Capital
The authorized share capital of DundeeWealth consists of: an
unlimited number of DW Common Shares; an unlimited number of
Series X Shares; 6,900,000 Series 1 Shares; and
an unlimited number of Special Shares issuable in series, of
which Series C, D and F have been authorized. As at
November 30, 2010, DundeeWealth had outstanding:
121,642,731 DW Common Shares; 508,571 Special Shares,
Series C; 250,000 Special Shares, Series D; 27,000,000
Series F Shares; 5,453,668 Series X Shares; 6,225,000
Series 1 Shares; Options to acquire 2,120,471 DW
Common Shares; 1,289,299 DSUs; and 1,533,596 Bonus Share Awards.
As of November 30, 2010, DC beneficially owned an aggregate
of 69,940,415 DW Common Shares and all of the issued and
outstanding Series X Shares. Further, all of the
outstanding Special Shares, Series C and Series D are
held in escrow and will be voted in the same way as the shares
held by DC. As of December 10, 2010, the Bank beneficially
owned an aggregate 1,223,500 DW Common Shares and 27,000,000
Series F Shares.
Price
Range and Trading Volume
The DW Common Shares and the Series 1 Shares are
listed and posted for trading on the TSX under the symbols
“DW” and “DW.PR.A”, respectively.
The following table sets forth, for the periods indicated, the
high and low trading prices and the trading volume of the DW
Common Shares on Canadian exchanges, including the TSX, (as
reported by Bloomberg) for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price Range
|
|
Year
|
|
|
Period
|
|
High
|
|
|
Low
|
|
|
Volume
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
2009
|
|
|
December
|
|
|
13.89
|
|
|
|
13.11
|
|
|
|
2,511,390
|
|
|
2010
|
|
|
January
|
|
|
15.00
|
|
|
|
14.05
|
|
|
|
2,676,377
|
|
|
|
|
|
February
|
|
|
14.63
|
|
|
|
13.52
|
|
|
|
3,380,062
|
|
|
|
|
|
March
|
|
|
15.12
|
|
|
|
13.51
|
|
|
|
4,327,633
|
|
|
|
|
|
April
|
|
|
15.04
|
|
|
|
14.36
|
|
|
|
2,558,817
|
|
|
|
|
|
May
|
|
|
14.46
|
|
|
|
13.29
|
|
|
|
3,758,349
|
|
|
|
|
|
June
|
|
|
15.53
|
|
|
|
13.22
|
|
|
|
8,661,609
|
|
|
|
|
|
July
|
|
|
13.85
|
|
|
|
13.25
|
|
|
|
2,044,940
|
|
|
|
|
|
August
|
|
|
14.21
|
|
|
|
12.90
|
|
|
|
3,035,566
|
|
|
|
|
|
September
|
|
|
14.57
|
|
|
|
13.23
|
|
|
|
4,644,371
|
|
|
|
|
|
October
|
|
|
16.50
|
|
|
|
14.50
|
|
|
|
3,877,192
|
|
|
|
|
|
November
|
|
|
20.75
|
|
|
|
16.79
|
|
|
|
15,985,913
|
|
|
|
|
|
December 1 to 9
|
|
|
21.05
|
|
|
|
20.54
|
|
|
|
7,373,958
|
|
20
The following table sets forth, for the periods indicated, the
high and low trading prices and trading volume of the
Series 1 Shares on Canadian exchanges, including the
TSX, (as reported by Bloomberg) for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price Range
|
|
Year
|
|
|
Period
|
|
High
|
|
|
Low
|
|
|
Volume
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
2009
|
|
|
December
|
|
|
23.75
|
|
|
|
23.10
|
|
|
|
113,033
|
|
|
2010
|
|
|
January
|
|
|
24.75
|
|
|
|
23.40
|
|
|
|
323,002
|
|
|
|
|
|
February
|
|
|
24.25
|
|
|
|
23.99
|
|
|
|
74,840
|
|
|
|
|
|
March
|
|
|
24.99
|
|
|
|
23.86
|
|
|
|
188,214
|
|
|
|
|
|
April
|
|
|
24.85
|
|
|
|
23.71
|
|
|
|
75,573
|
|
|
|
|
|
May
|
|
|
24.15
|
|
|
|
22.55
|
|
|
|
67,898
|
|
|
|
|
|
June
|
|
|
24.00
|
|
|
|
23.25
|
|
|
|
35,205
|
|
|
|
|
|
July
|
|
|
24.20
|
|
|
|
23.60
|
|
|
|
272,592
|
|
|
|
|
|
August
|
|
|
24.90
|
|
|
|
24.20
|
|
|
|
108,492
|
|
|
|
|
|
September
|
|
|
25.00
|
|
|
|
24.65
|
|
|
|
59,001
|
|
|
|
|
|
October
|
|
|
25.00
|
|
|
|
24.65
|
|
|
|
83,251
|
|
|
|
|
|
November
|
|
|
26.25
|
|
|
|
24.86
|
|
|
|
211,062
|
|
|
|
|
|
December 1 to 9
|
|
|
26.18
|
|
|
|
25.95
|
|
|
|
98,478
|
|
The closing price of the DW Common Shares on November 19,
2010, the last trading day prior to the announcement of the
Bank’s intention to make the Offer, was $19.47.
|
|
3.
|
BACKGROUND
TO THE OFFER
|
The Bank, DC and DundeeWealth entered into their agreements
providing for the Offer after the final phase of their
negotiations in November 2010.
In September 2007, the Bank entered into transactions with
DundeeWealth and Dundee involving, among other things, the
acquisition of shares of DundeeWealth that now represent an 18%
interest and the Shareholders’ Agreement between the Bank
and Dundee, the holder of the largest voting interest in
DundeeWealth (now representing approximately 60.3%). The
Shareholders’ Agreement provided for circumstances in which
Dundee or the Bank wished to sell its DundeeWealth shares by
granting the other a “right of first offer” and a
“right to match” third party offers. See
Section 19 of this Circular, “Arrangements, Agreements
or Understandings; Other Benefits to Insiders, Affiliates and
Associates — Shareholders Agreement between the Bank
and DC”.
The November 2010 negotiations were the culmination of periodic
negotiations between the Bank and DC over three years, in which
a variety of transactions relating to DundeeWealth were
discussed.
From November 2007 through May 2010, discussions between the
Bank and DC or DundeeWealth occurred from time to time. In those
discussions, a variety of structures for the acquisition of
DundeeWealth were considered, including those in which the Bank
would be the sole acquiror and those in which the Bank and DC
would own DundeeWealth together. Certain discussions also
related to additional business combinations, including those
with businesses owned by the Bank.
In late July, 2010, DC and the Bank negotiated financial terms,
including the payment of consideration principally in Bank
Common Shares and the payment of a special cash dividend to the
shareholders of DundeeWealth. They also discussed arrangements
for dealing with the capital markets division of DundeeWealth,
which the Bank viewed as a non-core asset, and the possibility
of DC remaining a shareholder of DundeeWealth. The Bank and DC
also acknowledged the need for settling other business matters,
including employee retention.
Counsel to the Bank and counsel to DC met and spoke several
times in August 2010 to exchange views on structural issues,
including those relating to the choices for the disposition by
DundeeWealth of its capital markets division and whether to
implement the transaction by means of a plan of arrangement or a
take-over bid. Although counsel to the Bank prepared term sheets
relating to possible structures for the transaction, they were
not negotiated with DC.
21
At the same time, representatives of the Bank and DC negotiated
financial aspects of the arrangements discussed in July 2010,
including the basis for calculation of the ratio for exchange of
DW Common Shares for Bank Common Shares and the use of preferred
shares of the Bank as additional consideration.
The Bank and DC decided, after receiving the advice of counsel,
to recommend that a formal valuation of the DW Common
Shares be obtained and to ask the DW Special Committee, which DC
advised the Bank had been reconstituted, to supervise the
valuation. On August 27, 2010, on the advice of its
counsel, the DW Special Committee engaged TD Securities to act
as financial advisor to the DW Special Committee and, in that
capacity, to prepare a formal valuation of DundeeWealth and a
fairness opinion.
On September 28, 2010, representatives of the Bank met with
representatives of TD Securities to discuss matters relating to
the formal valuation and the terms on which the Bank was
prepared to acquire DundeeWealth. TD Securities indicated that
it had provided preliminary perspectives on value, although not
a preliminary value range, to the DW Special Committee but did
not disclose them to the Bank.
On October 8, 2010, TD Securities informed the Bank that
the financial terms on which it was prepared to acquire
DundeeWealth were below the low point of the preliminary value
range.
The Bank, DC and DundeeWealth continued to discuss the value of
DundeeWealth, taking account, among other things, of the
increase in the market value of the Bank Common Shares to be
offered as consideration by the Bank. In a letter of
October 22, 2010 to DundeeWealth, the Bank confirmed the
ratio for exchange of DW Common Shares for Bank Common Shares
contemplated in July 2010 and noted that the ratio now yielded
additional value to shareholders of DundeeWealth.
On October 22, 2010, the Bank, wrote to DC to set out, in
broad terms, the basis on which the Bank would be prepared to
acquire DC’s Shares of DundeeWealth, subject to due
diligence and the negotiation of legally binding documentation,
and attached a term sheet. The Bank proposed an offer for all of
the shares of DundeeWealth for consideration, consisting of Bank
Common Shares and preferred shares of the Bank, a cash option
and special dividends, which resulted in additional value for
shareholders of DundeeWealth. The term sheet also contemplated
the disposition of DundeeWealth’s capital markets division,
a support agreement with DundeeWealth,
lock-up
agreements and non-competition and non-solicitation agreements
with DC and Messrs. Ned and David Goodman, and a due
diligence period of 14 days.
DC did not accept the Bank’s letter and term sheet and
negotiations were discontinued.
On November 16 and 17, 2010, representatives of DC and
representatives of the Bank met and spoke.
The representatives of DC informed the representatives of the
Bank that DC had received an expression of interest relating to
the acquisition of DundeeWealth from another interested party
(the “Interested Third Party”) and provided the
Bank with a copy of the indicative term sheet of the Interested
Third Party. The representatives of DC advised that the
expression of interest of the Interested Third Party was not an
offer that DC was willing to accept. The representatives of DC
explained that they considered that the execution risk with
respect to an acquisition of DundeeWealth by the Interested
Third Party was high and that, in light of consolidation of the
Canadian wealth management industry, the Bank was the logical
acquiror of DundeeWealth.
In accordance with the wishes of the Bank, the representatives
of DC also delivered an indicative term sheet stating the terms
on which DC was willing to negotiate the sale of its shares of
DundeeWealth to the Bank.
On November 18, 2010, the Bank and DundeeWealth entered
into a confidentiality agreement, after which the Bank commenced
further due diligence.
On November 19, 2010, the Bank proposed to DC in broad
terms the basis on which the Bank would acquire DundeeWealth,
subject to the resolution of a number of material business
issues, the negotiation of legally binding agreements and the
approval of the Special Committee.
On November 20 and 21, 2010, counsel to the Bank, DC,
DundeeWealth and the DW Special Committee negotiated outstanding
business issues and negotiated and settled the
Lock-Up
Agreement, the Support Agreement and other definitive and
legally binding agreements.
22
On November 21, 2010, as requested, the Bank modified its
offer to permit shareholders of DundeeWealth to elect cash in
lieu of the Bank Preferred Shares as partial consideration and
DC confirmed that it would elect Bank Preferred Shares.
On the evening of November 21, 2010, the DW Special
Committee met with its counsel, counsel to DundeeWealth and TD
Securities. TD Securities delivered orally the Valuation and
Fairness Opinion. The DW Special Committee then unanimously
recommended the Offer and the DW Board of Directors (with the
exception of Interested Directors) unanimously recommended the
Offer and authorized the Support Agreement.
Early in the morning of November 22, 2010, the
Lock-Up
Agreement and the Support Agreement were executed by the parties.
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4.
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AGREEMENTS
RELATING TO THE OFFER
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Support
Agreement
Pursuant to the Support Agreement, the Bank agreed to make or
cause to be made, and DundeeWealth agreed to support, the Offer,
subject to the conditions set forth therein. The following is a
summary of the principal terms of the Support Agreement. It does
not purport to be complete and is qualified in its entirety by
reference to the full text of the Support Agreement filed by
DundeeWealth with the Canadian Securities Administrators and
available on SEDAR at www.sedar.com.
DundeeWealth
Approval of the Offer
DundeeWealth has represented to the Bank that the members of the
DW Board of Directors have unanimously (with the exception of
the Interested Directors) determined that the consideration to
be received under the Offer is fair, from a financial point of
view, to the Shareholders (other than
Locked-Up
Shareholders).
Representations
and Warranties of DundeeWealth
DundeeWealth made customary representations and warranties in
the Support Agreement, including those in respect of the
following matters: (i) organization and qualification;
(ii) authority relative to and enforceability of the
Support Agreement; (iii) absence of conflict or breach and
required filings and consents; (iv) capitalization and
listing; (v) reports and public issuer obligations to
securities regulators; (vi) financial statements;
(vii) absence of undisclosed liabilities;
(viii) shareholder and similar agreements;
(ix) absence of certain changes or events;
(x) litigation; (xi) compliance with applicable Law;
(xii) brokers; (xiii) restrictions on business
activities; (xiv) rights of other persons;
(xv) absence of cease trade orders; (xvi) licenses;
(xvii) material contracts; (xviii) labour matters;
(xix) employees; (xx) tax matters;
(xxi) intellectual property; (xxii) non-Arm’s
Length transactions; and (xxiii) books and records.
Representations
and Warranties of the Bank
The Bank made customary representations and warranties in the
Support Agreement, including those in respect of the following
matters: (i) organization; (ii) authority relative to
and enforceability of the Support Agreement; (iii) absence
of conflict or breach and required filings and consents;
(iv) absence of cease trade orders; (v) reports and
public issuer obligations; (vi) Investment Canada Act
status; and (vii) absence of liabilities, obligations,
events, circumstances or occurrences which are reasonably likely
to have a Material Adverse Effect.
Covenants
by DundeeWealth
DundeeWealth has agreed to: (i) conduct its business in its
ordinary course and in a manner substantially consistent with
past practice and in compliance with all applicable Laws;
(ii) promptly notify the Bank orally and in writing of:
(A) the occurrence of any Material Adverse Effect relating
to DundeeWealth and of any material governmental or third party
complaints, investigations or hearings, or (B) the
occurrence, or failure to occur, of any event or state of facts
which would or would be likely to (x) cause
DundeeWealth’s representations and warranties to become
untrue or inaccurate (without giving effect to, applying or
taking into consideration any materiality or Material Adverse
Effect qualification
23
already contained within such representation or warranty) in any
material respect, or (y) result in the failure in any
material respect of DundeeWealth to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied prior to the Expiry Time; (iii) use commercially
reasonable effort to make or cooperate as necessary in the
making of all necessary filings and applications under
applicable Laws; and (iv) cooperate with the Bank in
respect of the Appropriate Regulatory Approvals.
DundeeWealth has agreed that it will not, directly or
indirectly: (i) amend or propose to amend its articles or
by-laws; (ii) split, combine or reclassify any outstanding
Shares or undertake any capital reorganization; (iii) issue
any securities (other than the issuance of Shares upon exercise
of the rights under certain outstanding Other Securities as of
the date of the Support Agreement that are convertible into
Shares); (iv) declare, set aside or pay any dividends or
make any other distributions, on, or in respect of, the Shares
other than Permitted Distributions; (v) take any action or
fail to take action that is intended to, or would reasonably be
expected to, individually or in the aggregate, prevent,
materially delay or materially impede the ability of the Bank to
consummate the Offer or the other transactions contemplated by
the Support Agreement or materially reduce the benefits of the
Offer to the Bank; (vi) grant or commit to grant any
options, warrants, convertible securities or rights to subscribe
for or otherwise acquire other ownership interest in
DundeeWealth or its Subsidiaries, other than DCM;
(vii) other than in connection with transactions between
DundeeWealth and one or more wholly-owned Subsidiaries or among
wholly-owned Subsidiaries, directly or indirectly redeem,
purchase or otherwise acquire or commit or offer to acquire any
share, warrant or other ownership interest in DundeeWealth or
its Subsidiaries; (viii) guarantee the payment of any
indebtedness of any Person other than DundeeWealth or a
Subsidiary or permit a Subsidiary to do so; (ix) enter into
a non-Arm’s Length transaction, other than transactions
solely between DundeeWealth and one or more wholly-owned
Subsidiaries or between or among wholly-owned Subsidiaries or
DundeeWealth or any Subsidiary and any mutual or investment
funds managed or advised by DundeeWealth or any Subsidiary; and
(x) take any action that may reasonably be expected to
render any representation or warranty made under the Support
Agreement untrue in any material respect.
DundeeWealth has also agreed that it will, and will cause each
of its Subsidiaries to, use commercially reasonable efforts to:
(i) cooperate with the Bank in structuring, planning and
preparing any transaction and take actions as are necessary to
carry out any reorganization (provided the terms and conditions
for such action as outlined in the Support Agreement are met);
(ii) maintain and cause each Subsidiary to maintain its
existing insurance except where replaced by insurance with at
least as favourable credit ratings with similar coverage and
subject to no more onerous deductibles and at a similar cost;
and (iii) facilitate the retention of certain employees of
DundeeWealth and its Subsidiaries and promptly notify the Bank
if any of DundeeWealth’s senior executive officers becomes
aware that any such employee intends to leave the employ of
DundeeWealth or any of its Subsidiaries.
Except (A) as required by applicable Laws or any agreement
to which DundeeWealth or any of its Subsidiaries is a party at
the date of the Support Agreement, (B) for employees of
DCM, and (C) in the case of clauses (i) and
(ii) below, for such ordinary course salary and
compensation increases and bonuses as are approved by
DundeeWealth in the normal course consistent with past practice
and disclosed to the Bank, DundeeWealth will not, and it will
not permit any of its Subsidiaries to do any of the following:
(i) increase the amount of benefit or amount payable under
any Employee Plan; (ii) increase the compensation or
benefits of any former, present or future director, officer,
employee or consultant; (iii) accelerate the release of, or
the expiry date of, any hold period relating to any Shares or
Share Based Compensation Awards held in the Employee Plans or
otherwise amend the Employee Plans; or (iv) adopt,
establish, enter into or implement any employee benefit plan,
policy, severance or termination agreement providing for any
form of benefits or compensation.
Pre-Closing
Transactions by DundeeWealth
DundeeWealth agreed to declare and distribute the Special
Distribution and consummate the Spinout Transaction.
Additional
Covenants of DundeeWealth in Contemplation of the
Offer
DundeeWealth has agreed to, within ten (10) Business Days
after the date of the Support Agreement, deliver to the Bank a
list of all consents of third parties required under its
material contracts.
24
Covenants
of the Bank
The Bank has covenanted to: (i) use reasonable commercial
efforts to satisfy the conditions to the Offer;
(ii) promptly notify DundeeWealth orally and in writing of:
(a) the occurrence of any Material Adverse Effect relating
to the Bank or (b) the occurrence, or failure to occur, of
any event or state of facts which occurrence or failure would or
would be likely to (x) cause any of the representations of
the Bank contained in the Support Agreement to be untrue or
inaccurate (without giving effect to, applying or taking into
consideration any materiality or Material Adverse Effect
qualification already contained within such representation or
warranty) in any material respect or (y) result in the
failure in any material respect of the Bank to comply with or
satisfy any covenant, condition or agreement (without giving
effect to, applying or taking into consideration any
qualification already contained in such covenant, condition or
agreement) to be complied with or satisfied prior to the Expiry
Time; (iii) use reasonable commercial efforts to make or
cooperate as necessary in making all necessary filings and
applications under all applicable Laws; (iv) cooperate with
DundeeWealth in respect of the Appropriate Regulatory Approvals
(it being agreed that the Bank shall have responsibility for and
control over notices, approvals, relief and filings in respect
of Securities Law approvals); (v) make the Offer in
accordance with the provisions of the Support Agreement and in
compliance with all applicable Laws; (vi) subject to the
terms and conditions of the Offer, take up the Shares tendered
to the Offer and pay for such Shares in accordance with the
Support Agreement and Securities Laws; and (vii) defend all
lawsuits and legal, regulatory or other proceedings against the
Bank challenging or affecting the Support Agreement or the
completion or the making of the Offer.
The Bank covenanted that it shall not, directly or indirectly:
(i) amend or propose to amend the terms of the Bank Shares;
(ii) split, combine or reclassify any outstanding Bank
Shares; (iii) take any action or fail to take any action
that is intended to, or would reasonably be expected to,
individually or in the aggregate, prevent, materially delay or
materially impede the ability of the Bank to consummate the
Offer or the other transactions contemplated by the Support
Agreement or materially reduce the benefits of the Offer to
Shareholders; (iv) take any action which may be expected to
render any representation or warranty made by the Bank in the
Support Agreement untrue in any material respect; or
(v) take any action or enter into any transaction which
would, or would reasonably be expected to, cause any condition
of the Offer to be incapable of satisfaction or that is
inconsistent with the successful completion of the transactions
contemplated by the Support Agreement or render the transactions
contemplated by the Support Agreement incapable of completion or
materially more difficult to complete.
Termination
of the Support Agreement
The Support Agreement may be terminated by notice in writing at
any time prior to the Effective Date by mutual consent of
DundeeWealth and the Bank.
The Bank may terminate the Support Agreement by notice in
writing:
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if any condition to the Offer (as described in Section 4 of
the Offer, “Conditions of the Offer”) is not satisfied
or waived by the Expiry Time, as such Expiry Time may be
extended by the Bank in its sole discretion pursuant to the
Support Agreement, and the Bank has not elected to waive such
condition, provided that the Bank is not then in breach of the
Support Agreement so as to cause any condition of the Offer not
to be satisfied;
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•
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at any time if: (i) DundeeWealth has breached any of its
representations and warranties that are qualified by a reference
to materiality or a Material Adverse Effect on DundeeWealth, as
of the date of the Support Agreement; or (ii) DundeeWealth
has breached in any material respect any of its other
representations and warranties contained in the Support
Agreement, as of the date of the Support Agreement (except to
the extent that such representations and warranties speak as of
an earlier or later date which representations and warranties if
not true and correct shall not have been true and correct as of
such earlier or later date) and any such breach or failure to be
true and correct is incapable of being cured by DundeeWealth or
is not cured within ten (10) calendar days after written
notice thereof (or, if the Expiry Time is less than ten
(10) calendar days from the date of such notice, such
lesser period of time) is delivered to DundeeWealth by the Bank;
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•
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at any time if DundeeWealth is in default in any material
respect of any material covenant or obligation under the Support
Agreement where such default is incapable of being cured by
DundeeWealth or is not cured within ten (10) calendar days
after written notice thereof (or, if the Expiry Time is less
than ten (10) calendar days from the date of such notice,
such lesser period of time) is delivered to DundeeWealth by the
Bank;
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•
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if (i) the DW Board of Directors withdraws, modifies,
changes or qualifies (or resolves to do so) its approval or
recommendation of the Support Agreement or the Offer in a manner
adverse to the Bank (unless the foregoing is done as a result of
the Bank having suffered a Material Adverse Effect);
(ii) the DW Board of Directors or any committee thereof
fails to publicly recommend or reaffirm its approval or
recommendation of the Offer within two (2) Business Days of
any written request by the Bank (or, in the event that the Offer
shall be scheduled to expire within such two (2) Business
Day period, prior to the scheduled expiry of the Offer); or
(iii) DundeeWealth breaches its non-solicitation covenant
under the Support Agreement; and
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•
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if the Effective Date has not occurred on or before the Outside
Date, except that this termination right shall not be available
to the Bank if its failure to fulfill any of its obligations or
its breach of any of its representations and warranties under
the Support Agreement has been the cause of, or resulted in, the
failure of the Effective Date to occur by such Outside Date.
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DundeeWealth may terminate the Support Agreement by notice in
writing:
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at any time if: (i) the Bank has breached any of its
representations and warranties that are qualified by a reference
to materiality or a Material Adverse Effect on the Bank, as of
the date of the Support Agreement; or (ii) the Bank has
breached in any material respect any of its other
representations and warranties contained in the Support
Agreement, as of the date of the Support Agreement (except to
the extent that such representations and warranties speak as of
an earlier date which representations and warranties if not true
and correct shall not have been true and correct as of such
earlier date) and any such breach or failure to be true and
correct is incapable of being cured by the Bank or is not cured
within ten (10) calendar days after written notice thereof
(or, if the Expiry Time is less than ten (10) calendar days
from the date of such notice, such lesser period of time) is
delivered to the Bank by DundeeWealth;
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•
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at any time if the Bank is in default in any material respect of
any material covenant or obligation under the Support Agreement
where such default is incapable of being cured by the Bank or is
not cured within ten (10) calendar days after written
notice thereof (or, if the Expiry Time is less than ten
(10) calendar days from the date of such notice, such
lesser period of time) is delivered to the Bank by DundeeWealth;
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if the Effective Date has not occurred on or before the Outside
Date except that such termination right shall not be available
to DundeeWealth if its failure to fulfill any of its obligations
or its breach of any of its representations and warranties under
the Support Agreement has been the cause of, or resulted in, the
failure of the Effective Date to occur by such Outside Date;
provided, however, that if the Bank’s take up and payment
for Shares deposited under the Offer is delayed by: (i) an
injunction or order made by a court or regulatory authority of
competent jurisdiction; or (ii) the Bank not having
obtained any regulatory waiver, consent or approval which is
necessary to permit the Bank to take up and pay for Shares
deposited under the Offer; then, provided that such injunction
or order is being contested or appealed or such regulatory
waiver, consent or approval is being actively sought, as
applicable, the Support Agreement shall not be terminated by
DundeeWealth until the date that is sixty (60) calendar
days after the Outside Date; and
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if at any time (i) DundeeWealth has complied with its
covenants and obligations under the Support Agreement in all
material respects; and (ii) its representations and
warranties are true and correct (except where any breach of such
representations and warranties would not give rise to a right of
termination described above), if the Bank does not commence the
Offer and mail the Offer, the Circular, the Letter of
Transmittal and the Notice of Guaranteed Delivery by the Offer
Deadline, except where the making of the Offer is delayed by:
(a) an injunction or order made by a court or regulatory
authority of competent jurisdiction or (b) the Bank not
having obtained any regulatory waiver, consent or approval which
is necessary to permit the Offer to be made; provided that such
injunction or order is being contested or appealed or such
regulatory waiver, consent or approval is being actively sought,
as applicable, in which case the Support Agreement shall not be
terminated by DundeeWealth until the earlier of (x) ninety
(90) calendar days from the Offer Deadline and (y) the
fifth Business Day following the date on which such injunction
or order ceases to be in effect or such waiver, consent or
approval is obtained, as applicable.
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26
Non-Solicitation
Obligations of DundeeWealth
Except as expressly provided for in the Support Agreement,
DundeeWealth and its Subsidiaries shall not directly or
indirectly do any the following: (i) make, solicit, assist,
initiate, encourage or otherwise facilitate any inquiries from
or submissions of proposals or offers or expressions of interest
from any other Person, other than the Bank and its affiliates
(as defined in the OBCA), relating to any inquiry or proposals
regarding any Acquisition Proposal; (ii) encourage or
participate in any discussions or negotiations, or furnish to
any Person any information, with respect to any Acquisition
Proposal; (iii) withdraw, modify or qualify, in any manner
adverse to the Bank, the approval or recommendation of the DW
Board of Directors; (iv) approve, recommend or remain
neutral with respect to an Acquisition Proposal; or
(v) accept or enter into any letter of intent, agreement in
principle, agreement, arrangement, understanding or undertaking
related to any Acquisition Proposal.
DundeeWealth has also agreed under the Support Agreement that it
will immediately cease and cause to be terminated any existing
solicitations, discussion or negotiations with any Persons other
than the Bank.
If DundeeWealth is in compliance with all of its obligations
under the Support Agreement and subsequently receives a bona
fide unsolicited written Acquisition Proposal that the DW
Board of Directors determines in good faith, after consultation
with its financial and outside legal counsel, constitutes a
Superior Proposal, then the DW Board of Directors may withdraw,
modify or qualify (in any manner adverse to the Bank) its
approval of or recommendation of the Support Agreement or the
Offer. DundeeWealth shall promptly (and in any event within
twenty-four (24) hours) notify the Bank, orally and in
writing of any proposal, inquiry, offer or request relating to
or constituting an Acquisition Proposal or in connection with an
Acquisition Proposal and provide the Bank with details of the
Acquisition Proposal including all material terms to the
proposal, inquiry, offer or request.
DundeeWealth has agreed that it will not enter any agreement
with any Person relating to an Acquisition Proposal during the
term of the Support Agreement.
Lock-Up
Agreement
Pursuant to the
Lock-Up
Agreement, the
Locked-Up
Shareholders have irrevocably agreed to tender their Shares to
the Offer. The following is a summary of the principal terms of
the Lock-Up
Agreement. It does not purport to be complete and is qualified
in its entirety by reference to the full text of the
Lock-Up
Agreement filed by the Bank and DC with the Canadian Securities
Administrators and available on SEDAR at www.sedar.com.
Agreement
to Tender
Each of the
Locked-Up
Shareholders has agreed to take all actions necessary to tender
all of its Shares with the Depositary under the Offer.
Covenants
of the
Locked-Up
Shareholders
Each of the
Locked-Up
Shareholders irrevocably agrees under the
Lock-Up
Agreement that: (i) it will not grant or agree to grant to
any third party any proxy or other right to its Shares or enter
into any voting trust, vote pooling or other agreement or
arrangement with respect to the right to vote, call meetings of
the shareholders of DundeeWealth or give consents or approvals
or permits of any kind with respect to its Shares;
(ii) except to the extent permitted in the
Lock-Up
Agreement, it will not take or authorize any investment banker,
financial advisor, attorney, accountant or any other
representative retained by it to take, any action of any kind
which may in any way adversely affect the success of, or delay
or interfere with the completion of, the Offer or the purchase
of any Shares under the Offer; (iii) it will immediately
cease and terminate any existing discussions with any parties
other than the Bank with respect to any Acquisition Proposal;
(iv) it will not encourage inquiries from or submission of
proposals or offers from any other entity relating to any
Acquisition Proposal; (v) if it receives any Acquisition
Proposal (including an offer or invitation to enter into
discussions), except where it has already done so, it will
forthwith notify the Bank in writing and provide to the Bank all
relevant details relating thereto including the price proposed
to be paid, the form of consideration and the identity of the
proponent; (vi) it will use reasonable efforts as a
shareholder of DundeeWealth to do all things necessary, proper
or advisable under applicable Law to consummate the transactions
contemplated by the Offer, the
Lock-Up
Agreement and the Support Agreement; (vii) except as
expressly contemplated in the
Lock-Up
Agreement to the contrary, it will exercise the voting rights
attaching to its Shares and otherwise use reasonable efforts to
oppose any proposed action that may be regarded as
27
likely to prevent or delay the take up and payment of the Shares
tendered to the Offer, the successful completion of the Offer or
other transactions provided for in the Support Agreement;
(viii) it will not sell, transfer, pledge or otherwise
encumber or convey any Shares to any person, entity or group;
and (ix) it will take all such steps required to ensure
that, at the time at which the Bank takes up and pays for the
Shares pursuant to the Offer, its Shares will be beneficially
owned with good and marketable title.
As promptly as reasonably practicable, but in no event later
than January 21, 2011: (i) Dundee shall prepare a
notice of special meeting of holders of shares of DC to be
called and the accompanying proxy circular; (ii) the board
of directors of DC shall recommend that DC shareholders vote in
favour of the sale of DC’s Shares to the Bank;
(iii) DC shall cause the notice of meeting, proxy circular
and other documentation to be sent to DC shareholders in
accordance with applicable Laws; (iv) Ned Goodman and David
Goodman shall vote any shares of DC which they control in favour
of the sale of the Shares to the Bank; and (v) DC, as the
sole shareholder of DCC, shall, upon receipt of the approval of
the sale of DC’s Shares, cause a shareholders’
resolution to be passed, approving the sale of DCC’s Shares
to the Bank.
Each of Ned Goodman and David Goodman irrevocably agreed that,
prior to the meeting of holders of DC Shares: (i) he will
not sell, transfer, pledge or otherwise encumber or convey any
shares of DC which he owns or controls to any person, entity or
group; and (ii) he will not grant to any third party any
proxy or other right to any such shares of DC or enter into any
voting trust, vote pooling or other agreement or arrangement
with respect to the right to vote, call meetings or give
consents or approvals of any kind with respect to such shares of
DC.
Each
Locked-Up
Shareholder will elect to receive Bank Preferred Shares in lieu
of cash as part of the Offer Consideration.
On the Effective Date, DC will transfer to DundeeWealth for no
additional consideration and on terms and conditions
satisfactory to the Bank, acting reasonably, all of DC’s
right, title and interest in and to all of the trademarks used
in the operation of the business of DundeeWealth other than:
(i) the “DundeeWealth” name, which DC will grant
DundeeWealth and the Bank a royalty-free license to use in their
mutual fund manufacturing
and/or
mutual fund distribution businesses until the earlier of the
third anniversary of the Effective Date and the date on which
the Bank ceases to use such name; and (ii) all business
names that include the word “Goodman” that are
currently used in DundeeWealth’s businesses, which DC will
grant DundeeWealth a royalty-free license to use for a
transitional period after the Effective Date provided that
DundeeWealth ceases to use the names as soon as practicable, and
provided that in no event shall such transitional period exceed
a period of one (1) year.
Representations
and Warranties of the
Locked-Up
Shareholders
Each of the
Locked-Up
Shareholders has made representations and warranties in the
Lock-Up
Agreement in respect of the following matters, among others:
(i) ownership of the Shares; (ii) authority relative
to the
Lock-Up
Agreement and enforceability of the
Lock-Up
Agreement; (iii) absence of breach; (iv) absence of
any agreement, options or right or privilege in the acquisition
or transfer of any of the Shares owned by the
Locked-Up
Shareholder; (v) that its Shares are the only securities of
DundeeWealth held by it; (vi) it has no claim against
DundeeWealth or any of its Subsidiaries at the date of the
Lock-Up
Agreement and will not have any claim against DundeeWealth or
any of its Subsidiaries by reason of the entering into of the
Lock-Up
Agreement; and (vii) residency.
Representations
and Warranties of the Bank
The Bank has made representations and warranties in the
Lock-Up
Agreement in respect of the following matters, among others:
(i) organization; (ii) authority relative to the
Lock-Up
Agreement and the Offer; (iii) that each Bank Share will
(when delivered to Dundee as consideration for the Shares) be
duly authorized and issued as a fully paid and non-assessable
share in the capital of the Bank; and (iv) absence of
breach.
Termination
The Lock-Up
Agreement may be terminated at any time on: (i) mutual
written consent of the Bank and Dundee; (ii) by Dundee upon
written notice to the Bank if the Offer is not mailed by the
Offer Deadline or if the Bank has not taken up and paid for
their Shares by the Outside Date; (iii) by the Bank upon
written notice to Dundee, if any condition of the Offer set
forth is not satisfied by the Outside Date, and the Bank has not
waived such condition; or (iv) upon written notice to the
other party, if such other party is in breach in any material
respect of the
Lock-Up
Agreement.
28
If the
Lock-Up
Agreement is terminated, the provisions of the
Lock-Up
Agreement become void and no party shall have liability to any
other party, except in respect of a breach of the
Lock-Up
Agreement which occurred prior to such termination and the Bank
shall no longer be required to pursue the Offer and, if the
Offer has been made, Dundee shall be entitled to withdraw any of
the Shares tendered to the Offer.
Non-Competition,
Non-Solicitation and Confidentiality Agreements
Each of DC, Ned Goodman and David Goodman will sign
Non-Competition, Non-Solicitation and Confidentiality Agreements
with the Bank on the Effective Date. The Non-Competition,
Non-Solicitation and Confidentiality Agreements, which are
appended to the
Lock-Up
Agreement, follow the same form, except that DC is responsible
for its own actions as well as the actions of its affiliates (as
defined in the OBCA), and David Goodman’s non-competition
obligations will extend throughout the period of his employment
or engagements with DundeeWealth or the Bank plus one
(1) year thereafter, subject to a minimum of three
(3) years.
Each of DC, Ned Goodman and David Goodman will agree not to:
(i) be engaged in any manner whatsoever, including as an
employee, director, officer, contractor, salesperson,
consultant, advisor, principal, agent, member or proprietor in
any business which competes with the Restricted Business; or
(ii) advise, invest or otherwise have any other financial
or other interest in or in respect of any Person that carries on
any business which competes with the Restricted Business,
subject to an exception for holding, as an investor, up to 5% of
the issued shares of a public company listed on any recognized
stock exchange or traded on any bona fide “over the
counter” market anywhere in the world, provided that the
party is not actively involved in the management of such public
company. DC and Ned Goodman will be subject to these
non-competition obligations for three (3) years from the
Effective Date and David Goodman will be subject to these
non-competition obligations throughout his employment or
engagement with DundeeWealth or the Bank plus one (1) year
thereafter (subject to a minimum of three (3) years from
the Effective Date).
Each of DC, Ned Goodman and David Goodman will agree to
non-solicitation obligations in respect of employees,
contractors, salespersons, or consultants for two (2) years
following the Effective Date and will agree not to cause any
actions which are intended to damage the relationship between
DundeeWealth or the Bank and their respective customers in the
Restricted Business.
Upon the Effective Date, DC will agree to immediately cease to
use the name “DundeeWealth”, or any variations thereof
or as part of any acronyms, for any business purpose and will
not grant to any Person (other than the Bank in accordance with
the Lock-Up
Agreement) any right to use such name, except for filings and
other documents required by Law.
Except in certain circumstances, each of DC, Ned Goodman and
David Goodman will also agree to be subject to customary
confidentiality obligations relating to the Restricted Business
or the Bank.
Each of DC, Ned Goodman and David Goodman will also agree that,
in addition to any other relief to which the Bank or
DundeeWealth may become entitled in respect of any breach, the
Bank or DundeeWealth shall be entitled to interim and permanent
injunctive relief, specific performance and other equitable
remedies.
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5.
|
ACCEPTANCE
OF THE OFFER
|
DC, Ned Goodman and David Goodman have irrevocably agreed to
tender their Shares to the Offer upon the terms and subject to
the conditions set forth in the
Lock-Up
Agreement. In addition, the Bank understands that all of the
directors and officers of DundeeWealth intend to tender their
Shares to the Offer. Other than the foregoing, the Bank has no
knowledge regarding whether any other Shareholders will accept
the Offer.
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6.
|
THE
SPINOUT TRANSACTION
|
The
Spinout Transaction
In connection with the Offer, DundeeWealth has agreed to
consummate the spinout of its capital markets business presently
conducted through Dundee Securities Corporation and operating
under the “Dundee Capital Markets” brand, and certain
other assets, by way of distribution to all holders of Shares
of, in the case of holders of DW Common Shares, one DCM
Share per Common Share and, in the case of holders of other
shares and Series F Shares, a comparable number of DCM
Shares per share, having regard to the ratio at which such
shares are convertible into DW Common Shares. Having regard to
the Valuation and Fairness Opinion, the value of each DCM Share
is expected to be approximately $0.50. The Spinout Transaction
will involve the distribution of the DCM Shares, being common
shares of a newly incorporated
29
corporation holding, directly or indirectly, all of the assets
and all of the liabilities of the DCM business. DundeeWealth
plans to issue the DCM Shares by way of a dividend in kind to be
declared on the Business Day immediately prior to the Effective
Date pursuant to an exemption from the prospectus requirements
set forth in applicable Securities Laws. In addition, DCM
intends to file a long-form prospectus with one or more
Securities Regulatory Authorities in order to enable DCM to
become a reporting issuer in one or more provinces or
territories of Canada. Following the issuance of the final
receipt by the applicable regulatory authorities, the DCM Shares
will, subject to certain exceptions, be freely tradable. There
is currently no market through which the DCM Shares may be sold
and Shareholders may not be able to resell the DCM Shares
distributed under the Spinout Transaction. This may affect the
pricing of the DCM Shares in the secondary market, the
transparency and availability of trading prices, the liquidity
of the DCM Shares, and the extent of issuer regulation.
DCM
DCM was incorporated in December 2010 to facilitate the Spinout
Transaction.
Immediately prior to the Spinout Transaction, DCM will become a
holding company for Dundee Securities Ltd., an entity
incorporated to hold the regulated business of DCM. DCM, through
Dundee Securities Ltd. (and one or more other wholly-owned
subsidiaries), will carry on (i) the business currently
carried on by Dundee Securities Corporation (other than the
independent retail advisory business and back-office operations
which will remain as part of DundeeWealth) and (ii) the
flow-through limited partnership business currently carried on
by DundeeWealth, consisting of the establishment and management
of flow-through limited partnerships, and the management of a
closed-end fund, CMP Gold Trust, pursuant to a management
contract which will be acquired by Dundee Securities Ltd. in
connection with the Spinout Transaction. Dundee Securities Ltd.
may also manage additional limited partnerships and closed-end
funds that may be established in the future. In addition, Dundee
Securities Inc., which is registered as a broker in the United
States and is also a member of the Financial Industry Regulatory
Authority, currently a wholly-owned subsidiary of Dundee
Securities Corporation will become a wholly owned subsidiary of
Dundee Securities Ltd. in connection with the Spinout
Transaction. Prior to the Spinout Transaction, DundeeWealth and
Dundee Securities Ltd. will conduct a series of reorganization
transactions, which will involve DundeeWealth transferring net
cash to Dundee Securities Ltd. (estimated as of the date of the
Support Agreement to be $34 million) and Dundee Securities
Ltd. acquiring investments in CMP Gold Trust and DPF India Fund
(estimated as of the date of the Support Agreement to have a
fair market value of $5.9 million and $9.9 million,
respectively). These transactions will occur at fair market
value as at the date on which such transactions take effect.
Subject to receipt of all Appropriate Regulatory Approvals,
Dundee Securities Ltd. will be a full service securities dealer
and a member of IIROC and the Canadian Investor Protection Fund.
Its principal activities will include institutional equity sales
and trading, investment banking, research, and the retail
corporate advisory business currently carried on by Dundee
Securities Corporation (comprised of about 44 IIROC licensed
advisors with approximately $2.8 billion of assets under
administration and approximately $826 million of assets
under management as at October 31, 2010). Dundee Securities
Ltd. will also carry on fixed income, foreign exchange trading,
principal and other trading activities.
The “core” capital markets activities to be carried on
by Dundee Securities Ltd., being institutional equity sales and
trading, investment banking and research will be carried out by
a team of approximately 80 professionals located in Toronto,
Montreal, Calgary and Vancouver.
The investment banking group provides a variety of financial
services, including underwriting the sale of securities to the
public, private placements of securities and advisory services
related to mergers and acquisitions, divestitures,
restructurings and stock exchange listings. The investment
banking group has technical expertise and specialized
capabilities in its core sectors. In the last few years the
investment banking group has continued to increase its presence
in Canada’s investment community with respect to its
participation in both the number of transactions and in its
general participation level within underwriting syndicates.
The primary focus of the institutional equities sales and
trading group is the selling, purchasing and trading of equity
and equity-related securities on behalf of institutional
clients, including mutual funds, hedge funds, pension funds,
banks and insurance companies, generally involving large blocks
of listed and over-the-counter equities. These transactions are
typically handled on an agency basis, but may, from time to
time, take long or short positions as principal to facilitate
client trading. Capital is utilized for principal trading, both
for its own account as well as to improve liquidity and
facilitate
30
client transactions. Additionally, Dundee Securities Ltd. will
have a proprietary equity trading team which is comprised of
three professionals, based in Toronto.
The research group provides individual investors and
institutional clients with reports and opinions covering a
number of industry sectors and specific companies to assist in
the making of investment decisions.
In addition, as a result of the acquisition by Dundee Securities
Ltd. from DundeeWealth of the flow-through limited partnership
business and the CMP Gold Trust management contract referred to
above, following the completion of the Spinout Transaction,
Dundee Securities Ltd. will also act as the manager of
(i) the 2010 and 2009 Canada Dominion Resources
flow-through limited partnerships and the 2009, 2009 II, 2010
and 2010 II CMP flow-through limited partnerships and any new
Canada Dominion Resources or CMP limited partnerships
subsequently created, and (ii) CMP Gold Trust. As at
October 31, 2010 these products had approximately
$449 million in assets under management.
In its capacity as manager of closed-end funds and flow-through
limited partnerships, Dundee Securities Ltd. will be entitled to
monthly or quarterly management fees for management and
distribution services provided by Dundee Securities Ltd. to such
funds and partnerships. Such fees are usually based on a
specified percentage of the net asset value of the applicable
fund or partnership. The net asset value on which the fees
payable to Dundee Securities Ltd. are calculated are based
primarily on the market value of the portfolio investments of
the applicable fund or partnership. In addition, certain funds
and/or
partnerships may pay a performance fee to Dundee Securities Ltd.
when the fund or partnership outperforms certain benchmarks.
Dundee Securities Ltd. intends to enter into an agreement with
Ned Goodman Asset Management Inc. (the current
sub-advisor
on these assets) to continue managing the assets for a
percentage of the management fee and the performance fee.
The transfer of the businesses described above from DundeeWealth
to Dundee Securities Ltd. is subject to the registration of
Dundee Securities Ltd. as a new IIROC dealer member. As part of
this process, Dundee Securities Ltd. will enter into an
introducing/carrying broker agreement with DundeeWealth for the
provision of back office services and a shared services
agreement for the provision of other administrative services. DC
will grant DCM a royalty free license to use the names
“Dundee Capital Markets”, “Dundee
Securities”, Canada Dominion Resources”,
“CMP” and “CMP Gold Trust”.
Pursuant to the Support Agreement, the Bank and DundeeWealth
have agreed that, upon mutual consent, not to be unreasonably
withheld, an alternative transaction to sell DCM and distribute
the sale proceeds may occur in lieu of the Spinout Transaction.
Additional information concerning DCM and Dundee Securities Ltd.
will be included in the prospectus, a copy of which will be
filed on SEDAR at www.sedar.com.
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7.
|
PURPOSE
OF THE OFFER AND PLANS FOR DUNDEEWEALTH
|
Purpose
of the Offer
The purpose of the Offer is to enable the Bank to acquire all
outstanding Shares. Provided that the
Locked-Up
Shareholders tender their Shares to the Offer as required by the
terms of the
Lock-Up
Agreement, the Bank will have a sufficient number of Shares to
acquire all of the Shares not tendered to the Offer pursuant to
a Subsequent Acquisition Transaction, as discussed in
Section 22 of this Circular, “Acquisition of
Shares Not Deposited Under the Offer”. Shareholders
whose Shares are acquired pursuant to a Compulsory Acquisition
or a Subsequent Acquisition Transaction will not receive the
Special Distribution to be declared by DundeeWealth or the
interest in DCM to be distributed by DundeeWealth in connection
with the Offer unless they are Shareholders of record as of the
record date for such distributions.
If for some reason the Bank is unable to effectuate a Compulsory
Acquisition or a Subsequent Acquisition Transaction as outlined
above, the Bank will evaluate other available alternatives.
These alternatives could include, to the extent permitted by
applicable Laws, purchasing additional Shares: (i) in the
open market; (ii) in privately negotiated transactions;
(iii) in another take-over bid or exchange offer or
otherwise; or (iv) from DundeeWealth. Any additional
purchases of Shares could be at a price greater than, equal to
or less than the price to be paid for Shares under the Offer and
could be for cash or securities or other consideration.
Alternatively, the Bank may sell or otherwise dispose of any or
all Shares acquired pursuant to the Offer. These transactions
may be effectuated on terms and at prices then determined by the
Bank, which may vary from the terms and the price paid for
Shares under the Offer.
31
Plans
for DundeeWealth Following the Completion of the
Offer
The acquisition of DundeeWealth is an important step in the
implementation of the Bank’s growth strategy for its wealth
management business. On September 7, 2010, the Bank
announced a reorganization into four business lines, one of
which is Global Wealth Management. To form Global Wealth
Management, the Bank combined its Canadian and international
wealth management and insurance businesses, along with Global
Transaction Banking. As a result of the acquisition, the Bank
will become the fifth largest mutual fund provider in Canada.
Following the acquisition, the Bank will review DundeeWealth and
its assets, corporate structure, capitalization, operations,
properties, policies, management and personnel in order to
determine how best to combine the operations of DundeeWealth
with those of the Bank in order to maximize synergies and
optimize operational efficiencies, taking into account the
circumstances prevailing at that time. The Bank currently
intends to maintain distinct brands for ScotiaFunds and
DundeeWealth’s Dynamic Funds. The transaction will
immediately increase the Bank’s presence in the third-party
advisor channel and enhance products and sales support across
the branch network. At the same time, greater breadth and scale
of distribution will strengthen competitive advantage in areas
of product innovation and efficiency.
Following the completion of the Offer and a Compulsory
Acquisition or Subsequent Acquisition Transaction, the Bank will
apply to the TSX to de-list the DW Common Shares from trading.
See Section 16 of this Circular, “Effect of the Offer
on the Market for Shares, Listing and Public Disclosure by
DundeeWealth”.
After the DW Common Shares are de-listed from trading on the
TSX, DundeeWealth is expected to remain a reporting issuer under
Securities Laws for so long as the Series 1 Shares and the
5.10% unsecured series 1 notes of DundeeWealth due
September 25, 2014 (the “Series 1
Notes”) remain outstanding.
Treatment
of Options and Other Share Based Compensation
Awards
The Offer is made only for Shares and not for any Other
Securities. Any holder of such Other Securities who wishes to
accept the Offer should, to the extent permitted by their terms
and applicable Law, exercise the rights under their Other
Securities in order to obtain certificate(s) representing Shares
that may be deposited in accordance with the terms of the Offer.
Any such exercise must be made sufficiently in advance of the
Expiry Time to ensure that such holders will have certificates
representing Shares available for deposit prior to the Expiry
Time or in sufficient time to comply with the procedures
referred to in Section 3 of the Offer, “Manner of
Acceptance — Procedure for Guaranteed Delivery”.
Immediately prior to the record date for the Spinout Transaction
and the Special Distribution, provided that the Bank has
received all Appropriate Regulatory Approvals, all vested or
unvested Options that remain outstanding will be exchanged for
options (each, a “Replacement Option”) to
acquire such number of Bank Common Shares as is equal to:
(a) that number of Shares that were issuable upon exercise
of such Options immediately prior to the record date for the
Spinout Transaction and the Special Distribution, multiplied by
(b) an exchange ratio of 0.3884, rounded down to the
nearest whole number of Bank Common Shares, at an exercise price
per Bank Common Share equal to (i) the exercise price per
Share at which such Option was exercisable immediately prior to
the record date for the Spinout Transaction and the Special
Distribution divided by (ii) an exchange ratio of 0.3884,
rounded up to the nearest cent. The term to expiry, conditions
to and manner of exercising the Replacement Option will be the
same as the Option for which it was exchanged, and the
Replacement Option shall be governed by the terms of the Option
Plans which shall be amended to refer to Bank Common Shares. See
Section 22 of this Circular, “Acquisition of
Shares Not Deposited under the Offer”.
Immediately prior to the record date for the Spinout Transaction
and the Special Distribution, provided that the Bank has
received all Appropriate Regulatory Approvals and except as
described below, all Share Awards outstanding immediately prior
to the record date for the Spinout Transaction and the Special
Distribution will be exchanged for awards to acquire such number
of Bank Common Shares as is equal to (a) that number of
Shares that were issuable pursuant to such Share Awards
immediately prior to the record date for the Spinout Transaction
and the Special Distribution, multiplied by (b) an exchange
ratio of 0.3884, rounded down to the nearest whole number of
Bank Common Shares; provided however, that: (i) prior to
the Effective Date, the DSU Plan will be terminated and
outstanding DSUs will be settled by DundeeWealth for cash
consideration equal to $21.00 per DSU together with any
Permitted Distributions other than the Special Distribution and
the distribution in connection with the Spinout Transaction; and
(ii) any Share Awards that are in the form of Shares held
in trust under DundeeWealth’s share incentive plan will be
settled by payment of the Offer Consideration, which will
continue to be held subject to the same vesting and other terms.
The tax consequences to holders of Options, Share Awards or
Other Securities are not described in this Circular. Holders of
Options, Share Awards and Other Securities should consult their
tax advisors for advice with
32
respect to any potential income tax consequences arising from
the Offer and any Compulsory Acquisition or Subsequent
Acquisition Transaction.
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8.
|
SOURCE
OF OFFER CONSIDERATION
|
The Bank estimates that if it acquires all of the outstanding
Shares pursuant to the Offer and is required to pay the maximum
amount of cash payable pursuant to the Offer, the total cash
consideration payable, excluding any cash that may be payable by
the Bank in lieu of fractional Bank Shares, will be
approximately $250 million, assuming all Shareholders
(other than the
Locked-Up
Shareholders) elect for the cash payment.
The Bank intends to finance the cash payable pursuant to the
Offer with cash on hand. The Bank’s obligation to purchase
the Shares tendered in the Offer is not subject to any financing
condition.
In no event shall any Shareholder be entitled to a fractional
Bank Share. Where the aggregate number of Bank Common Shares or
Bank Preferred Shares to be issued to a Shareholder as
consideration under the Offer would result in a fraction of a
Bank Share being issuable, the number of Bank Common Shares or
Bank Preferred Shares to be received by such Shareholder shall
be rounded down to the nearest whole Bank Common Share or Bank
Preferred Share and such Shareholder will receive: (i) in
lieu of a fractional Bank Common Share, a cash payment in
Canadian dollars (rounded down to the nearest cent) determined
on the basis of an amount equal to (a) the volume weighted
average trading price on the TSX of the Bank Common Share over
the five (5) Business Days ending one (1) Business Day
before the date that the Bank first takes up and pays for Shares
under the Offer multiplied by (b) the fractional share
amount; and (ii) in lieu of a fractional Bank Preferred
Share, a cash payment in Canadian dollars (rounded down to the
nearest cent) determined on the basis of $25.00 for each whole
Bank Preferred Share.
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|
10.
|
BENEFICIAL
OWNERSHIP OF AND TRADING IN SECURITIES
|
Beneficial
Ownership
Other than as disclosed below, none of the Bank, its affiliates
or related parties or any of its directors or senior officers
or, to the knowledge of such directors and senior officers after
reasonable enquiry: (a) any associate of such directors or
senior officers; (b) any insider of the Bank (other than a
director or officer) or an associate or affiliate (both as
defined in the Securities Act) of such insider; or (c) any
Person acting jointly or in concert with the Bank, beneficially
owns, directly or indirectly, or exercises control or direction
over, any of the securities of DundeeWealth.
As of December 10, 2010, the Bank beneficially owned
1,223,500 DW Common Shares and 27,000,000 Series F Shares,
which may be converted any time, at the option of DundeeWealth
or the Bank, into DW Common Shares on a
one-for-one
basis. Following conversion of the Series F Shares into DW
Common Shares, the Bank would have an 18% voting interest in
DundeeWealth. The Bank also owns 98,500 Series 1 Shares of
DundeeWealth, representing 1.58% of the outstanding
Series 1 Shares, and $7,477,000 principal amount of
Series 1 Notes, representing 3.74% of the outstanding notes
of that class.
The following table sets out the approximate number of
securities of DundeeWealth that each director and senior officer
of the Bank has advised are beneficially owned, directly or
indirectly, or subject to control or direction by that person at
the date of this Circular:
|
|
|
|
|
|
|
Number and Type of
|
|
% of Outstanding
|
Name of Director or Senior Officer
|
|
Securities Held
|
|
Securities of that Class
|
|
John C. Kerr
|
|
300 Series 1 Shares
|
|
less than 0.0001%
|
Anne Marie O’Donovan
|
|
1,300 Common Shares
|
|
less than 0.0001%
|
Significant
Shareholders
No Persons beneficially own, directly or indirectly, or exercise
control or direction over Shares carrying more than 10% of the
voting rights associated with the issued and outstanding Shares,
other than the Bank (as set out above) and the following:
|
|
|
|
•
|
As of November 30, 2010, DC owned, directly and indirectly,
69,940,415 DW Common Shares and 5,453,668 Series X Shares
which are exchangeable into DW Common Shares. DC has voting
control over 1,156,372
|
33
|
|
|
|
|
DW Common Shares that are currently held in escrow. In
addition, DC has voting control over 508,571 Special Shares,
Series C and 250,000 Special Shares, Series D, which
are currently held in escrow and will be released from escrow
subject to certain conditions and converted into DW Common
Shares at various dates, initially on a
one-for-one
basis, subject to adjustment in certain circumstances. While the
Special Shares, Series C and the Special Shares,
Series D are held in escrow, they will be voted in the same
manner as the DW Common Shares held by DC are voted at all
meetings of Shareholders. This represents a direct and indirect
equity ownership of 48.4%, assuming the conversion of the
Series X Shares, and direct and indirect control over a
60.5% voting interest by DC in DundeeWealth on a non-diluted
basis.
|
|
|
|
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•
|
As of November 30, 2010, Ned Goodman, the Chairman of
DundeeWealth, owned in aggregate, directly and indirectly,
Class A subordinate voting shares and Class B common
shares of DC representing an 81.9% voting interest in DC. Ned
Goodman also owned personally 453,270 DW Common Shares.
Accordingly, as of November 30, 2010, Mr. Ned Goodman
beneficially owned in aggregate, directly or indirectly, or
exercises control or direction over shares of DundeeWealth
representing a 48.7% equity interest, assuming the conversion of
the Series X Shares and a 60.8% voting interest on a
non-diluted basis.
|
As of November 30, 2010, the directors and senior officers
of DundeeWealth as a group beneficially owned, directly or
indirectly, or exercised control over: 72,594,370 DW Common
Shares; 5,453,668 Series X Shares; 508,571 Special Shares,
Series C; and 250,000 Special Shares, Series D,
together representing an approximately 61.6% voting interest in
DundeeWealth.
Trading
in DundeeWealth Securities
Except for 3,756 DW Common Shares sold by an associate of Anne
Marie O’Donovan on November 17, 2010 at $18.50 per
share, during the twelve-month period preceding the date of this
Circular, no securities of DundeeWealth have been traded by the
Bank or any of its directors or senior officers, or, to the
knowledge of the Bank’s directors and senior officers after
reasonable inquiry: (a) any associate of a director or
senior officer of the Bank; (b) any Person or company
holding more than 10% of any class of equity securities of the
Bank; or (c) any Person or company acting jointly or in
concert with the Bank.
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11.
|
VALUATION
AND FAIRNESS OPINION
|
The following summary of the Valuation and Fairness Opinion
is qualified in its entirety by the full text of the Valuation
and Fairness Opinion appended hereto as Annex “B”.
Shareholders are encouraged to read the full text of the
Valuation and Fairness Opinion. The Valuation and Fairness
Opinion has been prepared for the use of the DW Special
Committee and the DW Board of Directors and for inclusion in
this Offer and Circular and the Directors’ Circular. The
Valuation and Fairness Opinion does not constitute a
recommendation to any Shareholder as to whether such Shareholder
should tender to the Offer.
Engagement
of TD Securities by the DW Special Committee
TD Securities was retained to act as financial advisor to the DW
Special Committee and to prepare the Valuation and Fairness
Opinion in connection with the Offer pursuant to an agreement
(the “Engagement”) dated as of August 27,
2010. Under the terms of the Engagement, TD Securities will
receive a fee of $1.25 million for its services pursuant to
the Engagement and is also entitled to be reimbursed for
reasonable expenses. The DW Special Committee has agreed, on
behalf of DundeeWealth, to indemnify TD Securities and its
affiliates, subject to certain limitations, against certain
expenses, losses, claims, damages and liabilities arising out of
the Engagement. Fees payable to TD Securities pursuant to
the Engagement are not contingent in whole or in part on, and
there is no agreement, arrangement or understanding that gives
TD Securities a financial incentive in respect of, the success
of the Offer or the conclusions reached in the Valuation and
Fairness Opinion.
34
Credentials
of TD Securities
TD Securities is a Canadian investment banking firm with
operations in a broad range of investment banking activities,
including corporate and government finance, mergers and
acquisitions, equity and fixed income sales and trading,
investment management and investment research. TD Securities has
participated in a significant number of transactions involving
public and private companies and has extensive experience in
preparing valuations and fairness opinions.
Independence
of TD Securities
Neither TD Securities nor any of its affiliated entities:
(i) is an associated or affiliated entity or issuer insider
(as such terms are defined for the purposes of MI
61-101) of
DundeeWealth, the Bank, DC, or any of their respective
associates or affiliates (collectively, the “Interested
Parties”), (ii) is an advisor to any of the
Interested Parties or any of their respective associates or
affiliates in connection with the Offer, other than TD
Securities in its capacity as financial advisor to the DW
Special Committee, (iii) is a manager or co-manager of a
soliciting dealer group for the Offer (or a member of the
soliciting dealer group for the Offer providing services beyond
customary soliciting dealer’s functions or receiving more
than the per security or per security holder fees payable to the
other members of the group); or (iv) has a material
financial interest in the completion of the Offer.
TD Securities and its affiliated entities have not been engaged
to provide any financial advisory services, nor have they acted
as lead or co-lead manager on any offering of DW Common Shares
or any other securities of DundeeWealth, the Bank, DC, or any
Interested Party, during the 24 months preceding the date
on which TD Securities was first contacted in respect of the
Valuation and Fairness Opinion, other than as described in the
Valuation and Fairness Opinion. TD Securities acted as a
co-manager for DundeeWealth’s $200 million debenture
offering in September 2009, and for DC’s $115 million
preferred share issue in September 2009. During the
24 months preceding the date on which TD Securities was
first contacted in respect of the Valuation and Fairness
Opinion, TD Securities acted as lead underwriter for five unit
offerings by Dundee REIT, and acted as a co-manager for
flow-through offerings by certain entities related to
DundeeWealth. TD Securities acted as co-lead manager for the
Bank’s $1 billion subordinated debenture offering in
April 2009. During the 24 months preceding the date on
which TD Securities was first contacted in respect of the
Valuation and Fairness Opinion, TD Securities acted as a
co-manager
on a number of other securities offerings for the Bank. In
November 2010, The Toronto-Dominion Bank
(“TD Bank”), the parent company of TD
Securities, as lender closed a $200 million revolving term
credit facility for DC. TD Bank and TD Securities provide
credit and have a number of normal course ongoing financial
dealings with DundeeWealth, the Bank, DC, and other Interested
Parties.
The fees paid to TD Securities in connection with the foregoing
activities, together with the fee payable to TD Securities
pursuant to the Engagement, are not, in the aggregate,
financially material to TD Securities, and do not give TD
Securities any financial incentive in respect of the conclusions
reached in the Valuation and Fairness Opinion. There are no
understandings or agreements between TD Securities and
DundeeWealth, the Bank, DC, or any other Interested Party with
respect to future financial advisory or investment banking
business. TD Securities may in the future, in the ordinary
course of its business, perform financial advisory or investment
banking services for DundeeWealth, the Bank, DC, or any other
Interested Party. TD Bank and TD Securities, may in the future,
in the ordinary course of their business, provide banking
services or credit facilities to DundeeWealth, the Bank, DC, or
any other Interested Party.
TD Securities acts as a trader and dealer, both as principal and
agent, in major financial markets and, as such, may have and may
in the future, in the ordinary course of its business, have
positions in the securities of any Interested Party and, from
time to time, may have executed or may execute transactions on
behalf of such companies or other clients for which it may have
received or may receive compensation. As an investment dealer,
TD Securities conducts research on securities and may, in the
ordinary course of its business, provide research reports and
investment advice to its clients on investment matters,
including matters with respect to the Offer, DundeeWealth, the
Bank, DC, or any Interested Party.
Scope
of Review
In connection with the Valuation and Fairness Opinion, TD
Securities obtained information from publicly available sources
and from DundeeWealth and the Bank. In addition, TD Securities
reviewed and relied upon (without attempting to verify
independently the completeness or accuracy thereof) or carried
out, among other things: DundeeWealth’s 2010 budget and
unaudited projected financial information for DundeeWealth
prepared by management for each of the years ending 2010 to
2015, as well as such other corporate, industry and financial
market information, investigations and
35
analyses as TD Securities deemed necessary or appropriate in the
circumstances. TD Securities also held discussions with senior
management of DundeeWealth and the Bank. TD Securities has not,
to the best of its knowledge, been denied access by DundeeWealth
to any information requested by TD Securities.
General
Assumptions and Limitations
With the DW Special Committee’s acknowledgment and
agreement as provided for in the Engagement, TD Securities
has relied upon and assumed the accuracy, completeness and fair
presentation of all data and other information obtained by it
from public sources, provided to it by or on behalf of
DundeeWealth, provided to it by or on behalf of the Bank or
otherwise obtained by TD Securities (collectively the
“Information”). The Valuation and Fairness
Opinion assume and are conditional upon, such accuracy,
completeness and fair presentation. TD Securities has not
attempted to independently verify the accuracy, completeness or
fair presentation of any of the Information. With respect to any
budgets, forecasts, projections or estimates provided to TD
Securities and used in its analyses, TD Securities notes
that projecting future results is subject to uncertainty.
TD Securities has assumed, however, that such budgets,
forecasts, projections and estimates were prepared using the
assumptions identified therein which TD Securities has been
advised are (or were at the time of preparation and continue to
be), in the opinion of DundeeWealth, reasonable in the
circumstances.
In preparing the Valuation and Fairness Opinion,
TD Securities has made several assumptions, including that
all conditions precedent to be satisfied to complete the Offer
can be satisfied and that the disclosure in this Circular and in
the Directors’ Circular is accurate in all material
respects and complies, in all material respects, with the
requirements of all applicable Laws.
The Valuation and Fairness Opinion is rendered as of
November 21, 2010, on the basis of securities markets,
economic and general business and financial conditions
prevailing on that date and the condition and prospects,
financial and otherwise, of DundeeWealth, the Bank and their
subsidiaries and affiliates as they were reflected in the
Information and documents reviewed by TD Securities as
presented to it and as represented to TD Securities in its
discussions with management of DundeeWealth and the Bank. In its
analysis and in preparing the Valuation and Fairness Opinion,
TD Securities has made numerous assumptions with respect to
industry performance, general business and economic conditions
and other matters, many of which are beyond the control of
TD Securities.
The preparation of a valuation or a fairness opinion is a
complex process and is not necessarily amenable to partial
analysis or summary description. TD Securities believes that its
analyses must be considered as a whole and that selecting
portions of the analyses or the factors considered by it,
without considering all factors and analyses together, could
create an incomplete view of the process underlying the
Valuation and Fairness Opinion. Accordingly, the Valuation and
Fairness Opinion should be read in its entirety.
Valuation
Based upon and subject to the analyses, assumptions,
qualifications and limitations discussed in the Valuation and
Fairness Opinion, TD Securities is of the opinion that, as
of November 21, 2010, the fair market value of the DW
Common Shares is in the range of $19.50 to $23.50 per DW Common
Share.
Based upon and subject to the analyses, assumptions,
qualifications and limitations discussed in the Valuation and
Fairness Opinion, TD Securities is of the opinion that, as
of November 21, 2010, the value of the consideration to be
paid to holders of DW Common Shares under the Offer (combined
with the Distribution and Spinout Consideration) is in the range
of $21.00 to $21.25 per DW Common Share.
Fairness
Opinion
Based upon and subject to the analyses, assumptions,
qualifications and limitations discussed in the Valuation and
Fairness Opinion, TD Securities is of the opinion that, as
of November 21, 2010, the Offer Consideration (combined
with the Distribution and Spinout Consideration) to be received
by the holders of DW Common Shares and Special Shares, other
than the
Locked-Up
Shareholders, is fair, from a financial point of view, to such
shareholders.
36
To the knowledge of DundeeWealth and its directors and senior
officers, after reasonable inquiry, other than the Valuation and
Fairness Opinion, there have been no prior valuations (as
defined in MI
61-101)
prepared in respect of DundeeWealth, the Shares or any material
assets of DundeeWealth during the 24 months prior to the
date of the Offer.
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|
13.
|
DIVIDENDS
AND DIVIDEND POLICY
|
DundeeWealth’s current policy is to pay monthly regular
cash dividends to the holders of the DW Common Shares and
Special Shares (including the Series F Shares). In
addition, DundeeWealth’s current policy is to pay a special
dividend of 25% of DundeeWealth’s after-tax net earnings
received from performance fees in a given calendar year.
On November 4, 2010, the DW Board of Directors declared
monthly regular cash dividends in the amount of $0.05 per DW
Common Share and Special Share (including the Series F
Shares) payable on each of December 1, 2010,
January 4, 2011 and February 1, 2011. On the same day,
the DW Board of Directors also approved the payment of a
quarterly cash dividend of $0.29688 per Series 1 Share
payable on December 31, 2010 to shareholders of record as
at December 17, 2010.
The following table discloses the dollar amount of cash
dividends declared per share for each class and series of shares
of DundeeWealth outstanding during the financial years ended
December 31, 2009 and 2008 and the 2010 financial year to
date:
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|
|
|
|
|
|
|
|
|
|
|
|
Dividends per Outstanding Share
|
|
2010
|
|
|
2009
|
|
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2008
|
|
|
DW Common Shares
|
|
$
|
0.385
|
|
|
$
|
0.11
|
|
|
$
|
0.08
|
|
Special Shares Series C
|
|
$
|
0.385
|
|
|
$
|
0.11
|
|
|
$
|
0.08
|
|
Special Shares Series D
|
|
$
|
0.385
|
|
|
$
|
0.11
|
|
|
$
|
0.08
|
|
Special
Shares Series E(1)
|
|
|
n/a
|
|
|
$
|
0.04
|
|
|
$
|
0.08
|
|
Series F
Shares(2)
|
|
$
|
0.385
|
|
|
$
|
0.11
|
|
|
$
|
0.08
|
|
Series X Shares
|
|
$
|
0.60
|
|
|
$
|
0.60
|
|
|
$
|
0.60
|
|
Series 1 Shares
|
|
$
|
1.18752
|
|
|
$
|
1.18752
|
|
|
$
|
1.18752
|
|
|
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(1)
|
|
DundeeWealth paid dividends on the
Special Shares Series E for the first and second
quarters of 2009. On September 3, 2009, the Special
Shares Series E were converted into DW Common Shares.
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(2)
|
|
DundeeWealth paid dividends on the
Series F Shares commencing on January 2, 2008.
|
14. PREVIOUS
PURCHASES AND SALES
During the twelve (12) months prior to the date of this
Circular, DundeeWealth has not purchased or sold any securities
of DundeeWealth other than 634,500 DW Common Shares, which it
purchased under its outstanding normal course issuer bid for an
aggregate purchase price of $8,686,656 (without commission) or
an average purchase price per DW Common Share of $13.70.
According to the DundeeWealth Public Documents, as of
May 12, 2010, DundeeWealth believed that the purchase of DW
Common Shares at current market values represented a good
long-term investment for the company. 433,005 DW Common
Shares were released due to share loan repayments and 111,848
DW Common Shares were sold on the TSX for share loan
cancellations.
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|
15.
|
PREVIOUS
DISTRIBUTIONS OF SECURITIES
|
Other than as set forth below, during the five (5) years
prior to the date hereof, DundeeWealth has not completed any
other distribution of any class of Shares (excluding Shares
distributed pursuant to the exercise of Options, Shares
distributed pursuant to Employee Plans and Shares distributed as
dividends in kind):
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|
|
|
•
|
In February 2006, DundeeWealth issued 350,000 DW Common Shares
on the acquisition of Harrington Lane Inc. at a price of $10.75
per share or $3,763,000 in the aggregate.
|
|
|
•
|
In February 2007, DundeeWealth issued 11,000,000 DW Common
Shares on the acquisition of a 16.3% minority interest in DWM
Inc. held by Caisse de dépôt et placement du
Québec at a price of $15.99 per share or $175,890,000 in
the aggregate.
|
37
|
|
|
|
•
|
In November 2006, DundeeWealh issued 1,800,000 DW Common Shares
to DC on the exercise of warrants, which were exercisable at a
price of $7.75 for aggregate proceeds of $13,950,000.
|
|
|
•
|
In September 2007, DundeeWealth issued 300,000 DW Common Shares
and 27,000,000 Series F Shares to the Bank at a price of
$12.76 per share or $348.3 million in the aggregate.
|
|
|
•
|
In July 2008, DundeeWealth issued 1,417,582 DW Common Shares on
the acquisition of Aurion Capital Management Inc. at a price of
$13.65 per share or $19,350,000 in the aggregate.
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|
|
•
|
DW declares quarterly cash dividends on the Series X Shares
in the amount of $0.15 per share ($818,050.20 in the aggregate).
DCC owns all the issued and outstanding Series X Shares and
uses the dividend proceeds to subscribe for DW Common Shares.
The number of DW Common Shares to be issued is determined by
dividing $818,050.20 by the market price of the DW Common Shares
when the dividend is declared. DundeeWealth has issued a total
of 675,269 DW Common Shares pursuant to this arrangement and,
more specifically, (i) 82,216 DW Common Shares were issued
in January 2006 at a price of $9.95 per share; (ii) 71,134
DW Common Shares were issued in April 2006 at a price of $11.50
per share; (iii) 74,566 DW Common Shares were issued in
July 2006 at a price of $10.97 per share; (iv) 68,456 DW
Common Shares were issued in October 2006 at a price of $11.95
per share; (v) 59,798 DW Common Shares were issued in
January 2007 at a price of $13.68 per share; (vi) 50,870 DW
Common Shares were issued in April 2007 at a price of $16.08 per
share; (vii) 49,372 DW Common Shares were issued in July
2007 at a price of $16.57 per share; (viii) 47,286 DW
Common Shares were issued in October 2007 at a price of $17.30
per share; (ix) 43,687 DW Common Shares were issued in
January 2008 at a price of $18.73 per share; (x) 66,779 DW
Common Shares were issued in April 2008 at a price of $12.25 per
share; and (xi) 61,105 DW Common Shares were issued in July
2008 at a price of $13.39 per share.
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|
|
16.
|
EFFECT
OF THE OFFER ON THE MARKET FOR SHARES, LISTING AND PUBLIC
DISCLOSURE BY DUNDEEWEALTH
|
Market
for the Shares
Provided that the
Locked-Up
Shareholders tender their Shares to the Offer as required by the
terms of the
Lock-Up
Agreement, the Bank will have a sufficient number of Shares to
acquire all of the Shares not tendered to the Offer pursuant to
a Subsequent Acquisition Transaction. In such event, the Bank
will apply to de-list the DW Common Shares from the TSX and
there will no longer be a trading market for the DW Common
Shares.
Public
Disclosure by DundeeWealth
After the DW Common Shares are de-listed from trading on the
TSX, it is expected that DundeeWealth will remain a reporting
issuer under Securities Laws for so long as the Series 1
Shares and Series 1 Notes remain outstanding.
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|
17.
|
EFFECTS
OF THE OFFER ON OUTSTANDING INDEBTEDNESS
|
Series 1
Notes
As of December 10, 2010, DundeeWealth had $200 million
principal amount of Series 1 Notes outstanding. The Offer
will not have an impact on the outstanding Series 1 Notes.
Credit
Facilities
As of December 10, 2010, DundeeWealth had credit facilities
of $100,550,000 with certain Canadian Schedule I chartered
banks. It is anticipated that the credit facilities will be
assumed by DCM or cancelled.
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|
18.
|
COMMITMENTS
TO ACQUIRE SHARES
|
Except pursuant to the Offer, the
Lock-Up
Agreement and the Shareholders’ Agreement described below,
neither the Bank nor any of its directors or senior officers,
nor, to the knowledge of the directors and senior officers of
the Bank after reasonable enquiry: (i) any associate of
such directors or senior officers; (ii) any insider of the
Bank (other than a director or officer) or an associate or
affiliate (both as defined in the Securities Act) of such
insider; or (iii) any Person acting jointly or in concert
with the Bank, has entered into any commitments to acquire any
securities of DundeeWealth.
38
|
|
19.
|
ARRANGEMENTS,
AGREEMENTS OR UNDERSTANDINGS; OTHER BENEFITS TO INSIDERS,
AFFILIATES AND ASSOCIATES
|
There are no arrangements or agreements made or proposed to be
made between the Bank and any of the directors or senior
officers of DundeeWealth and no payments or other benefits are
proposed to be made or given by the Bank by way of compensation
for loss of office or as to such directors or senior officers
remaining in or retiring from office if the Offer is successful.
Other than the
Lock-Up
Agreement and the Shareholders’ Agreement described below,
there are no contracts, arrangements or understandings, formal
or informal, between the Bank and any securityholder of
DundeeWealth with respect to the Offer, or between the Bank and
any Person, with respect to any securities of DundeeWealth in
relation to the Offer.
Other than the Support Agreement, there is no arrangement,
agreement, commitment or understanding made between the Bank and
DundeeWealth relating to the Offer.
Other than the Shareholders’ Agreement described below,
there is no agreement, arrangement, commitment or understanding
of which the Bank is aware that could affect control of
DundeeWealth that the Bank has access to and can reasonably be
regarded as material to a tendering Shareholder under the Offer.
Shareholders’
Agreement between the Bank and DC
In September 2007, the Bank subscribed for 300,000 DW Common
Shares and 27,000,000 Series F Shares. In connection with
this investment, Dundee and the Bank entered into the
Shareholders’ Agreement outlining their respective rights
and interests as shareholders of DundeeWealth.
The Shareholders’ Agreement provides that:
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(a)
|
in the event that Dundee owns at any time, more than 30% of the
outstanding voting shares of DundeeWealth, DC may request the
Bank not to vote against or otherwise oppose the nomination by
DC of a majority of the DW Board of Directors (provided that the
Bank does not hold more voting and equity shares than Dundee at
such time);
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|
|
(b)
|
so long as the Bank holds a minimum of 10% of the issued and
outstanding voting or equity shares of DundeeWealth, the Bank
may propose two nominees to the DW Board of Directors and, so
long as the Bank holds Series F Shares, it shall be
entitled to propose one additional nominee to the DW Board of
Directors; and
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|
|
(c)
|
if the Bank elects to make such designation, Dundee shall
request that its nominees approve the appointment of the
designated Bank nominee to each of the committees of the DW
Board of Directors, provided in each case that the proposed
nominee has the requisite qualifications to serve on the
particular committee.
|
The parties have also agreed that if the DW Board of Directors
plans to issue additional equity or voting shares of
DundeeWealth, (other than pursuant to share based compensation
arrangements), each will use its reasonable best efforts to
ensure that each of Dundee and the Bank is offered the
opportunity to purchase shares sufficient to maintain its
proportionate voting and equity ownership at that time.
In addition, each of Dundee and the Bank has a “right of
first offer” to purchase shares of DundeeWealth if the
other Shareholder wishes to sell and are further subject to
certain “rights to match” if the parties do not
initially agree on a sale transaction and the seller receives an
offer from a third party. The Bank has also agreed to customary
“standstill” restrictions that prohibit the
Bank’s acquisition of more than a 20% interest in
DundeeWealth. Such restrictions do not apply to the acquisition
of Shares pursuant to the Offer.
Provided that Dundee holds at least 20% of the outstanding
equity or voting securities of DundeeWealth and in the event
that: (i) the right of first offer process is observed;
(ii) the Bank and Dundee do not reach an agreement for the
purchase of Dundee’s Shares pursuant to the Bank’s
right of first offer and such Shares are subsequently purchased
by a third party; and (iii) the Bank does not exercise its
right to match, then the Bank will be entitled to receive a
non-success fee from DundeeWealth in an amount equal to between
$20 million and $40 million, as determined by
reference to the actual per Share acquisition price paid by the
third party on completion of the acquisition. Although
DundeeWealth is not a party to the Shareholders’ Agreement,
the DW Board of Directors has approved the performance by
DundeeWealth of the above commitment as contemplated by the
Shareholders’ Agreement.
39
If at any time within twelve (12) months after the date
that the Bank takes up the Shares tendered to the Offer by DC
the Bank acquires Shares from minority shareholders at a price
higher than $21.00 per DW Common Share (which is what the Bank
regards as the price for the purposes of this provision taking
into account the Offer Consideration, the Special Distribution
and the Spinout Transaction), the Bank will be obliged to pay
such additional consideration to Dundee in respect of their
Shares tendered to the Offer and will ensure that Dundee receive
the same aggregate consideration per Share as those minority
shareholders.
A copy of the Shareholders’ Agreement filed by DundeeWealth
with Canadian Securities Administrators is available on SEDAR at
www.sedar.com.
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|
20.
|
MATERIAL
CHANGES AND OTHER INFORMATION
|
Except as disclosed elsewhere in this Circular (including the
documents incorporated by reference herein) or as otherwise
publicly disclosed by DundeeWealth or the Bank, the Bank has no
information which indicates any material change in the affairs
of DundeeWealth since the date of the last published financial
statements of DundeeWealth. The Bank has no knowledge of any
material information concerning the Bank or the Bank Common
Shares that has not been generally disclosed or any other matter
that has not previously been generally disclosed but which
would, in the latter case, reasonably be expected to affect the
decision of the Shareholders to accept or reject the Offer.
The Bank’s obligation to take up and pay for Shares
tendered under the Offer is conditional upon all Appropriate
Regulatory Approvals having been obtained on terms satisfactory
to the Bank, acting reasonably.
Bank
Act Approvals
The Bank is subject to the Bank Act and requires the written
approval of the Minister of Finance (Canada) to acquire control
(as defined in the Bank Act) of any entity which is primarily
engaged in dealing in securities from a person who is not a
member of the Bank’s group. This approval will be required
in connection with the Bank’s acquisition of DundeeWealth
pursuant to the Offer.
Under the Bank Act, the Bank must also obtain the approval of
the Office of the Superintendent of Financial Institutions to
issue shares for non-cash consideration. The Bank intends to
issue Bank Shares to Shareholders who tender their Shares to the
Offer and as required to complete the acquisition of any Shares
not deposited to the Offer pursuant to a Compulsory Acquisition
or Subsequent Acquisition Transaction.
The Bank is seeking the foregoing approvals.
Competition
Act Approval
Part IX of the Competition Act requires that the parties to
certain transactions that exceed the thresholds set out in
Sections 109 and 110 of the Competition Act
(“Notifiable Transactions”) provide the
Commissioner of Competition (the
“Commissioner”) with prior written notice of
the transaction. Subject to certain limited exceptions, the
parties to a Notifiable Transaction cannot complete such
transaction until they have provided to the Commissioner the
information prescribed pursuant to Subsection 114(1) of the
Competition Act and the applicable waiting period pursuant to
Section 123 of the Competition Act has expired or been
terminated. The waiting period is thirty (30) calendar days
after the day on which the parties to the transaction submit the
prescribed information, provided that, before the expiry of this
period, the Commissioner has not notified the parties pursuant
to Subsection 114(2) of the Competition Act that she requires
additional information that is relevant to the
Commissioner’s assessment of the transaction (a
“Supplementary Information Request”). If the
Commissioner provides the parties with a Supplementary
Information Request, the parties cannot complete the transaction
until thirty (30) calendar days after compliance with the
Supplementary Information Request, provided that there is no
order in effect prohibiting completion of the transaction at
that time. A transaction may be completed before the end of the
applicable waiting period if the Commissioner notifies the
parties that she does not, at such time, intend to challenge the
transaction by making an application under Section 92 of
the Competition Act.
Alternatively, or in addition to filing the prescribed
information, a party to a Notifiable Transaction may apply to
the Commissioner for: (i) an advance ruling certificate (an
“ARC”); or (ii) a “no-action”
letter and an exemption from the pre-
40
merger notification obligation under paragraph 113(c) of
the Competition Act (a “No-Action Letter”). The
Commissioner may issue either an ARC or No-Action Letter in
respect of a proposed transaction if she is satisfied that there
are not sufficient grounds on which to apply to the Competition
Tribunal for an order under Section 92 of the Competition
Act.
Upon completion of her review, the Commissioner may decide to:
(i) challenge a Notifiable Transaction, if the Commissioner
concludes that it is likely to substantially prevent or lessen
competition, and seek an order of the Competition Tribunal
(a) prohibiting the completion of the Notifiable
Transaction on an interim or permanent basis if the parties
insist on proceeding with it without addressing the
Commissioner’s concerns, (b) requiring the divestiture
of shares or assets or the dissolution of the Notifiable
Transaction, if it has been completed, or (c) with the
consent of the Person against whom the order is directed,
requiring that person to take any other action; (ii) issue
a No-Action Letter advising the parties that the Commissioner
does not intend to challenge the Notifiable Transaction at that
time (but that she retains the authority to do so for one
(1) year after completion of the Notifiable Transaction);
or (iii) issue an ARC. Where an ARC is issued and the
Notifiable Transaction to which the ARC relates is substantially
completed within one (1) year after the ARC is issued, the
Commissioner cannot seek an order of the Competition Tribunal in
respect of the Notifiable Transaction solely on the basis of
information that is the same or substantially the same as the
information on the basis of which the ARC was issued.
The purchase of Shares under the Offer is a Notifiable
Transaction. The Bank and DundeeWealth intend to submit a
request for an ARC or No-Action Letter in respect of the
transactions contemplated by the Offer on or around the date of
this Circular.
The obligation of the Bank to take up and pay for Shares under
the Offer is conditional upon obtaining Competition Act approval
(“Competition Act Approval”), defined to mean
that: (a) the Commissioner shall have issued an ARC, or
(b) the applicable waiting period under Section 123 of
the Competition Act shall have expired or been terminated by the
Commissioner; or the obligation to submit a notification shall
have been waived under paragraph 113(c) of the Competition
Act, and the Commissioner shall have issued a No-Action Letter.
Securities
Regulatory Approvals
The provisions of National Instrument
81-102,
“Mutual Funds” (“NI
81-102”)
of the Canadian Securities Administrators require that the
approval of the Canadian Securities Administrators be obtained
for the direct or indirect change in control of any manager of a
public mutual fund in Canada. GCICL is applying to the Canadian
Securities Administrators for, and expects to receive, such
approval.
NI 81-102
also provides that GCICL cannot continue to act as the manager
of the Dynamic and Marquis mutual funds unless securityholders
of the funds are provided with not less than sixty
(60) days’ prior notice of the change in control of
GCICL resulting from successful completion of the Offer. Such
notice has been mailed and an application is being made to the
Canadian Securities Administrators for permission (which is
expected to be received) to abridge this notice to a period that
will expire no later than the Expiry Time.
National Instrument
31-103,
“Registration Requirements and Exceptions”
requires that notice be given to the Canadian Securities
Administrators of a proposal to acquire beneficial ownership of,
or direct or indirect control or direction over, a security of:
(i) a registered firm; or (ii) a person or company of
which a registered firm is a subsidiary. The Canadian Securities
Administrators must not object to the acquisition. The Bank is
giving such notices to, and expects to receive the approvals and
non-objections of, the relevant Canadian Securities
Administrators in respect of the change of control of
DundeeWealth and its registrant subsidiaries and the Spinout
Transaction resulting from successful completion of the Offer.
The by-laws, rules and regulations of IIROC, the MFDA, the TSX,
the TSV-V and the Bourse require that IIROC, the MFDA, the TSX,
the TSX-V and the Bourse approve matters relating to the change
of control of any of their respective members. Applications are
being made and approvals are expected to be received from IIROC,
the MFDA, the TSX, the TSX-V and the Bourse in respect of the
change of control of DundeeWealth and its member subsidiaries
and the Spinout Transaction resulting from successful completion
of the Offer.
41
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22.
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ACQUISITION
OF SHARES NOT DEPOSITED UNDER THE OFFER
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Compulsory
Acquisition
If within 120 days after the date of the Offer, the Offer
is accepted by Shareholders who in the aggregate hold not less
than 90% of the issued and outstanding Shares of any class as at
the Expiry Time, other than Shares held at the date of the Offer
by or on behalf of the Bank or an affiliate or associate (as
those terms are defined in the OBCA) of the Bank, and the Bank
acquires or is bound to take up and pay for such Shares tendered
to the Offer, the Bank intends to acquire all Shares of that
class (including DW Common Shares that may be issued as a result
of the exercise of the rights under any outstanding Other
Securities) that are held by those persons who did not accept
the Offer (and each person who subsequently acquires any of such
Shares, collectively, the “Dissenting Offeree”)
pursuant to the provisions of Part XV of the OBCA on the
same terms and for the same consideration as the Shares acquired
under the Offer (a “Compulsory Acquisition”).
Shareholders whose Shares are acquired pursuant to a Compulsory
Acquisition will not receive the $2.00 special dividend to be
declared by DundeeWealth or the interest in DCM to be
distributed by DundeeWealth in connection with the Offer unless
they are Shareholders of record as of the record date for such
distributions.
To exercise its statutory right of Compulsory Acquisition, the
Bank must send a notice (the “Bank’s
Notice”) to each Dissenting Offeree and to DundeeWealth
of such proposed acquisition within sixty (60) days after
the date of the termination of the Offer and in any event within
180 days after the date of the Offer. Within twenty
(20) days after the Bank sends the Bank’s Notice, the
Bank must pay or transfer to DundeeWealth the consideration the
Bank would have to pay or transfer to the Dissenting Offerees if
they had elected to accept the Offer, to be held in trust for
the Dissenting Offerees. In accordance with Section 188 of
the OBCA, within twenty (20) days after receipt of the
Bank’s Notice, each Dissenting Offeree must send the
certificate(s) representing the Shares held by such Dissenting
Offeree to DundeeWealth and must elect either to transfer such
Shares to the Bank on the terms of the Offer or to demand
payment of the fair value of such Shares held by such holder by
so notifying the Bank within twenty (20) days after the
Dissenting Offeree receives the Bank’s Notice. A Dissenting
Offeree who does not, within twenty (20) days after the
Dissenting Offeree received the Bank’s Notice, notify the
Bank that the Dissenting Offeree is electing to demand payment
of the fair value of the Dissenting Offeree’s Shares is
deemed to have elected to transfer such Shares to the Bank on
the same terms that the Bank acquired Shares from the
Shareholders who accepted the Offer. If a Dissenting Offeree has
elected to demand payment of the fair value of such Shares, the
Bank may apply to a court having jurisdiction to hear an
application to fix the fair value of such Shares of such
Dissenting Offeree. If the Bank fails to apply to such court
within twenty (20) days after it made the payment or
transferred the consideration to DundeeWealth referred to above,
the Dissenting Offeree may then apply to the court within a
further period of twenty (20) days to have the court fix
the fair value. If there is no such application made by the
Dissenting Offeree within such period, the Dissenting Offeree
will be deemed to have elected to transfer such Shares to the
Bank on the terms that the Bank acquired Shares from the
Shareholders who accepted the Offer. Any judicial determination
of the fair value of the Shares could be less or more than the
amount paid pursuant to the Offer.
The foregoing is a summary only of the statutory right of
Compulsory Acquisition that may become available to the Bank and
is qualified in its entirety by the provisions of
Section 188 of the OBCA. Section 188 of the OBCA is
complex and may require strict adherence to notice and timing
provisions, failing which a Dissenting Offeree’s rights may
be lost or altered. Shareholders who wish to be better informed
about those provisions of the OBCA should consult their legal
advisors.
See Section 23 of this Circular, “Certain Canadian
Federal Income Tax Considerations” for a discussion of the
tax consequences to Shareholders in the event of a Compulsory
Acquisition.
Subsequent
Acquisition Transaction
If the Bank acquires less than 90% of the Shares of any class
under the Offer, or if the right of Compulsory Acquisition
described above is not available for any reason, the Bank will
pursue other means of acquiring the remaining Shares not
tendered to the Offer, including causing one or more special
meetings of the then Shareholders to be called to consider an
amalgamation, statutory arrangement, capital reorganization,
amendment to its articles, consolidation or other transaction
involving the Bank
and/or an
affiliate of the Bank and DundeeWealth
and/or the
Shareholders for the purpose of DundeeWealth becoming, directly
or indirectly, a wholly-owned subsidiary or affiliate of the
Bank (a “Subsequent Acquisition Transaction”).
The consideration to be paid to Shareholders pursuant to any
such Subsequent Acquisition Transaction would be equal in amount
to, and in the same form as, that payable under the Offer.
Shareholders whose Shares are acquired pursuant to a Subsequent
Acquisition Transaction will not receive the $2.00 special
dividend to
42
be declared by DundeeWealth or the interest in DCM to be
distributed by DundeeWealth in connection with the offer unless
they are Shareholders of record as of the record date for such
distributions.
MI 61-101
may deem a Subsequent Acquisition Transaction to be a
“business combination” if such Subsequent Acquisition
Transaction would result in the interest of a holder of Shares
being terminated without the consent of the holder, irrespective
of the nature of the consideration provided in substitution
therefor. The Bank expects that any Subsequent Acquisition
Transaction relating to Shares will be a “business
combination” under MI
61-101.
In certain circumstances, the provisions of MI
61-101 may
also deem certain types of Subsequent Acquisition Transactions
to be “related party transactions”. However, if the
Subsequent Acquisition Transaction is a “business
combination”, the “related party transaction”
provisions therein do not apply to such transaction. Following
completion of the Offer, the Bank may be a “related
party” of DundeeWealth for the purposes of MI
61-101,
although the Bank expects that any Subsequent Acquisition
Transaction would be a “business combination” for
purposes of MI
61-101 and
therefore the “related party transaction” provisions
of MI 61-101
would not apply to the Subsequent Acquisition Transaction. The
Bank intends to carry out any such Subsequent Acquisition
Transaction in accordance with MI
61-101, or
any successor provisions, or exemptions therefrom, such that the
“related party transaction” provisions of MI
61-101 would
not apply to such Subsequent Acquisition Transaction.
MI 61-101
provides that, unless exempted, an issuer proposing to carry out
a business combination is required to prepare a valuation of the
affected securities (and, subject to certain exceptions, any
non-cash consideration being offered therefor) and to provide
the holders of the affected securities with a summary of such
valuation. The Bank currently intends to rely on available
exemptions (or, if such exemptions are not available, to seek
waivers pursuant to MI
61-101
exempting DundeeWealth and the Bank or one or more of its
affiliates, as appropriate) from the valuation requirements of
MI 61-101.
An exemption is available under MI
61-101 for
certain business combinations completed within 120 days
after the date of expiry of a formal take-over bid where the
consideration per security under the business combination is at
least equal in value to and is in the same form as the
consideration that depositing security holders were entitled to
receive in the take-over bid, provided that certain disclosure
is given in the take-over bid disclosure documents (which
disclosure has been provided in this Circular). The Bank expects
that this exemption will be available.
Depending on the nature and terms of the Subsequent Acquisition
Transaction, the provisions of the OBCA and DundeeWealth’s
constating documents may require the approval of
662/3%
of the votes cast by holders of the outstanding Shares of each
class at a meeting duly called and held for the purpose of
approving the Subsequent Acquisition Transaction. MI
61-101 would
also require that, in addition to any other required security
holder approval, in order to complete a business combination
(such as a Subsequent Acquisition Transaction), the approval of
a majority of the votes cast by “minority”
shareholders of each class of affected securities must be
obtained unless an exemption is available or discretionary
relief is granted by applicable Securities Regulatory
Authorities. If, however, following the Offer, the Bank and its
affiliates are the registered holders of 90% or more of the
Shares of each class at the time the Subsequent Acquisition
Transaction is initiated, the requirement for
“minority” approval would not apply to the transaction
if an enforceable appraisal right or substantially equivalent
right is made available to “minority” shareholders.
In relation to the Offer and any subsequent business
combination, the “minority” shareholders will be,
unless an exemption is available or discretionary relief is
granted by applicable Securities Regulatory Authorities, all
Shareholders other than: (i) the Bank (other than in
respect of Shares acquired pursuant to the Offer as described
below); (ii) any “interested party” (within the
meaning of MI
61-101);
(iii) certain “related parties” of the Bank or of
any other “interested party” (in each case within the
meaning of MI
61-101)
including any director or senior officer of the Bank, any
affiliate or insider of the Bank or any of their directors or
senior officers; and (iv) any “joint actor”
(within the meaning of MI
61-101) with
any of the foregoing persons. MI
61-101 also
provides that the Bank may treat Shares acquired under the Offer
as “minority” Shares and to vote them, or to consider
them voted, in favour of such business combination if, among
other things: (i) the business combination is completed not
later than 120 days after the Expiry Time; (ii) the
consideration per security in the business combination is at
least equal in value to and in the same form as the
consideration paid under the Offer; and (iii) the
Shareholder who tendered such Shares to the Offer was not:
(a) a “joint actor” (within the meaning of MI
61-101) with
the Bank in respect of the Offer; (b) a direct or indirect
party to any “connected transaction” (within the
meaning of MI
61-101) to
the Offer; or (c) entitled to receive, directly or
indirectly, in connection with the Offer, a “collateral
benefit” (within the meaning of MI
61-101) or
consideration per Share that is not identical in amount and form
to the entitlement of the general body of holders in Canada of
Shares. The Bank currently intends that the consideration
offered for Shares under any Subsequent Acquisition Transaction
proposed by it would be equal in value to, and in the
43
same form as, the consideration paid to Shareholders under the
Offer and that such Subsequent Acquisition Transaction will be
completed no later than 120 days after the Expiry Time and,
accordingly, the Bank intends to cause Shares acquired under the
Offer to be voted in favour of any such transaction and, where
permitted by MI
61-101, to
be counted as part of any minority approval required in
connection with any such transaction. Based on the advice of
legal counsel and having considered the relevant facts and
circumstances, the Bank and DundeeWealth believe that the Bank
will be entitled to vote the Shares it acquires from the
Locked-Up
Shareholders under the Offer in favour of any Subsequent
Acquisition Transaction. Accordingly, provided that the
Locked-Up
Shareholders tender their Shares to the Offer as required by the
terms of the
Lock-Up
Agreement and assuming the Bank converts its Series F
Shares in accordance with their terms, the requisite shareholder
approvals are assured. To the knowledge of the Bank, after
reasonable inquiry, only the votes attached to the 1,223,500 DW
Common Shares and 27,000,000 Series F Shares held by the
Bank would be required to be excluded in determining whether
minority approval for a Subsequent Acquisition Transaction has
been obtained for the purposes of MI
61-101.
Any such Subsequent Acquisition Transaction may also result in
Shareholders having the right to dissent in respect thereof and
demand payment of the fair value of their Shares. The exercise
of such right of dissent, if certain procedures are complied
with by the holder, could lead to a judicial determination of
fair value required to be paid to such Dissenting Offeree for
its Shares. The fair value so determined could be more or less
than the amount paid per Share pursuant to such transaction or
pursuant to the Offer. The exact terms and procedures of the
rights of dissent available to Shareholders will depend on the
structure of the Subsequent Acquisition Transaction and will be
fully described in the proxy circular or other disclosure
document provided to Shareholders in connection with the
Subsequent Acquisition Transaction.
If the Bank is unable to effect a Compulsory Acquisition or a
Subsequent Acquisition Transaction, or proposes a Subsequent
Acquisition Transaction but cannot obtain any required approvals
or exemptions promptly, the Bank will evaluate its other
alternatives. Such alternatives could include, to the extent
permitted by applicable Laws, purchasing additional Shares in
the open market; in privately negotiated transactions; in
another take-over bid or exchange offer or otherwise; or from
DundeeWealth. Subject to applicable Laws, any additional
purchases of Shares could be at a price greater than, equal to,
or less than the price to be paid for Shares under the Offer and
could be for cash, securities
and/or other
consideration. Alternatively, the Bank may take no action to
acquire additional DW Common Shares, or, subject to applicable
Laws, may either sell or otherwise dispose of any or all Shares
acquired under the Offer, on terms and at prices then determined
by the Bank, which may vary from the price paid for Shares under
the Offer. See Section 12 of the Offer, “Market
Purchases”.
The tax consequences to a Shareholder of a Subsequent
Acquisition Transaction may differ from the tax
consequences to such Shareholder of accepting the Offer. See
Section 23 of this Circular, “Certain Canadian Federal
Income Tax Considerations”.
Shareholders should consult their legal advisors for a
determination of their legal rights with respect to a Subsequent
Acquisition Transaction.
Judicial
Developments
Certain judicial decisions may also be considered relevant to
any Subsequent Acquisition Transaction that may be proposed or
effected subsequent to the expiry of the Offer. Canadian courts
have, in a few instances prior to the adoption of MI 61-101 and
its predecessors, granted preliminary injunctions to prohibit
transactions involving certain business combinations. The
current trends in both legislation and Canadian jurisprudence
indicate a willingness to permit business combinations to
proceed, subject to evidence of procedural and substantive
fairness in the treatment of minority shareholders.
Shareholders should consult their legal advisors for a
determination of their legal rights with respect to any
transaction that may constitute a business combination.
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23.
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CERTAIN
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
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In the opinion of Torys LLP, counsel to the Bank, the following
is a general summary, as of the date hereof, of the principal
Canadian federal income tax considerations generally applicable
to a Shareholder who receives the Special Distribution, receives
DCM Shares as a result of the Spinout Transaction, disposes of
Shares pursuant to the Offer (or otherwise disposes of Shares
pursuant to certain transactions described in Section 22 of
this Circular, “Acquisition of
44
Shares Not Deposited Under the Offer”) and who, for
purposes of the Tax Act and at all relevant times (i) is or
is deemed to be resident in Canada; (ii) holds the Shares
and will hold the DCM Shares, Bank Shares and Floating Rate
Preferred Shares (issuable on the conversion of Bank Preferred
Shares) as capital property; and (iii) deals at Arm’s
Length and is not affiliated with the Bank or DundeeWealth.
Persons meeting such requirements are referred to in this
summary as a “Holder” or
“Holders” and this summary only addresses such
Holders.
Generally, the Shares, DCM Shares, Bank Shares and Floating Rate
Preferred Shares will constitute capital property to a Holder
unless the Holder holds such shares in the course of carrying on
a business or as part of an adventure or concern in the nature
of trade. Certain Holders whose Shares, DCM Shares, Bank Shares
and Floating Rate Preferred Shares might not otherwise qualify
as capital property may, in certain circumstances, be entitled
to make an irrevocable election in accordance with Subsection
39(4) of the Tax Act, the effect of which may be to deem such
shares and every “Canadian security” (as defined in
the Tax Act) owned by such Holder in the taxation year in which
the election is made and in all subsequent taxation years to be
capital property. Holders whose Shares, DCM Shares, Bank Shares
or Floating Rate Preferred Shares might not otherwise be
considered capital property should consult their own tax
advisors concerning this election.
This summary is not applicable to a Shareholder that is a
“financial institution” (as defined in the Tax Act for
purposes of the
mark-to-market
rules) or a “specified financial institution” (as
defined in the Tax Act), a Shareholder an interest in which is a
“tax shelter investment” for purposes of the Tax Act,
or to a Shareholder who has made an election under
Section 261 of the Tax Act to determine its Canadian tax
results in a “functional currency” (as defined in the
Tax Act) other than Canadian dollars or to a Shareholder who is
the Bank. Such Shareholders should consult their own tax
advisors. This summary also assumes that all issued and
outstanding Series X Shares, Bank Preferred Shares and
Floating Rate Preferred Shares are listed on a “designated
stock exchange” (as defined in the Tax Act) in Canada
(which includes the TSX) at such times as dividends (including
deemed dividends) are paid or received on such Series X
Shares, Bank Preferred Shares or Floating Rate Preferred Shares.
In addition, this summary is not applicable to persons holding
Options or other rights to acquire Shares or persons who
acquired Shares on the exercise of employee stock options and
all such persons should consult their own tax advisors in this
regard.
This summary is based on the current provisions of the Tax Act,
all specific proposals to amend the Tax Act publicly announced
by or on behalf of the Minister of Finance (Canada) prior to the
date hereof (“Proposed Amendments”) and
counsel’s understanding of the current administrative
policies and assessing practices of the Canada Revenue Agency
(“CRA”) published in writing prior to the date
hereof and assumes that the Proposed Amendments will be enacted
in the form proposed. No assurances can be given that the
Proposed Amendments will be enacted in the form proposed, or at
all. This summary does not otherwise take into account or
anticipate any changes in Law, whether by judicial, governmental
or legislative decision or action, or changes in the
administrative policy or assessing practices of the CRA, nor
does it take into account provincial, territorial or foreign
income tax legislation or considerations, which may differ from
the Canadian federal income tax considerations discussed herein.
This summary assumes that the Spinout Transaction is effected as
a
dividend-in-kind
of DCM Shares to Shareholders and does not address the tax
consequences to any Shareholder of any alternative manner of
effecting the Spinout Transaction. Shareholders should consult
their own tax advisors concerning the tax consequences of the
Spinout Transaction.
Pre-Closing
Transactions by DundeeWealth
Special
Distribution and Spinout Transaction
In connection with the Offer, Holders will receive the Special
Distribution consisting of a dividend of $2.00 in cash per
share. Holders will also receive a distribution of DCM Shares
pursuant to the Spinout Transaction. Holders who receive DCM
Shares on the Spinout Transaction will be considered to have
received a taxable dividend in an amount equal to the fair
market value of the DCM Shares so received plus the amount of
any cash received in lieu of fractional DCM Shares. The adjusted
cost base to a Holder of the DCM Shares received on the Spinout
Transaction will be equal to the fair market value of the DCM
Shares so received. In computing the adjusted cost base of such
shares at any time, the adjusted cost base of a Holder’s
DCM Shares will be averaged with the adjusted cost base of all
other DCM Shares, if any, held by the Holder as capital property
at the particular time. Having regard to the Valuation and
Fairness Opinion, the value of each DCM Share is expected to be
approximately $0.50. However, this determination of value is not
binding on the CRA or on any Holder.
45
For Holders who are individuals (other than certain trusts), the
amount of the Special Distribution and the amount of the
dividend in connection with the Spinout Transaction will be
included in computing the Holder’s income and will be
subject to the normal
gross-up and
dividend tax credit rules applicable to taxable dividends
received by individuals from taxable Canadian corporations,
including the enhanced
gross-up and
dividend tax credit applicable to any dividends designated by
DundeeWealth as “eligible dividends” in accordance
with the Tax Act. There may be limitations on the ability of
DundeeWealth to designate dividends as eligible dividends. Such
dividends received by an individual or a trust (other than
certain trusts) may give rise to alternative minimum tax under
the Tax Act.
For corporate Holders, the amount of the Special Distribution
and the amount of the dividend in connection with the Spinout
Transaction will be included in computing income and will
generally be deductible in computing the taxable income of the
corporation.
The Special Distribution and the dividend in connection with the
Spinout Transaction will be paid on the Shares, including the
Series X Shares. The Series X Shares are “taxable
preferred shares” as defined in the Tax Act. The terms of
the Series X Shares require DundeeWealth to make the
necessary election under Part VI.1 of the Tax Act so that
corporate Holders will not be subject to tax under
Part IV.1 of the Tax Act on dividends received (or deemed
to be received) on the Series X Shares, including the
Special Distribution and the dividend in connection with the
Spinout Transaction.
A “private corporation” (as defined in the Tax Act) or
any other corporation controlled, whether by reason of a
beneficial interest in one or more trusts or otherwise, by or
for the benefit of an individual (other than a trust) or a
related group of individuals (other than trusts), will generally
be liable to pay a
331/3%
refundable tax under Part IV of the Tax Act on dividends
received (or deemed to be received) on the Shares (including the
Special Distribution and the dividend in connection with the
Spinout Transaction) to the extent such dividends are deductible
in computing its taxable income.
Subsection 55(2) of the Tax Act provides that where a corporate
Holder receives a dividend and such dividend is deductible in
computing the corporate Holder’s income and is not subject
to Part IV tax or is subject to Part IV tax that is
refundable as part of the series of transactions that includes
the receipt of the dividend, all or part of the dividend may in
certain circumstances be treated as a capital gain from the
disposition of a capital property the taxable portion of which
must be included in computing the corporate Holder’s income
for the taxation year in which the dividend is received.
Accordingly, corporate Holders should consult their own tax
advisors for specific advice with respect to the potential
application of this provision to the Special Distribution and
the dividend in connection with the Spinout Transaction.
The
Offer
Holders
Who Accept the Offer
The Offer is made on the basis that a portion of each Share will
be exchanged exclusively for a portion of a Bank Common Share
and the remaining portion of each Share will be exchanged
exclusively for either (a) cash or (b) a portion of a
Bank Preferred Share, as the case may be. Under the terms of the
Offer, the portion of each Share that will be exchanged for a
portion of a Bank Common Share is equal to the quotient obtained
by dividing the fair market value of the portion of a Bank
Common Share received by the Holder by the sum of the fair
market value of such portion of a Bank Common Share plus the
fair market value of the portion of a Bank Preferred Share, if
any, received by the Holder plus the amount of cash, if any,
received by the Holder (excluding any cash received in lieu of a
fraction of a Bank Share). The remaining portion of each Share
will be exchanged for cash or for a portion of a Bank Preferred
Share, as the case may be. Each disposition of a portion of a
Share will be regarded as a separate transaction for the
purposes of computing the Holder’s capital gain or capital
loss on the disposition of the particular portion of the Share.
A Holder will realize a capital gain (or capital loss) in
respect of the portion of a Share that is disposed of for cash
to the extent that the amount of cash received for such portion
of a Share exceeds (or is exceeded by) the aggregate of the
adjusted cost base to the Holder of such portion of a Share and
any reasonable costs of disposition. Such capital gain (or
capital loss) will be subject to the treatment described below
under “Taxation of Capital Gains and Capital Losses”.
In respect of the portion of a Share that is disposed of for a
portion of a Bank Common Share, or the portion of a Share that
is disposed of for a portion of a Bank Preferred Share, as the
case may be, unless the Holder includes any part of the capital
gain or capital loss otherwise determined in respect of such
disposition in computing the Holder’s income for the
taxation year in which the disposition occurs, the Holder will
be deemed under the Tax Act to have disposed of such portion of
a Share for proceeds of disposition equal to the Holder’s
adjusted cost base of such portion immediately before the
disposition and will be deemed to have acquired the portion of
the Bank Common Share or the Bank Preferred Share,
46
as the case may be, received in exchange therefore at a cost
equal to such proceeds of disposition. The Bank will not make
joint elections under Section 85 of the Tax Act with any
Shareholders in connection with the Offer.
Under CRA’s current administrative practice, a Holder who
receives cash in lieu of a fraction of a Bank Common Share or
Bank Preferred Share, as the case may be, not in excess of
$200.00 may either treat this amount as proceeds of disposition
of the fraction of the Bank Common Share or Bank Preferred
Share, as the case may be, thereby realizing a capital gain (or
capital loss) to the extent that the proceeds of disposition
exceed (or are exceeded by) the adjusted cost base of such
fraction of a Bank Common Share or Bank Preferred Share, as the
case may be, as discussed below under the heading “Taxation
of Capital Gains and Capital Losses”, or alternatively may
reduce the adjusted cost base of the Bank Common Shares or the
Bank Preferred Shares, as the case may be, that the Holder
receives under the Offer by the amount of cash received.
Shares Not
Deposited Under the Offer
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(a)
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Compulsory Acquisition of Shares
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As described under Section 22 of this Circular,
“Acquisition of Shares Not Deposited Under the
Offer — Compulsory Acquisition”, the Bank may, in
certain circumstances, acquire Shares not deposited under the
Offer pursuant to statutory rights of purchase under the OBCA.
The tax consequences to a Holder of a disposition of Shares in
such circumstances will generally be similar to those described
above under “Holders Who Accept the Offer”. Interest
paid or credited to a Holder (if any) in connection with the
exercise of dissent rights under a Compulsory Acquisition must
be included in the income of such Holder for the purposes of the
Tax Act. Holders whose Shares may be so acquired should consult
their own tax advisors.
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(b)
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Subsequent Acquisition Transaction
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As described in Section 22 of this Circular,
“Acquisition of Shares Not Deposited Under the
Offer — Subsequent Acquisition Transaction”, if
the Bank does not acquire all of the Shares pursuant to the
Offer or by means of a Compulsory Acquisition, the Bank may
propose other means of acquiring the remaining issued and
outstanding Shares. The tax treatment of a Subsequent
Acquisition Transaction to a Holder will depend upon the exact
manner in which the Subsequent Acquisition Transaction is
carried out. The Bank may propose to carry out a Subsequent
Acquisition Transaction by means of an amalgamation, statutory
arrangement, capital reorganization, amendment to its articles,
consolidation or other transaction involving the Bank
and/or an
affiliate of the Bank and DundeeWealth
and/or the
Shareholders. Depending upon the exact manner in which the
transaction is carried out, the tax consequences may include a
capital gain or capital loss, a deemed dividend or both a deemed
dividend and a capital gain or capital loss. Holders should
consult their own tax advisors for advice with respect to the
income tax consequences of having their Shares acquired pursuant
to a Subsequent Acquisition Transaction.
In the event that the Subsequent Acquisition Transaction results
in a deemed dividend, subject to the application of Subsection
55(2) of the Tax Act, a Holder will be required to include in
computing its income for a taxation year any dividends deemed to
be received on the Shares or on any shares of a taxable Canadian
corporation issued as consideration for the Shares. In the case
of a Holder that is an individual (other than certain trusts),
such dividends will be subject to the normal
gross-up and
dividend tax credit rules applicable to taxable dividends
received from taxable Canadian corporations, including the
enhanced
gross-up and
dividend tax credit applicable to any dividends designated as
eligible dividends in accordance with the provisions of the Tax
Act. There may be limitations on DundeeWealth’s ability to
designate eligible dividends. Such dividends received by an
individual or a trust (other than certain trusts) may give rise
to alternative minimum tax under the Tax Act. Any such dividends
deemed to be received by a corporate Holder will be included in
computing income and will generally be deductible in computing
the corporate Holder’s taxable income.
Subsection 55(2) of the Tax Act provides that where a corporate
Holder would otherwise be deemed to receive a dividend, in
certain circumstances the deemed dividend may be deemed not to
be received as a dividend and instead may be treated as proceeds
of disposition of the Shares or of any shares of a taxable
Canadian corporation issued as consideration for the Shares for
purposes of computing the corporate Holder’s capital gain
or capital loss. Corporate Holders should consult their own tax
advisors in this regard.
A private corporation or any other corporation controlled,
whether by reason of a beneficial interest in one or more trusts
or otherwise, by or for the benefit of an individual (other than
a trust) or a related group of individuals (other than trusts),
will generally be liable to pay a
331/3%
refundable tax under Part IV of the Tax Act on dividends
received (or
47
deemed to be received) on the Shares or on any shares of a
taxable Canadian corporation issuable as consideration for the
Shares to the extent such dividends are deductible in computing
its taxable income.
If the Subsequent Acquisition Transaction is carried out by
means of an amalgamation, under the current administrative
practice of the CRA, Holders who exercise a right of dissent in
respect of such an amalgamation should be considered to have
disposed of their Shares for proceeds of disposition equal to
the amount paid by the amalgamated corporation to the dissenting
Holder for such Shares, other than any interest awarded by the
court. Because of uncertainties under the relevant corporate
legislation as to whether such amounts paid to a dissenting
Holder would be treated entirely as proceeds of disposition, or
in part as the payment of a deemed dividend, dissenting Holders
should consult with their tax advisors in this regard. A
dissenting Holder will be required to include in computing its
income any interest awarded by a court in connection with an
amalgamation.
Holders should consult their own tax advisors for advice with
respect to all income tax consequences to them of having their
Shares acquired pursuant to a Subsequent Acquisition Transaction.
If following completion of the Offer the DW Common Shares cease
to be listed on any “designated stock exchange” for
purposes of the Tax Act and DundeeWealth ceases to be a
“public corporation” for purposes of the Tax Act,
Holders that continue to hold Shares and that are trusts
governed by registered retirement savings plans, registered
retirement income funds, registered education savings plans,
deferred profit sharing plans, registered disability savings
plans and tax-free savings accounts (collectively,
“Registered Plans”) are cautioned that the
Shares will cease to be qualified investments for such trusts.
Such Holders should consult with their own tax advisors in this
regard. The DW Common Shares may cease to be listed on the TSX
following the completion of the Offer.
Taxation
of Capital Gains and Capital Losses
Generally, a Holder is required to include in computing its
income for a taxation year one half of the amount of any capital
gain (a “taxable capital gain”) realized in the
year. Subject to and in accordance with the provisions of the
Tax Act, a Holder is required to deduct one half of the amount
of any capital loss (an “allowable capital
loss”) realized in a taxation year from taxable capital
gains realized in the year by such Holder. Allowable capital
losses in excess of taxable capital gains may be carried back
and deducted in any of the three preceding taxation years or
carried forward and deducted in any subsequent taxation year
against taxable capital gains realized in such year to the
extent and under the circumstances described in the Tax Act.
A capital loss otherwise arising on the disposition of a Share
by a corporate Holder may be reduced by dividends previously
received or deemed to have been received thereon. Similar rules
may apply where a Share is owned by a trust or a partnership of
which a corporation, trust or partnership is a member or
beneficiary. Holders to whom these rules may be relevant should
consult their own tax advisors.
A Holder that is throughout the year a “Canadian-controlled
private corporation” (as defined in the Tax Act) is liable
to pay, in addition to tax otherwise payable under the Tax Act,
a tax, a portion of which may be refundable, on certain
investment income including taxable capital gains.
Capital gains realized by individuals and certain trusts may
give rise to alternative minimum tax.
Holding
and Disposing of DCM Shares, Bank Shares and Floating Rate
Preferred Shares
In the case of a Holder who is an individual (other than certain
trusts), dividends received or deemed to be received on DCM
Shares, Bank Shares or Floating Rate Preferred Shares (issuable
on the conversion of Bank Preferred Shares) will be included in
computing the Holder’s income, and will be subject to the
normal
gross-up and
dividend tax credit rules applicable to dividends received by
individuals from taxable Canadian corporations, including the
enhanced
gross-up and
dividend tax credit applicable to any dividend designated as an
eligible dividend in accordance with the provisions of the Tax
Act. There may be limitations on the ability of the issuer to
designate dividends as eligible dividends.
In the case of a corporate Holder, dividends received or deemed
to be received by the corporation will be included in computing
income and will generally be deductible in computing the taxable
income of the corporation. The Bank
48
Preferred Shares and Floating Rate Preferred Shares are
“taxable preferred shares” as defined in the Tax Act.
The terms of the Bank Preferred Shares and Floating Rate
Preferred Shares require the Bank to make the necessary election
under Part VI.1 of the Tax Act so that corporate
shareholders will not be subject to tax under Part IV.1 of
the Tax Act on dividends received (or deemed to be received) on
the Bank Preferred Shares or Floating Rate Preferred Shares.
A private corporation or any other corporation controlled,
whether by reason of a beneficial interest in one or more trusts
or otherwise, by or for the benefit of an individual (other than
a trust) or a related group of individuals (other than trusts),
will generally be liable to pay a
331/3%
refundable tax under Part IV of the Tax Act on dividends
received (or deemed to be received) on the DCM Shares, the Bank
Shares or the Floating Rate Preferred Shares to the extent such
dividends are deductible in computing its taxable income.
A Holder who disposes of or is deemed to dispose of a DCM Share,
Bank Share or Floating Rate Preferred Share (which includes the
redemption of such shares or the acquisition of such shares by
the issuer but not a conversion of Bank Preferred Shares for
Floating Rate Preferred Shares or the conversion of Floating
Rate Preferred Shares for Bank Preferred Shares) will generally
realize a capital gain (or capital loss) to the extent that the
proceeds of disposition exceed (or are less than) the aggregate
of the adjusted cost base of such shares to the Holder and any
reasonable costs of disposition. The amount of any deemed
dividend arising on the redemption or acquisition of such shares
by the issuer will generally not be included in computing the
proceeds of disposition to the Holder for purposes of computing
the capital gain or capital loss arising on the disposition of
such shares. See “Redemption” below.
The tax consequences to a Holder of realizing a capital gain or
a capital loss on a disposition of DCM Shares, Bank Shares or
Floating Rate Preferred Shares will be the same as described
above under “Taxation of Capital Gains and Capital
Losses”.
If DCM redeems for cash or otherwise acquires the DCM Shares or
the Bank redeems for cash or otherwise acquires the Bank Shares
or Floating Rate Preferred Shares, other than by a purchase in
the manner in which shares are normally purchased by a member of
the public in the open market, the Holder will generally be
deemed to have received a dividend equal to the amount, if any,
paid by DCM or the Bank, as the case may be, including any
redemption premium, in excess of the
paid-up
capital of such shares at such time as computed for purposes of
the Tax Act. See “Dividends” above.
The difference between the amount paid and the amount of the
deemed dividend will be treated as proceeds of disposition for
the purposes of computing the capital gain or capital loss
arising on the disposition of such shares. See
“Disposition” above.
In the case of a corporate Holder, it is possible that in
certain circumstances all or part of the amount so deemed to be
a dividend may be treated as proceeds of disposition and not as
a dividend.
The conversion of a Bank Preferred Share into a Floating Rate
Preferred Share or of a Floating Rate Preferred Share into a
Bank Preferred Share will be deemed not to be a disposition of
property and accordingly will not give rise to any capital gain
or capital loss to the Holder. The cost to a Holder of any Bank
Preferred Share or Floating Rate Preferred Share, as the case
may be, received on the conversion will be deemed to be equal to
the Holder’s adjusted cost base of the Bank Preferred Share
or Floating Rate Preferred Share, as the case may be,
immediately before the conversion.
|
|
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|
(e)
|
Alternative Minimum Tax
|
A capital gain realized, or a dividend received or deemed to be
received, by an individual or a trust (other than certain
trusts) may give rise to a liability for alternative minimum tax.
|
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24.
|
DEPOSITARY
AND INFORMATION AGENT
|
The Bank has engaged Computershare Investors Services Inc. to
act as the Depositary for the Offer. The Depositary may contact
Shareholders by mail, telephone and facsimile and may request
banks, brokers, investment dealers and other nominees to forward
materials relating to the Offer to beneficial owners of Shares.
The Depositary will facilitate book-entry only transfers of
Shares tendered under the Offer. The Depositary will receive
reasonable and customary
49
compensation from the Bank for its services in connection with
the Offer, will be reimbursed for certain
out-of-pocket
expenses and will be indemnified against certain liabilities and
expenses in connection with the Offer.
The Bank has also retained Kingsdale Shareholder Services Inc.
to act as Information Agent in connection with the Offer. The
Information Agent may contact Shareholders by mail, telephone,
other electronic means or in person and may request banks,
brokers, investment dealers and their nominees to forward
materials relating to the Offer to Shareholders. The Information
Agent will receive reasonable and customary compensation from
the Bank for its services in connection with the Offer, will be
reimbursed for certain
out-of-pocket
expenses and will be indemnified against certain liabilities and
expenses in connection with the Offer.
Questions and requests for assistance concerning the Offer may
be directed to the Depositary or the Information Agent,
Kingsdale Shareholder Services Inc., at
1-866-851-9601
toll free in North America, or at
416-867-2272
outside of North America, or by
e-mail at
contactus@kingsdaleshareholder.com. Further contact details for
such persons may be found on the back page of this document.
Additional copies of this document and related materials may be
obtained without charge on request from the Depositary or the
Information Agent at their respective offices specified on the
back page of this document. Copies of this document and related
materials may also be found on SEDAR at www.sedar.com.
Except as expressly set forth in this Offer and Circular, no
broker, investment dealer, bank or trust company shall be deemed
to be an agent of the Bank or the Depositary for the purposes of
the Offer.
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25.
|
EXPENSES
OF THE OFFER
|
The Bank estimates that expenses in the aggregate amount of
$6 million will be incurred by the Bank
and/or one
or more of its affiliates in connection with the Offer,
including legal, financial advising, accounting, filing and
printing costs, the Depositary fees, the Information Agent fees,
the cost of preparation and mailing of the Offer, the fees in
respect of the Valuation and Fairness Opinion, and fees or
expenses in connection with the Compulsory Acquisition or
Subsequent Acquisition Transaction.
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26.
|
BENEFITS
FROM THE OFFER
|
Other than as disclosed elsewhere in this Circular, no person
named under “Beneficial Ownership of and Trading in
Securities” in Section 10 of this Circular, will
receive any direct or indirect benefit from accepting or
refusing to accept the Offer, other than the consideration
available to any Shareholder who tenders Shares to the Offer.
Certain matters of Canadian and United States law relating to
the Offer have been passed upon by Torys LLP. As of the date of
this Circular, the partners and associates of Torys LLP
beneficially owned, directly or indirectly, less than 1% of the
outstanding securities of any class of the Bank or of
DundeeWealth.
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28.
|
OFFEREES’
STATUTORY RIGHTS
|
Securities legislation in the provinces and territories of
Canada provides Shareholders of DundeeWealth with, in addition
to any other rights they may have at law, rights of rescission,
price revision or damages if there is a misrepresentation in a
circular or a notice that is required to be delivered to such
Shareholders. However, such rights must be exercised within
prescribed time limits. Shareholders should refer to the
applicable provisions of the securities legislation of their
province or territory for particulars of those rights or consult
with a lawyer. Such rights may in certain cases need to be
exercised through CDS on behalf of a Shareholder. Shareholders
should accordingly also contact their broker or other nominee
for assistance as required.
The contents of the Offer and this Circular have been approved
and the sending thereof to the Shareholders has been authorized
by the board of directors of the Bank.
50
GLOSSARY
“Acquisition Proposal” means any inquiries from
or submissions of proposals or offers or expressions of interest
from any Person (including any of its officers or employees),
other than the Bank and its affiliates (as defined in the OBCA),
relating to: (A) any acquisition or purchase, direct or
indirect, of: (1) the assets of DundeeWealth
and/or one
or more of its Subsidiaries that, individually or in the
aggregate, constitute 20% or more of the consolidated assets of
DundeeWealth and its Subsidiaries, taken as a whole, or which
contribute 20% or more of the consolidated revenue of
DundeeWealth and its Subsidiaries, taken as a whole, or
(2) 20% or more of any voting or equity securities of
DundeeWealth or any one or more of its Subsidiaries that,
individually or in the aggregate, contribute 20% or more of the
consolidated revenues or constitute 20% or more of the
consolidated assets of DundeeWealth and its Subsidiaries, taken
as a whole; (B) any take-over bid, tender offer or exchange
offer that, if consummated, would result in such Person or group
of Persons beneficially owning 20% or more of any class of
voting or equity securities of DundeeWealth; or (C) a plan
of arrangement, merger, amalgamation, consolidation, share
exchange, business combination, reorganization,
recapitalization, liquidation, dissolution or other similar
transaction involving DundeeWealth
and/or any
of its Subsidiaries whose assets or revenues, individually or in
the aggregate, constitute 20% or more of the consolidated assets
or revenues, as applicable, of DundeeWealth and its
Subsidiaries, taken as a whole;
“affiliate”, unless otherwise indicated, has
the meaning ascribed to the term “affiliate entity” in
MI 61-101 as
in effect at the date hereof;
“allowable capital loss” has the meaning
ascribed thereto in Section 23 of the Circular,
“Certain Canadian Federal Income Tax Considerations”;
“Annual Fixed Dividend Rate” has the meaning
ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
“Appointee” has the meaning ascribed thereto in
Section 3 of the Offer, “Manner of Acceptance
— Power of Attorney”;
“Appropriate Regulatory Approvals” means those
sanctions, rulings, consents, orders, exemptions, permits and
other approvals (including the lapse, without objection, of a
prescribed time under a statute or regulation that states that a
transaction may be implemented if a prescribed time lapses
following the giving of notice without an objection being made)
of Governmental Entities required in connection with the
commencement of the Offer or the consummation of the Offer, and
including without limiting the generality of the foregoing, the
Competition Act Approval;
“ARC” has the meaning ascribed thereto in
Section 21 of the Circular, “Regulatory
Matters — Competition Act Approval”;
“Arm’s Length” has the meaning ascribed
thereto under the Tax Act;
“associate”, unless otherwise indicated, has
the meaning ascribed thereto in the Securities Act as in effect
at the date hereof;
“Bank” means The Bank of Nova Scotia, a
chartered bank existing under the Bank Act;
“Bank Act” means the Bank Act (Canada),
as amended and the regulations promulgated thereunder;
“Bank Common Shares” means the common shares in
the capital of the Bank;
“Bank’s Notice” has the meaning ascribed
thereto in Section 22 of the Circular, “Acquisition of
Shares Not Deposited Under the Offer”;
“Bank Preferred Shares” means the $25.00
principal amount 3.70% five year rate reset preferred shares
series 32 in the capital of the Bank;
“Bank Preferred Share Automatic Conversion” has
the meaning ascribed thereto in Annex A, “The Bank of
Nova Scotia — Conversion of Bank Preferred Shares into
Floating Rate Preferred Shares”;
“Bank Shares” means the Bank Common Shares and
the Bank Preferred Shares;
“Bill” has the meaning ascribed thereto in
Annex A, “Bank Act Restrictions and Restrictions on
Payments of Dividends”;
“Bloomberg Screen GCAN5YR Page” has the meaning
ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
51
“Book-Entry Confirmation” means confirmation of
a book-entry transfer of a Shareholder’s Shares into the
Depositary’s account at CDS;
“Bonus Share Awards” means awards granted by DW
to employees and financial advisors under DundeeWealth’s
share incentive plans providing for the issuance of Common
Shares conditional on such employees and financial advisors
meeting certain performance-related or time-related criteria;
“Bourse” means the Bourse de Montréal Inc.;
“Business Day” means any day of the week, other
than a Saturday or Sunday or a statutory or civic holiday
observed in Toronto, Ontario;
“Canadian GAAP” means Canadian generally
accepted accounting principles, including those set out in the
Handbook of the Canadian Institute of Chartered Accountants,
applied on a consistent basis;
“Canadian Securities Administrators” means the
provincial and territorial securities regulatory authorities in
the provinces and territories of Canada;
“CDS” means CDS Clearing and Depository
Services Inc. or its nominee (which is, at the date hereof,
CDS & Co.);
“CDS Participants” means a direct or indirect
participant of CDS;
“CDSX” means the computer system by which CDS
Participants can deposit book-based shares to the Depository
directly in lieu of completing and depositing a Letter of
Transmittal to the Depositary;
“Circular” means the take-over bid circular
accompanying the Offer and forming part of the Offer;
“Closing Time” means the completion of a
Compulsory Acquisition or a Subsequent Acquisition Transaction;
“Commissioner” has the meaning ascribed thereto
in Section 21 of the Circular, “Regulatory
Matters — Competition Act Approval”;
“Competition Act” means the Competition Act
(Canada) as amended and the regulations promulgated
thereunder;
“Competition Act Approval” has the meaning
ascribed thereto in Section 21 of the Circular,
“Regulatory Matters — Competition Act
Approval”;
“Compulsory Acquisition” has the meaning
ascribed thereto in Section 22 of the Circular,
“Acquisition of Shares Not Deposited Under the
Offer”;
“CRA” has the meaning ascribed thereto in
Section 23 of the Circular, “Certain Canadian Federal
Income Tax Considerations”;
“DBRS” has the meaning ascribed thereto in
Annex A, “Ratings”;
“DRS Statement” means a Direct Registration
System statement delivered by the Depositary to Depositing
Shareholders evidencing the registered ownership of Bank Shares
issued pursuant to the Offer;
“DC” means Dundee Corporation;
“DC Shareholder Approval” means the requisite
shareholder approval of DC for the sale of its Shares to the
Bank pursuant to the Offer;
“DCC” means Dundee Capital Corporation;
“DCM” means Dundee Capital Markets Inc.;
“DCM Shares” means all of the issued and
outstanding common shares in the capital of DCM;
“Depositary” means Computershare Investor
Services Inc., in its capacity as depositary for the Offer;
“Deposited Shares” has the meaning ascribed
thereto in Section 3 of the Offer, “Manner of
Acceptance”;
“Depositing Shareholders” means Shareholders
whose Shares are deposited to the Offer and are not withdrawn;
“Dissenting Offeree” has the meaning ascribed
thereto in Section 22 of the Circular, “Acquisition of
Shares Not Deposited Under the Offer”;
52
“Distribution and Spinout Consideration” means
the per share proceeds resulting from the Special Distribution
and the Spinout Transaction;
“Distributions” has the meaning ascribed
thereto in Section 3 of the Offer, “Manner of
Acceptance — Dividends and Distributions”;
“DSU Plan” means the deferred share unit plan
for the employees, officers and directors of DundeeWealth
adopted in 2003;
“DSUs” means the deferred share units awarded
under the DSU Plan;
“Dundee” means DC together with DCC;
“DundeeWealth” means DundeeWealth Inc., a
corporation incorporated under the laws of Ontario;
“DundeeWealth Public Documents” means all
forms, reports, schedules, statements and other documents
required to be filed by DundeeWealth since January 1, 2008
on SEDAR;
“DW Board of Directors” means the board of
directors of DundeeWealth;
“DW Common Shares” means common shares in the
capital of DundeeWealth;
“DW Special Committee” means the special
committee of the DW Board of Directors constituted to consider
the Offer;
“Effective Date” means the date on which the
Bank first takes up and pays for Shares deposited under the
Offer;
“Effective Time” means the time that the Bank
shall have acquired ownership of and paid for Shares deposited
under the Offer pursuant to the terms of the Offer;
“Election Notice” has the meaning ascribed
thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
“Eligible Institution” means a Canadian
Schedule I chartered bank, a major trust company in Canada,
a commercial bank or trust company in the United States, a
member of the Securities Transfer Association Medallion Program
(STAMP), a member of the Stock Exchange Medallion Program (SEMP)
or a member of the New York Stock Exchange Inc. Medallion
Signature Program (MSP). Members of these programs are usually
participating organizations in a recognized stock exchange in
Canada
and/or the
United States, members of IIROC, members of the National
Association of Securities Dealers or banks and trust companies
in the United States;
“Employee Plans” means all plans or
arrangements providing for the benefit of employees generally or
for any particular executive officer including all of the
employee benefit, health, welfare, disability, bonus, deferred
compensation, stock compensation, stock option or purchase or
other stock-based compensation plans or arrangements, retirement
plans, post-retirement benefit plans or arrangements, pension
plans or arrangements applicable to present or former employees
or directors of DundeeWealth or any of its Subsidiaries which
are currently maintained or participated in by DundeeWealth or
any of its Subsidiaries and under which DundeeWealth or any of
its Subsidiaries has any material obligations or liabilities;
“Engagement” has the meaning ascribed thereto
in Section 11 of the Circular, “Valuation and Fairness
Opinion”;
“Expiry Time” means 12:01 a.m. (Toronto
time) on January 20, 2011, subject to the Bank’s right
to extend from time to time the period during which the Shares
may be tendered to the Offer (but in any case, not beyond the
Outside Date) as described in Section 5 of the Offer,
“Extension and Variation of the Offer”;
“FINRA” means the Financial Industry Regulatory
Authority;
“Fixed Rate Calculation Date” has the meaning
ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
“Fixed Rate Share Conversion Date” has the
meaning ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Rate Preferred
Shares as a Series”;
“Floating Quarterly Dividend Rate” has the
meaning ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Floating Rate
Preferred Shares as a Series”;
53
“Floating Rate Calculation Date” has the
meaning ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Floating Rate
Preferred Shares as a Series”;
“Floating Rate Preferred Share Automatic
Conversion” has the meaning ascribed thereto in
Annex A, “The Bank of Nova Scotia — Certain
Provisions of the Floating Rate Preferred Shares as a
Series”;
“Floating Rate Preferred Shares” has the
meaning ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
“Floating Rate Share Conversion Date” has the
meaning ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
“fully-diluted basis” means a basis which
assumes that the number of Shares outstanding is that number
which would be outstanding assuming that the rights under all
Other Securities were exercised;
“GCICL” means Goodman & Company,
Investment Counsel Ltd.;
“Government of Canada Yield” has the meaning
ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
“Governmental Entity” means (a) any
multinational, federal, provincial, state, regional, municipal,
local or other government, governmental or public department,
central bank, court, tribunal, arbitral body, commission,
commissioner, board, bureau or agency, domestic or foreign;
(b) any subdivision, agent, commission, commissioner,
board, or authority of any of the foregoing; (c) any
self-regulatory authority, including the TSX, the TSX-V, the
Bourse, MFDA, IIROC, FINRA and each Canadian provincial
insurance council (or equivalent); or (d) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of
any of the foregoing;
“Holder” has the meaning ascribed thereto in
Section 23 of the Circular, “Certain Canadian Federal
Income Tax Considerations”;
“IIROC” means the Investment Industry
Regulatory Organization of Canada;
“Information” has the meaning ascribed thereto
in Section 11 of the Circular, “Valuation and Fairness
Opinion”;
“Information Agent” means Kingsdale Shareholder
Services Inc.;
“Initial Fixed Rate Period” has the meaning
ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
“insider” has the meaning ascribed thereto in
the Securities Act as in effect at the date hereof;
“Interested Directors” means those members of
the DW Board of Directors who have declared an interest in, and
refrained from voting in respect of, the transactions
contemplated under the Support Agreement, being Mr. Robert
Brooks, Mr. David Goodman, Mr. Ned Goodman,
Mr. J. Harold Gordon, Mr. Garth MacRae,
Mr. Robert McLeish and Mr. Russell Morgan;
“Interested Third Party” has the meaning
ascribed thereto in Section 3 of the Circular —
“Background to the Offer”;
“Interested Parties” has the meaning ascribed
thereto in Section 11 of the Circular, “Valuation and
Fairness Opinion”;
“Laws” means all laws (including common law),
by-laws, statutes, rules, regulations, principles of law,
orders, ordinances, judgments, decrees, guidelines, policies or
other requirements, whether domestic or foreign, and the terms
and conditions of any grant of approval, permission, authority
or license of any Governmental Entity and the term
“applicable” with respect to such Laws and in a
context that refers to one or more Parties, means such Laws as
are applicable to such Party or its business, undertaking,
property or securities and emanate from a Governmental Entity
having jurisdiction over the Party or Parties or its or their
business, undertaking, property or securities;
“Letter of Transmittal” means the letter of
transmittal (printed on yellow paper) in the form accompanying
the Offer and the Circular;
“Lock-Up
Agreement” means the
lock-up
agreement entered into between the Bank, DC, DCC, Ned Goodman
and David Goodman on November 22, 2010;
“Locked-Up
Shareholders” means DC and DCC, Ned Goodman and David
Goodman;
54
“Material Adverse Effect” when used in
connection with a Party, means any one or more changes, effects,
events, occurrences or states of fact, either individually or in
the aggregate, that is, or would reasonably be expected to be,
material and adverse to the assets, liabilities (including any
contingent liabilities that may arise through outstanding,
pending or threatened litigation or otherwise), business,
operations, results of operations, capital, property,
obligations (whether absolute, accrued, conditional or
otherwise), financial condition of a Party and its Subsidiaries
taken as a whole, other than changes, effects, events,
occurrences or states of fact consisting of, resulting from or
arising in connection with:
|
|
(i)
|
the public announcement of the execution of the Support
Agreement or the transactions contemplated hereby or the
performance of any obligations hereunder;
|
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(ii)
|
general economic, financial, currency exchange, securities or
commodity market conditions in Canada or the United States;
|
|
(iii)
|
changes generally affecting the mutual fund or wealth management
business in one or more countries or geographic markets where a
Party or any of its Subsidiaries operates or conducts business;
|
|
(iv)
|
any change in applicable Laws, regulations or Canadian GAAP;
|
|
(v)
|
any natural disaster; or
|
|
(vi)
|
any outbreak or escalation of hostilities, declared or
undeclared acts of war or terrorism;
|
except, in the case of clauses (ii), (iii) and (iv), to the
extent any such change, effect, event, occurrences or state of
fact has had a materially disproportionate effect on a Party and
its Subsidiaries taken as a whole compared to other comparable
Persons of similar size operating in the mutual fund or wealth
management business in one or more countries in geographic
markets so affected;
“MFDA” means the Mutual Fund Dealers
Association;
“MI
61-101”
means Multilateral Instrument
61-101,
“Protection of Minority Security Holders in Special
Transactions” of the Canadian Securities
Administrators, as amended or replaced from time to time;
“MI
62-104”
means Multilateral Instrument
62-104
“Take-Over Bids and Issuer Bids” of the
Canadian Securities Administrators, as amended or replaced from
time to time;
“Moody’s” has the meaning ascribed thereto
in Annex A, “Ratings”;
“NI
81-102”
has the meaning ascribed thereto in Section 21 of the
Circular, “Regulatory Matters — Securities
Regulatory Approvals”;
“No-Action Letter” has the meaning ascribed
thereto in Section 21 of the Circular, “Regulatory
Matters — Competition Act Approval”;
“nominee” means a registered broker or
investment dealer, financial institution or other intermediary
that holds Shares on behalf of a Person who is not the
registered holder of the Shares;
“Non-Competition, Non-Solicitation and Confidentiality
Agreements” mean the non-competition, non-solicitation
and confidentiality agreements (in the same form as attached as
schedule D to the
Lock-Up
Agreement) to be entered into between the Bank, DundeeWealth and
each of DC, Ned Goodman and David Goodman on the Effective Date;
“Notice of Guaranteed Delivery” means the
notice of guaranteed delivery printed on green paper in the form
accompanying the Offer and the Circular;
“Notifiable Transactions” has the meaning
ascribed thereto in Section 21 of the Circular,
“Regulatory Matters — Competition Act
Approval”;
“NYSE” means the New York Stock Exchange;
“OBCA” means Business Corporations Act
(Ontario), as amended from time to time;
“Offer” means the offer to purchase all of the
outstanding Shares made hereby to Shareholders (as it may be
amended);
“Offer Consideration” has the meaning ascribed
thereto in Section 1 of the Offer, “The Offer”;
“Offer Deadline” means December 15, 2010;
55
“Option Plans” means all plans of DundeeWealth
providing options to purchase Shares or Other Securities of
DundeeWealth”;
“Options” means options to purchase Shares or
Other Securities of DundeeWealth pursuant to the Option Plans;
“OSC” means the Ontario Securities Commission;
“OSC
Rule 62-504”
means Ontario Securities Commission
Rule 62-504,
“Take-Over Bids and Issuer Bids”, as amended or
replaced from time to time;
“Other Securities” means all securities
convertible into, or exchangeable or exercisable for, Shares,
including the Options;
“Outside Date” means April 30, 2011,
subject to the right of either DundeeWealth or the Bank to
postpone the Outside Date on no more than two occasions by a
period of 30 days if (A) any of the Appropriate
Regulatory Approvals has not been obtained, (B) an action,
suit or proceeding shall have been taken, commenced or
threatened before or by any Governmental Entity to cease trade,
enjoin, prohibit or impose material limitations or conditions on
the purchase by or sale to the Bank of the Shares or the rights
of the Bank to own or exercise full rights of ownership of the
Shares, to complete a Compulsory Acquisition or Subsequent
Acquisition Transaction or which would have such an effect and
the Party electing to postpone the Outside Date, if that Party
is a Party to such action, suit or proceeding, is diligently
contesting it, or (C) DundeeWealth has not completed the
Spinout Transaction, by giving written notice to the Bank to
such effect no later than 5:00 p.m. (Toronto time) on the
date that is five (5) days prior to the then current
Outside Date, or such other date as may be agreed to by the
Parties;
“Parties” means DundeeWealth and the Bank; and
“Party” means anyone of them;
“Permitted Distributions” means (a) the
Special Distribution, (b) any distribution in connection
with the Spinout Transaction, (c) monthly cash dividends on
the DW Common Shares and the Special Shares to be paid in
accordance with the revised dividend policy of DundeeWealth
announced on November 4, 2010, (d) quarterly cash
dividends on the Preferred Shares declared and paid in
accordance with the dividend policy of DundeeWealth, as set
forth in the DundeeWealth Public Documents and (e) a
performance fee dividend equal to 25% of the after tax net
performance fees earned by DundeeWealth in respect of the 2010
year, the calculation of which shall be approved by the Bank,
acting reasonably, and which shall be paid on the DW Common
Shares, the Special Shares and the Series F Shares in
January, 2011 in accordance with the dividend policy of
DundeeWealth;
“Person” includes an individual, partnership,
association, body corporate, joint venture, business
organization, trustee, executor, administrator, legal
representative, government (including any Governmental Entity)
or any other entity, whether or not having legal status;
“Preferred Shares” means, collectively,
Series X Shares and Series 1 Shares;
“Proposed Amendments” has the meaning ascribed
thereto in Section 23 of the Circular, “Certain
Canadian Federal Income Tax Considerations”;
“Purchased Securities” has the meaning ascribed
thereto in Section 3 of the Offer, “Manner of
Acceptance — Power of Attorney”;
“Quarterly Dividend Payment Date” has the
meaning ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Floating Rate
Preferred Shares as a Series”;
“Registered Plans” has the meaning ascribed
thereto in Section 23 of the Circular, “Certain
Canadian Federal Income Tax Considerations”;
“Replacement Option” has the meaning ascribed
thereto in Section 7 of the Circular, “Purpose of the
Offer and Plans for DundeeWealth — Treatment of
Options and other Share Based Compensation Awards”;
“Restricted Business” means: (i) the
retail mutual fund business, including the creation,
distribution,
and/or
management (including
sub-advisory)
of retail mutual funds (for further clarity, these comprise open
ended mutual funds governed by NI
81-102,
exchange traded funds, insurance guaranteed mutual funds
(commonly called segregated funds) or principal protected notes
linked to any open-ended fund); (ii) the management of
individual segregated managed accounts in a manner substantially
similar to the business currently conducted by the Dundee
Investment Counsel Division of
56
DundeeWealth (formerly, Goodman Private Wealth Management);
(iii) the mutual fund advisory business, being the sale of
mutual funds and other products as described above by licensed
advisors (but excluding the IIROC advisors in DCM); and
(iv) the insurance brokerage business; in each case carried
on from time to time in Canada by or on behalf of DundeeWealth;
“S&P” has the meaning ascribed thereto in
Annex A, “Ratings”;
“Scotia BaTS” has the meaning ascribed thereto
in Annex A, “Bank Act Restrictions and Restrictions on
Payments of Dividends”;
“SEC” means the U.S. Securities and
Exchange Commission;
“Securities Act” means the Securities Act
(Ontario) as amended, and the rules, regulations and
published policies made thereunder, as now in effect and as they
may be amended from time to time prior to the Effective Date;
“Securities Laws” means the Securities Act and
all other applicable securities laws, rules and regulations and
published policies thereunder in Canada;
“Securities Regulatory Authorities” means all
applicable securities regulatory authorities, including
(i) the provincial and territorial securities regulatory
authority in the provinces and territories of Canada in which
DundeeWealth is a reporting issuer (or the equivalent),
(ii) all applicable federal and state securities regulatory
authorities in the United States including, without limitation,
the SEC, in each case having or claiming jurisdiction over
DundeeWealth, and (iii) the TSX;
“SEDAR” means the System for Electronic
Document Analysis and Retrieval maintained by the Canadian
Securities Administrators;
“Series 1 Notes” has the meaning ascribed
thereto in Section 7 of the Circular, “Purchase of the
Offer and Plans for DundeeWealth — Plans for
DundeeWealth Following the Completion of the Offer”;
“Series 1 Shares” means the first
preference shares, series 1 in the capital of DundeeWealth;
“Series F Shares” means the special
shares, series F in the capital of DundeeWealth;
“Series X Shares” means the first
preference shares, series X in the capital of DundeeWealth;
“Share Awards” means the awards granted
pursuant to the Share Plans;
“Share Based Compensation Awards” means the
awards granted pursuant to the Share Based Compensation Plans;
“Share Based Compensation Plans” means all
Option Plans and Share Plans;
“Share Plans” means all of Employee Plans
(other than the Option Plans and the DSU Plan);
“Shares” means all of the issued and
outstanding shares in the capital of DundeeWealth other than the
Series 1 Shares and the Series F Shares, and, for
greater certainty, includes the DW Common Shares and the Special
Shares and the Series X Shares;
“Shareholders” means holders of Shares;
“Shareholders’ Agreement” means the
shareholders’ agreement in respect of DundeeWealth dated
September 28, 2007 among the Bank, DC and Dundee Capital as
amended from time to time;
“Special Distribution” has the meaning ascribed
thereto in Section 1 of the Offer, “The Offer”;
“Special Shares” means the Special Shares,
Series C and the Special Shares, Series D;
“Spinout Transaction” has the meaning ascribed
thereto in Section 1 of the Offer, “The Offer”;
“Subsequent Acquisition Transaction” has the
meaning ascribed thereto in Section 22 of the Circular,
“Acquisition of Shares Not Deposited Under the
Offer”;
“Subsequent Fixed Rate Period” has the meaning
ascribed thereto in Annex A, “The Bank of Nova
Scotia — Certain Provisions of the Bank Preferred
Shares as a Series”;
“Subsidiaries” means, with respect to a
specified body corporate, any body corporate (other than a
mutual fund corporation) of which more than 50% of the
outstanding shares ordinarily entitled to elect a majority of
the board of
57
directors thereof (whether or not shares of any other class or
classes shall or might be entitled to vote upon the happening of
any event or contingency) are at the time owned, or publicly
announced as in the process of being acquired, directly or
indirectly, by such specified body corporate and shall include
any body corporate, partnership, joint venture or other entity
over which such specified body corporate exercises direction or
control or which is in a like relation to a subsidiary;
“Superintendent” means the Superintendent of
Financial Institutions (Canada);
“Superior Proposal” means an unsolicited
bona fide written Acquisition Proposal made by a third
party after the date of the Support Agreement: (i) that is
made available to all Shareholders on the same terms and
conditions; (ii) that is not subject to a financing
condition; (iii) that is not subject to any due diligence
and/or
access condition; (iv) that the DW Board of Directors has
determined in good faith (after receipt of advice from its
financial advisors and its outside legal counsel) is reasonably
capable of completion without undue delay taking into account
all legal, financial, regulatory (including all approvals
identified in the Support Agreement, to the extent applicable)
and other aspects of such Acquisition Proposal and the Person
making such Acquisition Proposal; and (v) in respect of
which the DW Board of Directors determines in good faith (after
receipt of advice from its outside legal counsel with respect to
(a) below and financial advisors with respect to
(b) below) that (a) failure to recommend such
Acquisition Proposal to Shareholders would be inconsistent with
its fiduciary duties and (b) that such Acquisition Proposal
would, if consummated in accordance with its terms (but not
assuming away any risk of non-completion), result in a
transaction more favourable to Shareholders from a financial
point of view than the Offer);
“Supplementary Information Request” has the
meaning ascribed thereto in Section 21 of the Circular,
“Regulatory Matters — Competition Act
Approval”;
“Support Agreement” means the support agreement
entered into between the Bank and DundeeWealth on
November 22, 2010;
“T-Bill Rate” has the meaning ascribed thereto
in Annex A, “The Bank of Nova Scotia —
Certain Provisions of the Floating Rate Preferred Shares as a
Series”;
“Tax Act” means the Income Tax Act
(Canada), as amended and the regulations promulgated
thereunder, and any successor legislation thereto;
“taxable capital gain” has the meaning ascribed
thereto in Section 23 of the Circular, “Certain
Canadian Federal Income Tax Considerations”;
“TD Securities” means TD Securities Inc.;
“TFSAs” has the meaning ascribed thereto in
Annex A, “Eligibility for Investment”;
“TSX” means the Toronto Stock Exchange;
“TSX-V” means the TSX Venture Exchange;
“U.S. Person” has the meaning ascribed
thereto in Regulation S under the United States
Securities Act of 1933; and
“Valuation and Fairness Opinion” means the
independent formal valuation of the DW Common Shares prepared by
TD Securities for the DW Special Committee in accordance
with MI
61-101, and
the opinion of TD Securities to the DW Special Committee as
to the fairness, from a financial point of view, to holders of
DW Common Shares and Special Shares (other than the
Locked-Up
Shareholders) of the Offer Consideration and Distribution and
Spinout Consideration, a copy of which is attached as
Annex “B” to this Circular.
58
CONSENT
OF TORYS LLP
TO: The Board of Directors of The Bank of Nova Scotia (the
“Bank”)
We hereby consent to the reference to our name and opinion
contained under “Certain Canadian Federal Income Tax
Considerations” and our name under “Legal
Matters”, in the Circular, and to our name and opinion
contained under “Eligibility for Investment” in
Annex A, accompanying the Offer dated December 15,
2010 made by the Bank to the holders of common shares, special
shares, series C, special shares, series D and first
preference shares, series X of DundeeWealth Inc.
(Signed) TORYS LLP
Toronto, Ontario
December 15, 2010
59
CONSENT
OF TD SECURITIES INC.
TO: The Board of Directors of The Bank of Nova Scotia (the
“Bank”)
We refer to the Valuation and Fairness Opinion dated
November 21, 2010, which we prepared for the Special
Committee of the Board of Directors of DundeeWealth Inc. in
connection with the offer made by the Bank to the holders of
common shares, special shares, series C, special shares,
series D and first preference shares, series X of
DundeeWealth Inc., other than the Bank. We consent to the filing
of the Valuation and Fairness Opinion with the applicable
Canadian Securities Administrators and the inclusion of the
Valuation and Fairness Opinion and a summary thereof in this
Circular. In providing such consent, we do not intend that any
person other than the Special Committee and the Board of
Directors of DundeeWealth Inc. rely upon such Valuation and
Fairness Opinion.
(signed) TD SECURITIES INC.
Toronto, Ontario
December 15, 2010
60
AUDITORS’
CONSENT
TO: The Board of Directors of The Bank of Nova Scotia (the
“Bank”)
We have read the Offer and Take-Over Bid Circular dated
December 15, 2010 of the Bank offering to purchase of all
of the outstanding common shares, special shares, series C,
special shares, series D and first preference shares,
series X of DundeeWealth Inc. (the
“Circular”). We have complied with Canadian
generally accepted standards for an auditor’s involvement
with offering documents.
We consent to the incorporation by reference in the Circular of
our report to the shareholders of the Bank on the consolidated
balance sheets of the Bank as at October 31, 2010 and 2009
and the consolidated statements of income, changes in
shareholders’ equity, comprehensive income, and cash flows
for each of the years in the three-year period ended
October 31, 2010. Our report is dated December 3, 2010.
(signed) KPMG LLP
Chartered Accountants, Licensed Public Accountants
Toronto, Canada
December 15, 2010
61
CERTIFICATE
OF THE BANK
Dated:
December 15, 2010
The foregoing, together with the documents incorporated by
reference, contains no untrue statement of a material fact and
does not omit to state a material fact that is required to be
stated or that is necessary to make a statement not misleading
in the light of the circumstances in which it is made. In
addition, the foregoing does not contain any misrepresentation
likely to affect the value or market price of the securities to
be distributed.
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(signed) Richard E. Waugh
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(signed) Luc A. Vanneste
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President and
Chief Executive Officer
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Executive Vice-President and
Chief Financial Officer
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On behalf of the Board of Directors of The Bank of Nova
Scotia
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(signed) Michael J.L. Kirby
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(signed) John Mayberry
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Director
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Director
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62
ANNEX A
INFORMATION
CONCERNING THE BANK OF NOVA SCOTIA
The following information should be read in conjunction with
the information concerning the Bank appearing elsewhere in the
Offer and Circular and incorporated by reference in the Offer
and Circular. Capitalized terms not otherwise defined in
Annex A are defined in the Glossary and the Circular.
DOCUMENTS
INCORPORATED BY REFERENCE
The following documents filed with the Canadian Securities
Administrators are specifically incorporated by reference in and
form an integral part of this Circular:
(a) the Bank’s annual information form dated
December 3, 2010, for the year ended October 31, 2010;
(b) the Bank’s management proxy circular attached to
the notice of meeting dated February 9, 2010 prepared in
connection with the Bank’s annual meeting of shareholders
held on April 8, 2010;
(c) the Bank’s consolidated balance sheets as at
October 31, 2010 and 2009 and the consolidated statements
of income, changes in shareholders’ equity, comprehensive
income and cash flows for each of the years in the three-year
period ended October 31, 2010, together with the
auditors’ report thereon;
(d) the Bank’s management’s discussion and
analysis of financial condition and results of operations, for
the year ended October 31, 2010;
(e) the Bank’s material change report dated
September 13, 2010; and
(f) the Bank’s material change report dated
November 24, 2010.
All documents of the type referred to above (excluding
confidential material change reports) and any business
acquisition reports and news releases announcing financial
information filed by the Bank with any of the Canadian
Securities Administrators subsequent to the date of this
Circular and prior to the Effective Date shall be deemed to be
incorporated by reference into this Circular.
Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein relating to the
Bank shall be deemed to be modified or superseded for the
purposes of this Circular to the extent that a statement
contained herein, or in any other subsequently filed document
which also is incorporated or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. The
modifying or superseding statement need not state that it has
modified or superseded a prior statement or include any other
information set forth in the document which it modifies or
supersedes. The making of a modifying or superseding statement
will not be deemed an admission for any purpose that the
modified or superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an
omission to state a material fact that is required to be stated
or that is necessary to make a statement not misleading in light
of the circumstances in which it was made. Any statement so
modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this
Circular.
Information has been incorporated by reference in this
Circular from documents filed with Canadian Securities
Administrators. Copies of the documents incorporated herein
by reference may be obtained on request without charge from the
Executive Vice-President, General Counsel and Secretary of the
Bank at Scotia Plaza, 44 King Street West, Toronto, Ontario, M5H
1H1 and are also available electronically on SEDAR at
www.sedar.com.
A-1
THE BANK
OF NOVA SCOTIA
The Bank of Nova Scotia was granted a charter under the laws of
the Province of Nova Scotia in 1832 and commenced operations in
Halifax, Nova Scotia in that year. Since 1871, the Bank has been
a chartered bank under the Bank Act. The Bank is a
Schedule I bank under the Bank Act and the Bank Act is its
charter. The head office of the Bank is located at 1709 Hollis
Street, Halifax, Nova Scotia, B3J 3B7 and its executive offices
are at Scotia Plaza, 44 King Street West, Toronto, Ontario, M5H
1H1.
Further information with respect to the Bank’s business
operations are contained under the headings “Corporate
Structure”, “General Development of the Bank’s
Business” and “Description of the Bank’s
Business” in the Bank’s annual information form
incorporated by reference in this Circular.
Authorized
and Outstanding Share Capital
The authorized common share capital of the Bank consists of an
unlimited number of Bank Common Shares. As of December 10,
2010, the Bank had outstanding 1,043,245,513 Bank Common Shares
and options to purchase 24,113,459 Bank Common Shares.
The authorized preferred share capital of the Bank consists of
an unlimited number of preferred shares without nominal or par
value issuable in series. As at December 10, 2010,
12,000,000 Preferred Shares, Series 12; 12,000,000
Preferred Shares, Series 13; 13,800,000 Preferred Shares,
Series 14; 13,800,000 Preferred Shares, Series 15;
13,800,000 Preferred Shares, Series 16; 9,200,000 Preferred
Shares, Series 17; 13,800,000 Preferred Shares,
Series 18; 14,000,000 Preferred Shares, Series 20;
12,000,000 Preferred Shares, Series 22; 10,000,000
Preferred Shares, Series 24; 13,000,000 Preferred Shares,
Series 26; 11,000,000 Preferred Shares, Series 28; and
10,600,000 Preferred Shares, Series 30 were issued and
outstanding. In addition, Preferred Shares, Series 19;
Preferred Shares, Series 21; Preferred Shares,
Series 23; Preferred Shares, Series 25; Preferred
Shares, Series 27; Preferred Shares, Series 29; and
Preferred Shares, Series 31 were authorized. None of the
Preferred Shares, Series 19; Preferred Shares,
Series 21; Preferred Shares, Series 23; Preferred
Shares, Series 25; Preferred Shares, Series 27;
Preferred Shares, Series 29; or Preferred Shares,
Series 31 are currently outstanding.
Price
Range and Trading Volume
The Bank’s common shares trade under the stock symbol
“BNS” on the TSX and the NYSE. The Preferred Shares
are listed on the TSX under the stock symbols
“BNS.PR.J” for the Preferred Shares, Series 12;
“the BNS.PR.K” for the Preferred Shares,
Series 13; “the BNS.PR.L” for the Preferred
Shares, Series 14; “the BNS.PR.M” for the
Preferred Shares, Series 15; “the BNS.PR.N” for
the Preferred Shares, Series 16; “the BNS.PR.O”
for the Preferred Shares, Series 17; “the
BNS.PR.P” for the Preferred Shares, Series 18;
“the BNS.PR.Q” for the Preferred Shares,
Series 20; “the BNS.PR.R” for the Preferred
Shares, Series 22; “the BNS.PR.S” for the
Preferred Shares, Series 24; “the BNS.PR.T” for
the Preferred Shares, Series 26; “the BNS.PR.X”
for the Preferred Shares, Series 28; and “the
BNS.PR.Y” for the Preferred Shares, Series 30. The
Bank also has deposit notes and debentures listed on the London
Stock Exchange and the Swiss Exchange.
A-2
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Preferred Shares
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Common
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Series
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Series
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Series
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Series
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Series
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Series
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Series
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Series
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Series
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Series
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Series
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Series
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Series
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Shares
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12
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13
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14
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15
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16
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17
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18
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20
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22
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24(1)
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26
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28
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30
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December 2009
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— High Price ($)
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49.72
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24.00
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22.33
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20.83
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20.72
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24.00
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25.39
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26.75
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26.83
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26.69
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—
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28.19
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28.31
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—
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— Low Price ($)
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47.45
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23.58
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21.68
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20.36
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20.32
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23.57
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24.90
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26.40
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26.10
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26.25
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—
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27.77
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27.90
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—
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— Volume (‘000)
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69,768
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174
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218
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363
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361
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185
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122
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157
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121
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217
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—
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345
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168
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—
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January 2010
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— High Price ($)
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48.93
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24.05
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22.03
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20.86
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20.80
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23.97
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25.00
|
|
|
|
26.60
|
|
|
|
26.79
|
|
|
|
26.68
|
|
|
|
—
|
|
|
|
28.12
|
|
|
|
27.99
|
|
|
|
—
|
|
— Low Price ($)
|
|
|
44.60
|
|
|
|
23.70
|
|
|
|
21.72
|
|
|
|
20.38
|
|
|
|
20.38
|
|
|
|
23.46
|
|
|
|
24.60
|
|
|
|
26.24
|
|
|
|
26.16
|
|
|
|
26.17
|
|
|
|
—
|
|
|
|
27.71
|
|
|
|
27.70
|
|
|
|
—
|
|
— Volume (‘000)
|
|
|
60,818
|
|
|
|
233
|
|
|
|
117
|
|
|
|
344
|
|
|
|
345
|
|
|
|
237
|
|
|
|
140
|
|
|
|
317
|
|
|
|
307
|
|
|
|
289
|
|
|
|
—
|
|
|
|
291
|
|
|
|
456
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— High Price ($)
|
|
|
48.01
|
|
|
|
23.75
|
|
|
|
21.85
|
|
|
|
20.50
|
|
|
|
20.47
|
|
|
|
23.63
|
|
|
|
24.86
|
|
|
|
26.52
|
|
|
|
26.48
|
|
|
|
26.52
|
|
|
|
—
|
|
|
|
28.12
|
|
|
|
28.10
|
|
|
|
—
|
|
— Low Price ($)
|
|
|
44.84
|
|
|
|
23.15
|
|
|
|
21.10
|
|
|
|
20.08
|
|
|
|
20.08
|
|
|
|
23.09
|
|
|
|
24.53
|
|
|
|
26.19
|
|
|
|
26.20
|
|
|
|
26.20
|
|
|
|
—
|
|
|
|
27.85
|
|
|
|
27.81
|
|
|
|
—
|
|
— Volume (‘000)
|
|
|
48,391
|
|
|
|
165
|
|
|
|
249
|
|
|
|
468
|
|
|
|
354
|
|
|
|
150
|
|
|
|
139
|
|
|
|
669
|
|
|
|
223
|
|
|
|
266
|
|
|
|
—
|
|
|
|
267
|
|
|
|
303
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— High Price ($)
|
|
|
51.82
|
|
|
|
23.35
|
|
|
|
21.15
|
|
|
|
20.10
|
|
|
|
20.17
|
|
|
|
23.15
|
|
|
|
24.65
|
|
|
|
26.57
|
|
|
|
26.55
|
|
|
|
26.60
|
|
|
|
—
|
|
|
|
28.42
|
|
|
|
28.44
|
|
|
|
—
|
|
— Low Price ($)
|
|
|
48.26
|
|
|
|
22.40
|
|
|
|
20.41
|
|
|
|
19.34
|
|
|
|
19.35
|
|
|
|
22.27
|
|
|
|
24.07
|
|
|
|
26.25
|
|
|
|
26.20
|
|
|
|
26.25
|
|
|
|
—
|
|
|
|
27.89
|
|
|
|
27.95
|
|
|
|
—
|
|
— Volume (‘000)
|
|
|
75,015
|
|
|
|
195
|
|
|
|
285
|
|
|
|
729
|
|
|
|
417
|
|
|
|
182
|
|
|
|
191
|
|
|
|
235
|
|
|
|
367
|
|
|
|
367
|
|
|
|
—
|
|
|
|
975
|
|
|
|
788
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— High Price ($)
|
|
|
58.18
|
|
|
|
22.08
|
|
|
|
20.10
|
|
|
|
18.95
|
|
|
|
18.97
|
|
|
|
21.90
|
|
|
|
23.52
|
|
|
|
26.20
|
|
|
|
25.99
|
|
|
|
26.00
|
|
|
|
—
|
|
|
|
27.73
|
|
|
|
27.78
|
|
|
|
24.48
|
|
— Low Price ($)
|
|
|
50.00
|
|
|
|
21.30
|
|
|
|
19.32
|
|
|
|
18.26
|
|
|
|
18.35
|
|
|
|
21.15
|
|
|
|
22.65
|
|
|
|
25.49
|
|
|
|
25.38
|
|
|
|
25.40
|
|
|
|
—
|
|
|
|
26.45
|
|
|
|
26.52
|
|
|
|
23.80
|
|
— Volume (‘000)
|
|
|
70,697
|
|
|
|
296
|
|
|
|
290
|
|
|
|
479
|
|
|
|
393
|
|
|
|
312
|
|
|
|
416
|
|
|
|
263
|
|
|
|
316
|
|
|
|
435
|
|
|
|
—
|
|
|
|
568
|
|
|
|
752
|
|
|
|
1,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— High Price ($)
|
|
|
52.69
|
|
|
|
22.09
|
|
|
|
19.87
|
|
|
|
18.88
|
|
|
|
18.93
|
|
|
|
21.99
|
|
|
|
23.39
|
|
|
|
25.94
|
|
|
|
25.80
|
|
|
|
25.9
|
|
|
|
—
|
|
|
|
27.18
|
|
|
|
27.15
|
|
|
|
24.46
|
|
— Low Price ($)
|
|
|
48.02
|
|
|
|
21.48
|
|
|
|
19.44
|
|
|
|
18.42
|
|
|
|
18.45
|
|
|
|
21.35
|
|
|
|
23.00
|
|
|
|
25.55
|
|
|
|
25.50
|
|
|
|
25.53
|
|
|
|
—
|
|
|
|
26.70
|
|
|
|
26.80
|
|
|
|
24.00
|
|
— Volume (‘000)
|
|
|
71,839
|
|
|
|
147
|
|
|
|
233
|
|
|
|
304
|
|
|
|
306
|
|
|
|
287
|
|
|
|
267
|
|
|
|
130
|
|
|
|
150
|
|
|
|
184
|
|
|
|
—
|
|
|
|
301
|
|
|
|
366
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— High Price ($)
|
|
|
51.55
|
|
|
|
22.97
|
|
|
|
20.99
|
|
|
|
19.87
|
|
|
|
19.88
|
|
|
|
22.98
|
|
|
|
24.75
|
|
|
|
26.25
|
|
|
|
26.25
|
|
|
|
26.33
|
|
|
|
—
|
|
|
|
27.70
|
|
|
|
27.70
|
|
|
|
24.84
|
|
— Low Price ($)
|
|
|
48.69
|
|
|
|
22.10
|
|
|
|
20.05
|
|
|
|
18.98
|
|
|
|
18.91
|
|
|
|
21.85
|
|
|
|
23.46
|
|
|
|
25.85
|
|
|
|
25.80
|
|
|
|
25.83
|
|
|
|
—
|
|
|
|
27.07
|
|
|
|
27.11
|
|
|
|
24.50
|
|
— Volume (‘000)
|
|
|
67,956
|
|
|
|
181
|
|
|
|
315
|
|
|
|
329
|
|
|
|
262
|
|
|
|
590
|
|
|
|
152
|
|
|
|
170
|
|
|
|
118
|
|
|
|
119
|
|
|
|
—
|
|
|
|
303
|
|
|
|
150
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— High Price ($)
|
|
|
52.44
|
|
|
|
23.61
|
|
|
|
21.53
|
|
|
|
20.24
|
|
|
|
20.27
|
|
|
|
23.42
|
|
|
|
24.94
|
|
|
|
26.22
|
|
|
|
26.25
|
|
|
|
26.34
|
|
|
|
—
|
|
|
|
27.89
|
|
|
|
27.92
|
|
|
|
24.95
|
|
— Low Price ($)
|
|
|
47.85
|
|
|
|
22.67
|
|
|
|
20.71
|
|
|
|
19.42
|
|
|
|
19.41
|
|
|
|
22.72
|
|
|
|
24.51
|
|
|
|
25.90
|
|
|
|
25.80
|
|
|
|
25.73
|
|
|
|
—
|
|
|
|
27.42
|
|
|
|
27.25
|
|
|
|
24.50
|
|
— Volume (‘000)
|
|
|
61,397
|
|
|
|
172
|
|
|
|
279
|
|
|
|
307
|
|
|
|
191
|
|
|
|
428
|
|
|
|
162
|
|
|
|
270
|
|
|
|
186
|
|
|
|
279
|
|
|
|
—
|
|
|
|
261
|
|
|
|
276
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— High Price ($)
|
|
|
52.03
|
|
|
|
24.28
|
|
|
|
22.21
|
|
|
|
21.08
|
|
|
|
20.96
|
|
|
|
24.13
|
|
|
|
25.25
|
|
|
|
26.45
|
|
|
|
26.74
|
|
|
|
26.74
|
|
|
|
—
|
|
|
|
28.03
|
|
|
|
28.10
|
|
|
|
25.00
|
|
— Low Price ($)
|
|
|
49.25
|
|
|
|
23.39
|
|
|
|
21.25
|
|
|
|
20.08
|
|
|
|
20.07
|
|
|
|
23.26
|
|
|
|
24.69
|
|
|
|
26.10
|
|
|
|
26.25
|
|
|
|
26.18
|
|
|
|
—
|
|
|
|
27.62
|
|
|
|
27.75
|
|
|
|
24.66
|
|
— Volume (‘000)
|
|
|
69,254
|
|
|
|
227
|
|
|
|
284
|
|
|
|
257
|
|
|
|
384
|
|
|
|
301
|
|
|
|
240
|
|
|
|
160
|
|
|
|
257
|
|
|
|
197
|
|
|
|
—
|
|
|
|
201
|
|
|
|
147
|
|
|
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2010
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— High Price ($)
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54.92
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24.89
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23.23
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22.31
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22.22
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24.94
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26.09
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26.85
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26.79
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27.10
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—
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28.39
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28.50
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25.48
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— Low Price ($)
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51.25
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24.10
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22.27
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21.02
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20.99
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24.09
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25.15
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26.45
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26.53
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26.70
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—
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27.94
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27.97
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25.01
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— Volume (‘000)
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72,656
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|
189
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281
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|
|
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374
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|
|
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380
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803
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327
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1,001
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594
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|
388
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—
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570
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|
|
483
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548
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October 2010
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— High Price ($)
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55.52
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24.97
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23.79
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22.52
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22.62
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24.98
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25.86
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26.70
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26.64
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26.78
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—
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28.00
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28.05
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25.48
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— Low Price ($)
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53.88
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24.50
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22.65
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21.63
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21.61
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24.50
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|
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25.20
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|
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26.13
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26.15
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|
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26.40
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—
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27.55
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27.50
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25.00
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— Volume (‘000)
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50,033
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|
287
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363
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415
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|
|
464
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620
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|
|
317
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|
|
673
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|
|
391
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|
|
158
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—
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|
444
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|
340
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451
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November 2010
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— High Price ($)
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54.70
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25.28
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24.25
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22.87
|
|
|
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22.98
|
|
|
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25.19
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|
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26.30
|
|
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26.70
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|
|
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26.81
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|
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26.87
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—
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28.10
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|
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28.15
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25.69
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— Low Price ($)
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52.63
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24.80
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23.48
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|
|
|
22.36
|
|
|
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22.27
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|
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24.76
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|
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25.52
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|
|
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26.20
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|
|
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26.29
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|
|
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26.55
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—
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27.80
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|
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27.66
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25.00
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— Volume (‘000)
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72,246
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|
362
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|
489
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684
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|
|
514
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822
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|
277
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|
|
745
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|
|
|
426
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|
|
|
305
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|
|
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—
|
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|
|
231
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|
|
|
329
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|
333
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December 1 to 9, 2010
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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— High Price ($)
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|
|
56.12
|
|
|
|
24.79
|
|
|
|
23.73
|
|
|
|
22.45
|
|
|
|
22.47
|
|
|
|
24.88
|
|
|
|
25.39
|
|
|
|
26.29
|
|
|
|
26.29
|
|
|
|
26.58
|
|
|
|
—
|
|
|
|
27.89
|
|
|
|
27.84
|
|
|
|
25.10
|
|
— Low Price ($)
|
|
|
53.97
|
|
|
|
24.58
|
|
|
|
23.40
|
|
|
|
22.19
|
|
|
|
22.01
|
|
|
|
24.60
|
|
|
|
25.07
|
|
|
|
26.05
|
|
|
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26.14
|
|
|
|
26.34
|
|
|
|
—
|
|
|
|
27.43
|
|
|
|
27.40
|
|
|
|
24.90
|
|
— Volume (‘000)
|
|
|
31,939
|
|
|
|
75
|
|
|
|
121
|
|
|
|
77
|
|
|
|
181
|
|
|
|
72
|
|
|
|
58
|
|
|
|
189
|
|
|
|
557
|
|
|
|
41
|
|
|
|
—
|
|
|
|
192
|
|
|
|
196
|
|
|
|
114
|
|
|
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(1)
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|
The Preferred Shares,
Series 24 were issued on December 12, 2008 by the Bank
to SunLife Financial Inc. as partial consideration for the
acquisition by the Bank of trust units of CI Financial Income
Fund (now CI Financial Corp.).
|
A-3
Description
of the Bank Common Shares
Holders of the Bank Common Shares are entitled to receive notice
of and vote at all meetings of the shareholders of the Bank
except meetings at which only the holders of preferred shares of
the Bank are entitled to vote. Holders of the Bank Common Shares
are entitled to receive dividends, as and when declared on the
Bank Common Shares.
After the payment to the holders of the preferred shares of the
amount or amounts to which they may be entitled, the holders of
the Bank Common Shares shall be entitled to receive the
remaining property of the Bank upon its liquidation, dissolution
or
winding-up.
Description
of the Bank Preferred Shares as a Class
The following is a summary of the rights, privileges,
restrictions and conditions of or attaching to the preferred
shares of the Bank as a class.
Issuable
in Series
The authorized preferred share capital of the Bank consists of
an unlimited number of preferred shares without nominal or par
value. The directors of the Bank may divide any unissued
preferred shares into series and fix the number of shares in
each series and the rights, privileges, restrictions and
conditions thereof.
Priority
The preferred shares of each series will rank on a parity with
preferred shares of every other series and are entitled to
preference over the Bank Common Shares and over any other shares
of the Bank ranking junior to the preferred shares with respect
to the payment of dividends and upon any distribution of assets
in the event of liquidation, dissolution or
winding-up
of the Bank.
Restrictions
The Bank may not create, without the approval of the holders of
preferred shares, any other class of shares ranking prior to or
on a parity with the preferred shares, increase the authorized
number of preferred shares or amend the provisions attaching to
the preferred shares.
Shareholder
Approval
Any approval to be given by the holders of the preferred shares
may be given by a resolution carried by the affirmative vote of
not less than
662/3%
of the votes cast at a meeting of holders of preferred shares at
which a majority of the outstanding preferred shares is
represented or, if no such quorum is present at such meeting, at
any adjourned meeting at which shareholders then present or
represented by proxy would form the necessary quorum.
Certain
Provisions of the Bank Preferred Shares as a Series
The following is a summary of the rights, privileges,
restrictions and conditions of or attaching to the Bank
Preferred Shares as a series.
Definition
of Terms
The following definitions are relevant to the Bank Preferred
Shares:
“Annual Fixed Dividend Rate” means, for any
Subsequent Fixed Rate Period, the rate (expressed as a
percentage rate rounded down to the nearest one hundred
thousandth of one percent (with 0.000005% being rounded up))
equal to the sum of the Government of Canada Yield on the
applicable Fixed Rate Calculation Date plus 1.34%;
“Bloomberg Screen GCAN5YR Page” means the
display designated as page “GCAN5YR<INDEX>”
on the Bloomberg Financial L.P. service (or such other page as
may replace the GCAN5YR page on that service) for purposes of
displaying Government of Canada Bond yields;
“Fixed Rate Calculation Date” means, for any
Subsequent Fixed Rate Period, the 30th day prior to the
first day of such Subsequent Fixed Rate Period;
A-4
“Government of Canada Yield” on any date means
the yield to maturity on such date (assuming semi-annual
compounding) of a Canadian dollar denominated non-callable
Government of Canada bond with a term to maturity of five
(5) years as quoted as of 10:00 a.m. (Toronto time) on
such date and which appears on the Bloomberg Screen GCAN5YR Page
on such date; provided that, if such rate does not appear on the
Bloomberg Screen GCAN5YR Page on such date, the Government of
Canada Yield will mean the average of the yields determined by
two registered Canadian investment dealers, other than Scotia
Capital Inc., selected by the Bank, as being the yield to
maturity on such date (assuming semi-annual compounding) which a
Canadian dollar denominated non-callable Government of Canada
bond would carry if issued in Canadian dollars at 100% of its
principal amount on such date with a term to maturity of five
(5) years;
“Initial Fixed Rate Period” means the initial
five-year period commencing on the Effective Date; and
“Subsequent Fixed Rate Period” means for the
initial Subsequent Fixed Rate Period, the five-year period
commencing on the day immediately following the end of the
Initial Fixed Rate Period and for each succeeding Subsequent
Fixed Rate Period, the five-year period commencing on the day
immediately following the end of the preceding Subsequent Fixed
Rate Period.
Dividends
During the Initial Fixed Rate Period, the holders of the Bank
Preferred Shares will be entitled to receive fixed quarterly
non-cumulative preferential cash dividends, as and when declared
by the board of directors, subject to the provisions of the Bank
Act, at an annual rate equal to $0.925 per share.
During each Subsequent Fixed Rate Period after the Initial Fixed
Rate Period, the holders of Bank Preferred Shares will be
entitled to receive fixed non-cumulative preferential cash
dividends, as and when declared by the board of directors,
subject to the provisions of the Bank Act, payable quarterly, in
the amount per share per annum determined by multiplying the
Annual Fixed Dividend Rate applicable to such Subsequent Fixed
Rate Period by $25.00.
The Annual Fixed Dividend Rate applicable to a Subsequent Fixed
Rate Period will be determined by the Bank on the Fixed Rate
Calculation Date. Such determination will, in the absence of
manifest error, be final and binding upon the Bank and upon all
holders of Bank Preferred Shares. The Bank will, on the Fixed
Rate Calculation Date, give written notice of the Annual Fixed
Dividend Rate for the ensuing Subsequent Fixed Rate Period to
the registered holders of the then outstanding Bank Preferred
Shares.
If the board of directors does not declare a dividend, or any
part thereof, on the Bank Preferred Shares on or before the
dividend payment date for a particular quarter, then the
entitlement of the holders of the Bank Preferred Shares to
receive such dividend, or to any part thereof, for such quarter
will be forever extinguished.
Redemption
The Bank Preferred Shares will not be redeemable prior to the
end of the Initial Fixed Rate Period. Subject to the provisions
of the Bank Act, the prior consent of the Superintendent and the
provisions described below under the heading “Restrictions
on Dividends and Retirement of Shares”, and the provisions
in the Circular, on the first day after the Initial Fixed Rate
Period and every five (5) years thereafter, the Bank may
redeem all or any part of the then outstanding Bank Preferred
Shares, at the Bank’s option without the consent of the
holder, by the payment of an amount in cash for each such share
so redeemed of $25.00 together with all declared and unpaid
dividends to the date fixed for redemption.
Notice of any redemption will be given by the Bank at least
thirty (30) days and not more than sixty (60) days
prior to the date fixed for redemption. If less than all the
outstanding Bank Preferred Shares are at any time to be
redeemed, the shares to be redeemed will be redeemed pro
rata, disregarding fractions.
Conversion
of Bank Preferred Shares into Floating Rate Preferred
Shares
Holders of Bank Preferred Shares will have the right, at their
option, on the first day after the Initial Fixed Rate Period and
every five years thereafter (a “Floating Rate Share
Conversion Date”), to convert, subject to the Bank
Preferred Share Automatic Conversion provision described below,
the provisions of the Bank Act and the payment or delivery to
the Bank of evidence of payment of the tax (if any) payable, all
or any of the Bank Preferred Shares registered in their name
into a new series of non-cumulative Floating Rate Preferred
Shares series 33 (the “Floating Rate Preferred
Shares”) on the basis of one Floating Rate Preferred
Share for each Bank Preferred Share. The conversion of Bank
Preferred Shares
A-5
may be effected upon written notice (an “Election
Notice”) given not earlier than the 30th day prior
to, but not later than 5:00 p.m. (Toronto time) on the
15th day preceding, the applicable Floating Rate Share
Conversion Date.
The Bank will, at least thirty (30) days and not more than
sixty (60) days prior to the applicable Floating Rate Share
Conversion Date, give notice in writing and a form of Election
Notice to the then registered holders of the Bank Preferred
Shares of the above-mentioned conversion right. On the
30th day prior to each Floating Rate Share Conversion Date,
the Bank will give notice in writing to the then registered
holders of the Bank Preferred Shares of the Annual Fixed
Dividend Rate for the next succeeding Subsequent Fixed Rate
Period.
Holders of Bank Preferred Shares will not be entitled to convert
their shares into Floating Rate Preferred Shares if the Bank
determines that, after giving effect to any Election Notices
received by the Bank during the time fixed therefor, there would
remain outstanding on a Floating Rate Share Conversion Date less
than 1,000,000 Floating Rate Preferred Shares, after having
taken into account all Bank Preferred Shares tendered for
conversion into Floating Rate Preferred Shares. The Bank will
give notice in writing thereof to all registered holders of Bank
Preferred Shares at least seven (7) days prior to the
applicable Floating Rate Share Conversion Date. Furthermore, if
the Bank determines that, after giving effect to any Election
Notices received by the Bank during the time fixed therefor,
there would remain outstanding on a Floating Rate Share
Conversion Date less than 1,000,000 Bank Preferred Shares after
having taken into account all Bank Preferred Shares tendered for
conversion into Floating Rate Preferred Shares, then all, but
not part, of the remaining issued and outstanding Bank Preferred
Shares will automatically be converted into Floating Rate
Preferred Shares on the basis of one Floating Rate Preferred
Share for each Bank Preferred Share on the applicable Floating
Rate Share Conversion Date and the Bank will give notice in
writing thereof to the then registered holders of such remaining
Bank Preferred Shares at least seven (7) days prior to such
Floating Rate Share Conversion Date (“Bank Preferred
Share Automatic Conversion”).
Upon the exercise by the holder of this right to convert Bank
Preferred Shares into Floating Rate Preferred Shares (and upon a
Bank Preferred Share Automatic Conversion), the Bank reserves
the right not to issue Floating Rate Preferred Shares to any
person whose address is in, or whom the Bank or its transfer
agent has reason to believe is a resident of, any jurisdiction
outside Canada, to the extent that such issue would require the
Bank to comply with the registration, prospectus, filing or
other similar requirements under the applicable securities laws
of such jurisdiction.
If the Bank gives notice to the registered holders of the Bank
Preferred Shares of the redemption of all of the Bank Preferred
Shares, the Bank will not be required to give notice as provided
hereunder to the registered holders of the Bank Preferred Shares
of an Annual Fixed Dividend Rate or of the conversion right of
holders of Bank Preferred Shares and the right of any holder of
Bank Preferred Shares to convert such Bank Preferred Shares will
cease and terminate in that event.
Purchase
for Cancellation
Subject to the provisions of the Bank Act, the prior consent of
the Superintendent, the provisions in the Circular and as
described below under the heading “Restrictions on
Dividends and Retirement of Shares”, the Bank may at any
time purchase for cancellation any Bank Preferred Shares in the
open market at the lowest price or prices at which in the
opinion of the board of directors such shares are obtainable.
Restrictions
on Dividends and Retirement of Shares
So long as any of the Bank Preferred Shares are outstanding, the
Bank will not, without the approval of the holders of
outstanding Bank Preferred Shares given as specified below:
(a) pay any dividends on the Bank Common Shares or any
other shares ranking junior to the Bank Preferred Shares (other
than stock dividends payable in shares ranking junior to the
Bank Preferred Shares);
(b) redeem, purchase or otherwise retire any Bank Common
Shares or any other shares ranking junior to the Bank Preferred
Shares (except out of the net cash proceeds of a substantially
concurrent issue of shares ranking junior to the Bank Preferred
Shares);
(c) redeem, purchase or otherwise retire less than all the
Bank Preferred Shares; or
(d) except pursuant to any purchase obligation, sinking
fund, retraction privilege or mandatory redemption provisions
attaching to any series of preferred shares of the Bank, redeem,
purchase or otherwise retire any other shares ranking on a
parity with the Bank Preferred Shares;
A-6
unless, in each such case, all dividends up to and including the
dividend payment date for the last completed period for which
dividends will be payable will have been declared and paid or
set apart for payment in respect of each series of cumulative
preferred shares of the Bank then issued and outstanding and on
all other cumulative shares ranking on a parity with the
preferred shares of the Bank and there will have been paid or
set apart for payment all declared dividends in respect of each
series of non-cumulative preferred shares of the Bank (including
the Bank Preferred Shares) then issued and outstanding and on
all other non-cumulative shares ranking on a parity with the
preferred shares of the Bank.
Issue
of Additional Series of Preferred Shares
The Bank may issue other series of preferred shares ranking on a
parity with the Bank Preferred Shares without the authorization
of the holders of the Bank Preferred Shares.
Amendments
to Bank Preferred Shares
The Bank will not, without the approval of the holders of the
Bank Preferred Shares given as specified below under
“Shareholder Approvals”, delete or vary any rights,
privileges, restrictions or conditions attaching to the Bank
Preferred Shares. In addition to the aforementioned approval,
the Bank will not without, but may from time to time with, the
prior approval of the Superintendent, make any such deletion or
variation which might affect the classification afforded the
Bank Preferred Shares from time to time for capital adequacy
requirements pursuant to the Bank Act and the regulations and
guidelines thereunder.
Shareholder
Approvals
The approval of any amendments to the rights, privileges,
restrictions and conditions attaching to the Bank Preferred
Shares may be given by a resolution carried by the affirmative
vote of not less than
662/3%
of the votes cast at a meeting of holders of Bank Preferred
Shares at which a majority of the outstanding Bank Preferred
Shares is represented or, if no such quorum is present at such
meeting, at any adjourned meeting at which shareholders then
present or represented by proxy would form the necessary quorum.
Rights
on Liquidation
In the event of the liquidation, dissolution or
winding-up
of the Bank, the holders of the Bank Preferred Shares will be
entitled to receive $25.00 per share together with all dividends
declared and unpaid to the date of payment before any amount
will be paid or any assets of the Bank distributed to the
holders of any shares ranking junior to the Bank Preferred
Shares. The holders of the Bank Preferred Shares will not be
entitled to share in any further distribution of the assets of
the Bank.
Voting
Rights
Subject to the provisions of the Bank Act, the holders of Bank
Preferred Shares as such will not be entitled to receive notice
of, attend, or vote at, any meeting of the shareholders of the
Bank unless and until the first time at which the board of
directors of the Bank has not declared the whole dividend on the
Bank Preferred Shares in respect of any quarter. In that event,
the holders of Bank Preferred Shares will be entitled to receive
notice of, and to attend, meetings of shareholders at which
directors of the Bank are to be elected and will be entitled to
one (1) vote for each Bank Preferred Share held. The voting
rights of the holders of the Bank Preferred Shares will
forthwith cease upon payment by the Bank of the first dividend
on the Bank Preferred Shares to which the holders are entitled
subsequent to the time such voting rights first arose until such
time as the Bank may again fail to declare the whole dividend on
the Bank Preferred Shares in respect of any quarter, in which
event such voting rights will become effective again and so on
from time to time.
In connection with any action to be taken by the Bank which
requires the approval of the holders of Bank Preferred Shares
voting as a series or as part of the class, each such share will
entitle the holder thereof to one vote.
Business
Days
If any action is required to be taken by the Bank on a day that
is not a Business Day, then such action will be taken on the
next succeeding day that is a Business Day.
A-7
Certain
Provisions of the Floating Rate Preferred Shares as a
Series
The following is a summary of the rights, privileges,
restrictions and conditions of or attaching to the Floating Rate
Preferred Shares as a series.
Definition
of Terms
The following definitions are relevant to the Floating Rate
Preferred Shares.
“Floating Quarterly Dividend Rate” means, for
any quarter, the rate (expressed as a percentage rate rounded
down to the nearest one hundred thousandth of one percent (with
0.000005% being rounded up)) equal to the sum of the T-Bill Rate
on the applicable Floating Rate Calculation Date plus 1.34%;
“Floating Rate Calculation Date” means, for any
quarter, the 30th day prior to the first day of such
quarter; and
“T-Bill Rate” means, for any quarter, the
average yield expressed as a percentage per annum on three month
Government of Canada Treasury Bills, as reported by the Bank of
Canada, for the most recent treasury bills auction preceding the
applicable Floating Rate Calculation Date, the results of which
are posted on Reuters page BOCBILL.
Issue
Price
The Floating Rate Preferred Shares will have an issue price of
$25.00 per share.
Dividends
The holders of the Floating Rate Preferred Shares will be
entitled to receive floating rate non-cumulative preferential
cash dividends as and when declared by the board of directors of
the Bank, subject to the provisions of the Bank Act, payable
quarterly (the “Quarterly Dividend Payment
Date”), in the amount per share determined by
(a) multiplying the applicable Floating Quarterly Dividend
Rate by $25.00 by (b) a fraction, the numerator of which is
the actual number of days elapsed in the applicable quarterly
period and the denominator of which is 365.
The Floating Quarterly Dividend Rate for each quarter will be
determined by the Bank thirty (30) days prior to the first
day of the quarter. Such determination will, in the absence of
manifest error, be final and binding upon the Bank and upon all
holders of Floating Rate Preferred Shares. The Bank will, on the
Floating Rate Calculation Date, give written notice of the
Floating Quarterly Dividend Rate for the ensuing quarter to all
registered holders of the then outstanding Floating Rate
Preferred Shares.
If the board of directors of the Bank does not declare a
dividend, or any part thereof, on the Floating Rate Preferred
Shares on or before the Quarterly Dividend Payment Date for a
particular quarter, then the entitlement of the holders of the
Floating Rate Preferred Shares to receive such dividend, or to
any part thereof, for such quarter will be forever extinguished.
Redemption
Subject to the provisions of the Bank Act the prior consent of
the Superintendent, the provisions in the Circular and to the
provisions described below under the heading “Restrictions
on Dividends and Retirement of Shares”, on not more than
sixty (60) nor less than thirty (30) days’
notice, the Bank may redeem all or any part of the then
outstanding Floating Rate Preferred Shares, at the Bank’s
option without the consent of the holder, by the payment of an
amount in cash for each such share so redeemed of
(i) $25.00 together with all declared and unpaid dividends
to the date fixed for redemption in the case of redemptions on
the first day after the five year anniversary of the Initial
Fixed Rate Period and every five (5) years thereafter (a
“Fixed Rate Share Conversion Date”); or
(ii) $25.50 together with all declared and unpaid dividends
to the date fixed for redemption in the case of redemptions on
any other date that is not a Fixed Rate Share Conversion Date.
Notice of any redemption will be given by the Bank at least
thirty (30) days and not more than sixty (60) days
prior to the date fixed for redemption. If less than all the
outstanding Floating Rate Preferred Shares are at any time to be
redeemed, the shares to be redeemed will be redeemed pro
rata, disregarding fractions.
A-8
Conversion
of Floating Rate Preferred Shares into Bank Preferred
Shares
Holders of Floating Rate Preferred Shares will have the right,
at their option, on a Fixed Rate Share Conversion Date, to
convert, subject to the restrictions on conversion described
below, the provisions of the Bank Act and the payment or
delivery to the Bank of evidence of payment of the tax (if any)
payable, all or any of their Floating Rate Preferred Shares
registered in their name into Bank Preferred Shares on the basis
of one Bank Preferred Share for each Floating Rate Preferred
Share. The conversion of Floating Rate Preferred Shares may be
effected upon Notice given not earlier than the 30th day
prior to, but not later than 5:00 p.m. (Toronto time) on
the 15th day preceding, a Fixed Rate Share Conversion Date.
The Bank will, at least thirty (30) days and not more than
sixty (60) days prior to the applicable Fixed Rate Share
Conversion Date, give notice in writing and a form of Election
Notice to the then registered holders of the Floating Rate
Preferred Shares of the above-mentioned conversion right. On the
30th day prior to each Fixed Rate Share Conversion Date,
the Bank will give notice in writing to the then registered
holders of Floating Rate Preferred Shares of the Annual Fixed
Dividend Rate for the Subsequent Fixed Rate Period.
Holders of the Floating Rate Preferred Shares will not be
entitled to convert their shares into Bank Preferred Shares if
the Bank determines that, after giving effect to any Election
Notices received by the Bank during the time fixed therefor,
there would remain outstanding on a Fixed Rate Share Conversion
Date less than 1,000,000 Bank Preferred Shares, after having
taken into account all Floating Rate Preferred Shares tendered
for conversion into Bank Preferred Shares. The Bank will give
notice in writing thereof to all registered holders of Floating
Rate Preferred Shares at least seven (7) days prior to the
applicable Floating Rate Share Conversion Date. Furthermore, if
the Bank determines that, after giving effect to any Election
Notices received by the Bank during the time fixed therefor,
there would remain outstanding on a Fixed Rate Share Conversion
Date less than 1,000,000 Floating Rate Preferred Shares, after
having taken into account all Floating Rate Preferred Shares
tendered for conversion into Bank Preferred Shares, then all,
but not part, of the remaining issued and outstanding Floating
Rate Preferred Shares will automatically be converted into Bank
Preferred Shares on the basis of one Bank Preferred Share for
each Floating Rate Preferred Share on the applicable Fixed Rate
Share Conversion Date and the Bank will give notice in writing
thereof to the then registered owners of such remaining Floating
Rate Preferred Shares at least seven (7) days prior to such
Fixed Rate Share Conversion Date (“Floating Rate
Preferred Share Automatic Conversion”).
Upon the exercise by the holder of this right to convert
Floating Rate Preferred Shares into Bank Preferred Shares (and
upon a Floating Rate Preferred Share Automatic Conversion), the
Bank reserves the right not to issue Bank Preferred Shares to
any person whose address is in, or whom the Bank or its transfer
agent has reason to believe is a resident of, any jurisdiction
outside Canada, to the extent that such issue would require the
Bank to comply with the registration, prospectus, filing or
other similar requirements under the applicable securities laws
of such jurisdiction.
If the Bank gives notice to the registered holders of the
Floating Rate Preferred Shares of the redemption of all the
Floating Rate Preferred Shares, the Bank will not be required to
give notice as provided hereunder to the registered holders of
the Floating Rate Preferred Shares of an Annual Fixed Dividend
Rate or of the conversion right of holders of Floating Rate
Preferred Shares and the right of any holder of Floating Rate
Preferred Shares to convert such Floating Rate Preferred Shares
will cease and terminate in that event.
Purchase
for Cancellation
Subject to the provisions of the Bank Act, the prior consent of
the Superintendent, the provisions in the Circular and the
provisions described below under the heading “Restrictions
on Dividends and Retirement of Shares”, the Bank may at any
time purchase for cancellation any of the Floating Rate
Preferred Shares in the open market at the lowest price or
prices at which in the opinion of the board of directors of the
Bank such shares are obtainable.
Restrictions
on Dividends and Retirement of Shares
So long as any of the Floating Rate Preferred Shares are
outstanding, the Bank will not, without the approval of the
holders of outstanding Floating Rate Preferred Shares given as
specified below:
(a) pay any dividends on the Bank Common Shares or any
other shares ranking junior to the Floating Rate Preferred
Shares (other than stock dividends payable in shares of the Bank
ranking junior to the Floating Rate Preferred Shares);
A-9
(b) redeem, purchase or otherwise retire any Bank Common
Shares or any other shares ranking junior to the Preferred
Shares (except out of the net cash proceeds of a substantially
concurrent issue of shares ranking junior to the Floating Rate
Preferred Shares);
(c) redeem, purchase or otherwise retire less than all the
Floating Rate Preferred Shares; or
(d) except pursuant to any purchase obligation, sinking
fund, retraction privilege or mandatory redemption provisions
attaching to any series of preferred shares of the Bank, redeem,
purchase or otherwise retire any other shares ranking on a
parity with the Floating Rate Preferred Shares;
unless, in each such case, all dividends up to and including the
dividend payment date for the last completed period for which
dividends will be payable will have been declared and paid or
set apart for payment in respect of each series of cumulative
preferred shares of the Bank then issued and outstanding and on
all other cumulative shares ranking on a parity with the
preferred shares of the Bank and there will have been paid or
set apart for payment all declared dividends in respect of each
series of non-cumulative preferred shares of the Bank (including
the Floating Rate Preferred Shares) then issued and outstanding
and on all other non-cumulative shares ranking on a parity with
the preferred shares of the Bank.
Issue
of Additional Series of Preferred Shares
The Bank may issue other series of preferred shares ranking on a
parity with the Floating Rate Preferred Shares without the
authorization of the holders of the Bank Preferred Shares.
Amendments
to Floating Rate Preferred Shares
The Bank will not, without the approval of the holders of the
Floating Rate Preferred Shares given as specified below under
“Shareholder Approvals”, delete or vary any rights,
privileges, restrictions or conditions attaching to the Floating
Rate Preferred Shares. In addition to the aforementioned
approval, the Bank will not without, but may from time to time
with, the prior approval of the Superintendent, make any such
deletion or variation which might affect the classification
afforded the Floating Rate Preferred Shares from time to time
for capital adequacy requirements pursuant to the Bank Act and
the regulations and guidelines thereunder.
Shareholder
Approvals
The approval of any amendments to the rights, privileges,
restrictions and conditions attaching to the Floating Rate
Preferred Shares may be given by a resolution carried by the
affirmative vote of not less than
662/3%
of the votes cast at a meeting of holders of Floating Rate
Preferred Shares at which a majority of the outstanding Floating
Rate Preferred Shares is represented or, if no such quorum is
present at such meeting, at any adjourned meeting at which
shareholders then present or represented by proxy would form the
necessary quorum.
Rights
on Liquidation
In the event of the liquidation, dissolution or
winding-up
of the Bank, the holders of the Floating Rate Preferred Shares
will be entitled to receive $25.00 per share together with all
dividends declared and unpaid to the date of payment before any
amount will be paid or any assets of the Bank distributed to the
holders of any shares ranking junior to the Floating Rate
Preferred Shares. The holders of the Floating Rate Preferred
Shares will not be entitled to share in any further distribution
of the assets of the Bank.
Voting
Rights
Subject to the provisions of the Bank Act, the holders of
Floating Rate Preferred Shares as such will not be entitled to
receive notice of, attend, or vote at, any meeting of the
shareholders of the Bank unless and until the first time at
which the board of directors of the Bank has not declared the
whole dividend on the Floating Rate Preferred Shares in respect
of any quarter. In that event, the holders of Floating Rate
Preferred Shares will be entitled to receive notice of, and to
attend, meetings of shareholders at which directors of the Bank
are to be elected and will be entitled to one vote for each
Floating Rate Preferred Share held. The voting rights of the
holders of the Floating Rate Preferred Shares will forthwith
cease upon payment by the Bank of the first dividend on the
Floating Rate Preferred Shares to which the holders are entitled
subsequent to the time such voting rights first arose until such
time as the Bank may again fail to declare the whole
A-10
dividend on the Floating Rate Preferred Shares in respect of any
quarter, in which event such voting rights will become effective
again and so on from time to time.
In connection with any action to be taken by the Bank which
requires the approval of the holders of Floating Rate Preferred
Shares voting as a series or as part of the class, each such
share will entitle the holder thereof to one vote.
Business
Days
If any action is required to be taken by the Bank on a day that
is not a Business Day, then such action will be taken on the
next succeeding day that is a Business Day.
BANK ACT
RESTRICTIONS AND RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Bank Act contains restrictions on the issue, transfer,
acquisition and beneficial ownership of all shares of a
chartered bank. The following is a summary of such restrictions.
No person may be a major shareholder of a bank if the bank has
equity of $8 billion or more (which would include the
Bank). A person is a major shareholder of a bank if:
(i) the aggregate of shares of any class of voting shares
beneficially owned by that person, by entities controlled by
that person and by any person associated or acting jointly or in
concert with that person is more than 20% of that class of
voting shares; or (ii) the aggregate of shares of any class
of non-voting shares beneficially owned by that person, by
entities controlled by that person and by any person associated
or acting jointly or in concert with that person is more than
30% of that class of non-voting shares. No person may have a
significant interest in any class of shares of a Canadian
chartered bank, including the Bank, unless the person first
receives the approval of the Minister of Finance (Canada). For
purposes of the Bank Act, a person has a significant interest in
a class of shares of a bank where the aggregate of any shares of
the class beneficially owned by that person, by entities
controlled by that person and by any person associated or acting
jointly in concert with that person exceeds 10% of all of the
outstanding shares of that class of shares of such bank.
The Bank Act has for some time prohibited the Bank from
recording on its securities register a transfer or issue of any
shares to the federal or a provincial government in Canada or
any foreign government or their respective agents. However, on
March 12, 2009, Bill C-10, the Budget Implementation
Act, 2009 (Canada) (the “Bill”), received
Royal Assent. The Bill includes certain amendments to the Bank
Act that would permit the Canadian federal government to acquire
shares of a bank, including the Bank, if the Minister and
Governor in Council were to conclude that to do so was necessary
to promote stability in the financial system. While the
government holds any shares of a bank, including the Bank, the
Minister may impose certain terms and conditions, including
conditions on the payment by the Bank of dividends on any of its
shares.
Under the Bank Act, the Bank cannot redeem or purchase any of
its shares, including the Bank Preferred Shares and Bank Common
Shares, unless the consent of the Superintendent has been
obtained. In addition, the Bank Act prohibits the Bank from
purchasing or redeeming any shares or paying any dividends if
there are reasonable grounds for believing that the Bank is, or
the payment would cause the Bank to be, in contravention of the
Bank Act requirement to maintain, in relation to the Bank’s
operations, adequate capital and appropriate forms of liquidity
and to comply with any regulations or directions of the
Superintendent in relation thereto.
The Bank has covenanted that, if a distribution is not paid when
due on any outstanding Scotiabank Trust Securities (also
known as “Scotia BaTS”) issued by BNS Capital
Trust or Scotiabank Capital Trust, the Bank will not pay
dividends on its common shares and preferred shares, until the
twelfth month following the failure to pay the required
distribution in full, unless the required distribution is paid
to the holders of Scotia BaTS. In addition, the Bank has also
covenanted that if the interest is not paid in cash on any
outstanding 7.802% Scotiabank Tier 1 Securities
Series 2009-1
issued by Scotiabank Tier 1 Trust, the Bank will not pay
dividends on its common shares and preferred shares for a
specified period of time.
A-11
CONSOLIDATED
CAPITALIZATION OF THE BANK
The following table sets forth the consolidated capitalization
of the Bank as at October 31, 2010, before and after giving
effect to the issuance by the Bank of the Bank Shares offered to
Shareholders as consideration under the Offer. This table should
be read in conjunction with the Bank’s consolidated annual
financial statements and the Annual MD&A and the
Bank’s consolidated interim financial statements and
MD&A as at and for the three months ended October 31,
2010.
|
|
|
|
|
|
|
|
|
|
|
As at October 31,
|
|
|
As Adjusted as at
|
|
|
|
2010
|
|
|
October 31,
2010(1)(2)
|
|
|
|
(In millions of
|
|
|
(In millions of
|
|
|
|
Canadian dollars)
|
|
|
Canadian dollars)
|
|
|
Subordinated Debt
|
|
$
|
5,939
|
|
|
$
|
5,939
|
|
Capital Instrument Liabilities
|
|
|
500
|
|
|
|
500
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred Shares
|
|
|
3,975
|
|
|
|
4,353
|
|
Common Shares and Contributed Surplus
|
|
|
5,775
|
|
|
|
7,484
|
|
Retained Earnings
|
|
|
21,932
|
|
|
|
21,932
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
(4,051
|
)
|
|
|
(4,051
|
)
|
|
|
|
|
|
|
|
|
|
Total Shareholders’ Equity
|
|
|
27,631
|
|
|
|
29,718
|
|
Total Capitalization
|
|
$
|
34,070
|
|
|
$
|
36,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Adjusted to give effect to the
Offer. Assumes that all Shares other than those beneficially
owned directly or indirectly by the Bank are tendered to the
Offer, that all vested Options are exercised, and that all
Shareholders other than the
Locked-Up
Shareholders elect to receive cash rather than Bank Preferred
Shares.
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|
(2)
|
|
On November 26, 2010, the Bank
announced BNS Capital Trust’s intention to redeem all
issued and outstanding Scotiabank Trust Securities —
Series 2000-1 on December 31, 2010. The table has not
been adjusted to give effect to this redemption.
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EARNINGS
COVERAGE
The Bank’s dividend requirements on its outstanding
preferred shares, after giving effect to the issue of the Bank
Preferred Shares offered to Shareholders as consideration under
the Offer, and adjusted to a before-tax equivalent using a
statutory income tax rate of 30.27% for the 12 months ended
October 31, 2010, amounted to $328 million for the
12 months ended October 31, 2010. The Bank’s
interest requirements for subordinated debentures, capital
instrument liabilities, those instruments that were reclassified
as deposits from capital instrument liabilities in accordance
with the pronouncements issued by the Canadian Institute of
Chartered Accountants amounted to $570 million for the
12 months ended October 31, 2010. The Bank’s
earnings before interest and income tax for the 12 months
ended October 31, 2010 was $6,554 million, which was
7.30 times the Bank’s aggregate dividend and interest
requirements for that period after giving effect to the issue of
Bank Preferred Shares offered to Shareholders as consideration
under the Offer. All amounts appearing under this heading,
“Earnings Coverage”, for the 12 months ended
October 31, 2010 are derived from financial information
which is audited.
RATINGS
The Bank Preferred Shares are provisionally rated “Pfd-1
(low)” by DBRS Limited (“DBRS”).
“Pfd-1” is in the highest category available from DBRS
for preferred shares. Each rating category is denoted by the
subcategories “high” and “low”. A reference
to “high” or “low” reflects the relative
strength within the rating category.
The Bank Preferred Shares have a preliminary rating
“A” by Standard & Poor’s Ratings
Services (“S&P”), a division of The
McGraw-Hill Companies (Canada) Corporation, using
S&P’s global scale for preferred shares. The
“A” rating is in the highest of the three categories
used by S&P on its global scale.
The Bank Preferred Shares are provisionally rated (P)A3 by
Moody’s Investors Service, Inc.
(“Moody’s”), a subsidiary of Moody’s
Corporation. Securities rated “A” are considered to be
of upper-medium grade and are subject to low credit risk. The
modifier “3” indicates that the obligation ranks at
the lower end of the “A” rating category.
Shareholders should consult the relevant rating organization
with respect to the interpretation and implications of the
foregoing provisional/preliminary ratings. The foregoing ratings
should not be construed as recommendations to buy, sell or hold
Bank Preferred Shares. Ratings may be revised or withdrawn at
any time by the respective rating organizations.
A-12
PRIOR
SALES
The TSX has conditionally approved the listing of the Bank
Common Shares and Bank Preferred Shares to be issued pursuant to
the Offer. In addition, the Bank plans to file a supplemental
listing application to list those additional Bank Common Shares
on the NYSE. The Bank Preferred Shares will be listed and
posted for trading on the TSX under the symbol
“BNS.PR.Z”. There is currently no market through which
the Bank Preferred Shares may be sold and no Bank Preferred
Shares have been distributed by the Bank in the 12 months
prior to the date of this Circular.
Other than Bank Common Shares issued under the Bank’s stock
option plans and its shareholder dividend and share purchase
plan, no Bank Common Shares were issued during the
12 months prior to the date of this Circular.
RISK
FACTORS
An investment in securities of the Bank is subject to certain
risks. As Shareholders will acquire Bank Common Shares and Bank
Preferred Shares as consideration under the Offer, Shareholders
should carefully consider the risks and uncertainties associated
with the Bank and with the Offer, as set out below and in the
Bank’s Annual MD&A, which is incorporated by reference
in this Offer and Circular. These risks may not be the only
risks faced by the Bank or related to the Offer. Risks and
uncertainties not presently known by the Bank or which are
presently considered immaterial may also adversely impact the
Offer or the Bank’s business, results of operations and
financial performance.
Risks
Relating to the Bank
Unlike DundeeWealth Shareholders, whose rights are governed by
the OBCA, the Bank’s activities in Canada and the rights of
its shareholders are governed by the Bank Act. Upon successful
completion of the Offer, Shareholders will become shareholders
of the Bank. Whereas the Bank Act has some fundamental
similarities to the OBCA, the Bank Act does not contain several
provisions such as providing for a right of dissent in respect
of certain fundamental changes, or for an oppression remedy
pursuant to which a shareholder or other complainant may seek
rectification of a matter that is oppressive, unfairly
prejudicial to, or that unfairly disregards the interest of, a
complainant.
The Bank Act also imposes a strict regulatory regime and
provides the Superintendent with broad regulatory oversight and
authority with respect to the Bank. For instance, the Bank Act
requires approval by the Superintendent or the Minister of
Finance (Canada) of substantially all fundamental changes with
respect to the Bank and for certain types of acquisitions
involving acquisition of a substantial investment or control of
other corporations or entities.
The Bank is also subject to regulatory oversight by the Canada
Deposit Insurance Corporation, the Financial Consumer Agency of
Canada and various other regulatory authorities in the United
States and other jurisdictions. The role of such regulators is
not necessarily for protection of investors and the Bank may be
caused to take actions that may adversely impact shareholder
value.
Further information relating to Bank Act regulation can be found
under the heading “Supervision and Regulation in
Canada” beginning at page 4 of the annual information
form of the Bank incorporated by reference in this Circular.
Risks
Relating to the Offer
The
issuance of Bank Shares under the Offer and the resale of Bank
Common Shares received in connection with the Offer may cause
the market price of Bank Common Shares to decline
As of December 10, 2010, 1,043,245,513 Bank Common Shares
were outstanding. Based on the number of Shares outstanding on
November 22, 2010, the Bank expects that in connection with
the Offer it will issue a maximum of 32,000,000 Bank Common
Shares. The issuance of these new Bank Common Shares and their
sale in the public market from time to time could have the
effect of depressing the market price for Bank Common Shares.
Although the issuance of Bank Common Shares under the Offer
should increase the liquidity in the market for such Bank Common
Shares and offer benefits of larger market capitalization, there
may be greater volatility of market prices in the near term
pending the creation of a stable shareholder base.
A-13
Shareholders
will receive a fixed number of Bank Shares under the Offer and
this consideration will not be adjusted to reflect market
fluctuations. Consequently, the Bank Common Shares issuable
under the Offer may have a market value lower than
expected.
Shareholders will receive a fixed number of Bank Common Shares
under the Offer, rather than Bank Common Shares with a fixed
market value. Because the consideration under the Offer will not
be adjusted to reflect any changes in the market value of the
Bank Common Shares, the market value of Bank Common Shares may
vary significantly from the value at the dates referenced in
this Circular or the actual dates that Shareholders become
entitled to receive Bank Common Shares pursuant to the Offer.
For example, during the twelve (12) month period ending on
November 19, 2010 (the most recent trading day prior to the
date of the announcement of the Offer), the trading price of
Bank Common Shares on the TSX varied from a low of $44.12 to a
high of $55.75 and ended that period at $54.65. Variations may
occur as a result of changes in, or market perceptions of
changes in, the business, operations or prospects of the Bank,
market assessments of the likelihood that the Offer will be
consummated, regulatory considerations, general market and
economic conditions and other factors over which the Bank has no
control. Moreover, currency exchange rates may fluctuate and the
prevailing Canadian dollar — U.S. dollar exchange
rate on the Effective Date may be significantly different from
the exchange rate on the date of this Circular or the actual
dates that Shareholders who are U.S. Persons become
entitled to receive the cash payment in lieu of Bank Shares.
These changes may significantly affect the value of the
consideration received by U.S. Persons under the Offer.
Risks
Relating to the Bank Preferred Shares
The Bank has covenanted that, if a distribution is not paid when
due on any outstanding Scotia BaTS issued by BNS Capital Trust
or Scotiabank Capital Trust, the Bank will not pay dividends on
its “Dividend Restricted Shares”, which would include
the Bank Preferred Shares and the Floating Rate Preferred
Shares, until the twelfth month following the failure to pay the
required distribution in full, unless the required distribution
is paid to the holders of Scotia BaTS. In addition, the Bank has
also covenanted that if the interest is not paid in cash on any
outstanding 7.802% Scotiabank Tier 1 Securities
Series 2009-1
issued by Scotiabank Tier 1 Trust, the Bank will not pay
dividends on its common shares and preferred shares (which would
include the Bank Preferred Shares and the Floating Rate
Preferred Shares) for a specified period of time.
The value of Bank Preferred Shares and the Floating Rate
Preferred Shares, respectively, will be affected by the general
creditworthiness of the Bank. The Bank’s Annual MD&A
is incorporated by reference in this Circular. This analysis
discusses, among other things, known material trends and events,
and risks or uncertainties that are reasonably expected to have
a material effect on the Bank’s business, financial
condition or results of operations.
Real or anticipated changes in credit ratings on the Bank
Preferred Shares or the Floating Rate Preferred Shares, if any,
may affect the market value of the Bank Preferred Shares and the
Floating Rate Preferred Shares, respectively. In addition, real
or anticipated changes in credit ratings can affect the cost at
which the Bank can transact or obtain funding, and thereby
affect the Bank’s liquidity, business, financial condition
or results of operations.
The value of the Bank Preferred Shares and the Floating Rate
Preferred Shares may be affected by market value fluctuations
resulting from factors which influence the Bank’s
operations, including regulatory developments, competition and
global market activity.
The Bank Preferred Shares and the Floating Rate Preferred Shares
are non-cumulative and dividends are payable at the discretion
of the board of directors of the Bank. Reference is made to
“Earnings Coverage”, which is relevant to an
assessment of the risk that the Bank will be unable to pay
dividends on the Bank Preferred Shares or the Floating Rate
Preferred Shares.
The Bank Preferred Shares rank, and the Floating Rate Preferred
Shares will rank, subject to the Bank fulfilling TSX
requirements relating to such shares, equally with other
preferred shares of the Bank in the event of an insolvency or
winding-up
of the Bank. If the Bank becomes insolvent or is
wound-up,
the Bank’s assets must be used to pay deposit liabilities
and other debt, including subordinated debt, before payments may
be made on Bank Preferred Shares or the Floating Rate Preferred
Shares.
Prevailing yields on similar securities will affect the market
value of Bank Preferred Shares and the Floating Rate Preferred
Shares. Assuming all other factors remain unchanged, the market
value of the Bank Preferred Shares and the Floating Rate
Preferred Shares will decline as prevailing yields for similar
securities rise, and will increase as prevailing
A-14
yields for similar securities decline. Spreads over the
Government of Canada Yield, T-Bill Rate and comparable benchmark
rates of interest for similar securities will also affect the
market value of the Bank Preferred Shares and the Floating Rate
Preferred Shares in an analogous manner.
The redemption or purchase by the Bank of the Bank Preferred
Shares and the Floating Rate Preferred Shares is subject to the
consent of the Superintendent and other restrictions contained
in the Bank Act. See “Bank Act Restrictions and
Restrictions on Payment of Dividends” above.
Neither Bank Preferred Shares nor the Floating Rate Preferred
Shares have a fixed maturity date and are not redeemable at the
option of the holders of Bank Preferred Shares or Floating Rate
Preferred Shares, as applicable. The ability of a holder to
liquidate its holdings of Bank Preferred Shares or Floating Rate
Preferred Shares, as applicable, may be limited.
The dividend rate in respect of the Bank Preferred Shares will
reset on the date after the Initial Fixed Rate Period and every
five (5) years thereafter. The dividend rate in respect of
the Floating Rate Preferred Shares will reset quarterly. In each
case, the new dividend rate is unlikely to be the same as, and
may be lower than, the dividend rate for the applicable
preceding dividend period.
An investment in the Bank Preferred Shares may become an
investment in Floating Rate Preferred Shares without the consent
of the holder in the event of an automatic conversion in the
circumstances described under “Conversion of Bank Preferred
Shares into Floating Rate Preferred Shares” above. Upon the
automatic conversion of the Bank Preferred Shares into Floating
Rate Preferred Shares, the dividend rate on the Floating Rate
Preferred Shares will be a floating rate that is adjusted
quarterly by reference to the T-Bill Rate which may vary from
time to time.
Stock market volatility may affect the market price of the Bank
Preferred Shares and Floating Rate Preferred Shares for reasons
unrelated to the Bank’s performance.
There can be no assurance that an active trading market will
develop for the Bank Preferred Shares after the effective time
or for the Floating Rate Preferred Shares following the issuance
of any of those shares, or if developed, that such a market will
be sustained at the offering price of the Bank Preferred Shares
or the issue price of the Floating Rate Preferred Shares.
ELIGIBILITY
FOR INVESTMENT
In the opinion of Torys LLP, the Bank Shares and the Floating
Rate Preferred Shares (issuable on the conversion of Bank
Preferred Shares), if issued on the date hereof, would be
qualified investments under the Tax Act on such date for trusts
governed by registered retirement savings plans, registered
retirement income funds, registered education savings plans,
deferred profit sharing plans, registered disability savings
plans and tax-free savings accounts (“TFSAs”)
and, provided that the holder of a TFSA deals at Arm’s
Length with the Bank, does not have a “significant
interest” (within the meaning of the Tax Act) in the Bank,
and does not have a “significant interest” (within the
meaning of the Tax Act) in a corporation, partnership or trust
that does not deal at Arm’s Length with the Bank, the Bank
Shares and the Floating Rate Preferred Shares would not be, on
such date, a “prohibited investment” under the Tax Act
for such TFSA.
TRANSFER
AGENT AND REGISTRAR
The transfer agent and registrar for the Bank Shares is
Computershare Investors Services Inc. at the following address:
Computershare Investors Services Inc., 100 University Avenue,
9th Floor, Toronto, Ontario, M5J 2Y1.
A-15
ANNEX B
VALUATION
AND FAIRNESS OPINION
TD Securities Inc.
TD Tower
66 Wellington Street West,
8th Floor
Toronto, Ontario M5K 1A2
November 21, 2010
The Special Committee of the Board of Directors
and the Board of Directors
DundeeWealth Inc.
1 Adelaide Street East
Toronto, Ontario
M5C 2V9
To the Special Committee:
TD Securities Inc. (“TD Securities”) understands that
DundeeWealth Inc. (“DundeeWealth”, or the
“Company”) is considering entering into an agreement
(the “Support Agreement”) with The Bank of Nova Scotia
(“Scotiabank”) pursuant to which Scotiabank proposes
to acquire all of the outstanding common shares (the
“Common Shares”); Special Shares, Series C; and
Special Shares, Series D of DundeeWealth (collectively, the
“Shares”); as well as all of the outstanding First
Preference Shares, Series X of DundeeWealth that Scotiabank
does not already own by way of a take-over bid (the
“Offer”). Pursuant to the Offer, holders of Shares
(the “Shareholders”) will receive consideration (the
“Offer Consideration”) for each Share consisting of:
(i) 0.2497 of a Scotiabank common share (a “Scotiabank
Common Share”), plus (ii) at the election of the
Shareholder, either: (a) $5.00 in cash, or (b) 0.2 of
a $25.00, 3.70% five year rate reset Scotiabank preferred share
(a “Scotiabank Reset Preferred Share”). Prior to
closing of the Offer, DundeeWealth will also: (i) complete
a special distribution (the “DundeeWealth Special
Distribution”) in the amount of $2.00 per Share in cash
(the “DundeeWealth Special Distribution
Consideration”), and (ii) consummate the spinout (the
“Spinout Transaction”) of its capital markets business
(“Dundee Capital Markets”) and certain other assets by
distributing consideration (the “Spinout
Consideration”) of one common share of Dundee Capital
Markets Inc. (a “DCM Share”) for each Share. The
Offer, the DundeeWealth Special Distribution, and the Spinout
Transaction are collectively referred to as the
“Transaction”, and the Offer Consideration, the
DundeeWealth Special Distribution Consideration, and the Spinout
Consideration are collectively referred to as the
“Consideration”. The above description is summary in
nature. The specific terms and conditions of the Transaction are
to be described in the offer to purchase and take-over bid
circular of Scotiabank (the “Take-over Bid Circular”)
and in the directors’ circular of DundeeWealth (the
“Directors’ Circular”) which are to be mailed to
Shareholders in connection with the Transaction.
TD Securities also understands that a special committee (the
“Special Committee”) of the board of directors (the
“Board of Directors”) of DundeeWealth who are
independent of Scotiabank and Dundee Corporation has been
constituted to consider the Transaction and make recommendations
thereon to the Board of Directors. The Special Committee has
retained TD Securities to prepare and deliver to the Special
Committee: (i) a formal valuation (the
“Valuation”) of the Common Shares in accordance with
the requirements of Multilateral Instrument
61-101
(“MI
61-101”)
of the Ontario Securities Commission and Autorité des
marches financiers; and (ii) an opinion (the “Fairness
Opinion”) as to the fairness, from a financial point of
view, of the Consideration to be received by the Shareholders,
other than the
Locked-Up
Shareholders, in connection with the Transaction. For purposes
of the Fairness Opinion,
“Locked-Up
Shareholders” means Dundee Corporation, Dundee Capital
Corporation, Mr. Ned Goodman, and Mr. David Goodman.
Member of TD Bank Financial Group
B-1
Engagement
of TD Securities by the Special Committee
Representatives of the Special Committee initially contacted TD
Securities on August 19, 2010, regarding a potential
advisory assignment and TD Securities was engaged by the Special
Committee pursuant to an engagement agreement (the
“Engagement Agreement”) dated August 27, 2010. On
November 21, 2010, at the request of the Special Committee,
TD Securities orally delivered the Valuation and Fairness
Opinion. This Valuation and Fairness Opinion provides the same
opinions, in writing, as of November 21, 2010. The terms of
the Engagement Agreement provide that TD Securities will receive
a fee of $1,250,000 for its services and is to be reimbursed for
its reasonable
out-of-pocket
expenses. In addition, the Company has agreed to indemnify TD
Securities, in certain circumstances, against certain expenses,
losses, claims, actions, damages and liabilities incurred in
connection with the provision of its services.
Subject to the terms of the Engagement Agreement, TD Securities
consents to the inclusion of the Valuation and Fairness Opinion
in the Take-over Bid Circular and the Directors’ Circular,
with a summary thereof, in a form acceptable to
TD Securities, and to the filing thereof with the
applicable Canadian securities regulatory authorities.
Credentials
of TD Securities
TD Securities is a Canadian investment banking firm with
operations in a broad range of investment banking activities,
including corporate and government finance, mergers and
acquisitions, equity and fixed income sales and trading,
investment management and investment research. TD Securities has
participated in a significant number of transactions involving
public and private companies and has extensive experience in
preparing valuations and fairness opinions.
The Valuation and Fairness Opinion are the opinions of TD
Securities and their form and content have been approved by a
committee of senior investment banking professionals of TD
Securities, each of whom is experienced in merger, acquisition,
divestiture, valuation and fairness opinion matters. The
Valuation and Fairness Opinion have been prepared in accordance
with the Disclosure Standards for Formal Valuations and Fairness
Opinions of the Investment Industry Regulatory Organization (the
“Organization”) but the Organization has not been
involved in the preparation or review of this Valuation and
Fairness Opinion.
Independence
of TD Securities
Neither TD Securities nor any of its affiliated entities (as
such term is defined for the purposes of MI
61-101):
(i) is an associated or affiliated entity or issuer insider
(as such terms are defined for the purposes of MI
61-101) of
DundeeWealth, Scotiabank, Dundee Corporation, or any of their
respective associates or affiliates (collectively, the
“Interested Parties”), (ii) is an advisor to any
of the Interested Parties or any of their respective associates
or affiliates in connection with the Transaction, other than TD
Securities in its capacity as financial advisor to the Special
Committee, (iii) is a manager or co-manager of a soliciting
dealer group for the Offer (or a member of the soliciting dealer
group for the Offer providing services beyond customary
soliciting dealer’s functions or receiving more than the
per security or per security holder fees payable to the other
members of the group), or (iv) has a material financial
interest in the completion of the Transaction.
TD Securities and its affiliated entities have not been engaged
to provide any financial advisory services, nor have they acted
as lead or co-lead manager on any offering of Common Shares or
any other securities of DundeeWealth, Scotiabank, Dundee
Corporation, or any Interested Party, during the 24 months
preceding the date on which TD Securities was first contacted in
respect of the Valuation and Fairness Opinion, other than as
described herein. TD Securities acted as a co-manager for
DundeeWealth’s $200 million debenture offering in
September 2009, and for Dundee Corporation’s
$115 million preferred share issue in September 2009.
During the 24 months preceding the date on which TD
Securities was first contacted in respect of the Valuation and
Fairness Opinion, TD Securities acted as lead underwriter for
five unit offerings by Dundee REIT, and acted as a co-manager
for flow-through offerings by certain entities related to
DundeeWealth. TD Securities acted as co-lead manager for
Scotiabank’s $1 billion subordinated debenture
offering in April 2009. During the 24 months preceding the
date on which TD Securities was first contacted in respect of
the Valuation and Fairness Opinion, TD Securities acted as a
co-manager on a number of other securities offerings for
Scotiabank. In November 2010, The Toronto-Dominion Bank
(“TD Bank”), the parent company of TD Securities, as
Member of TD Bank Financial Group
B-2
lender closed a $200 million revolving term credit facility
for Dundee Corporation. TD Bank and TD Securities provide credit
and have a number of normal course ongoing financial dealings
with DundeeWealth, Scotiabank, Dundee Corporation, and other
Interested Parties.
The fees paid to TD Securities in connection with the foregoing
activities, together with the fee payable to TD Securities
pursuant to the Engagement Agreement, are not, in the aggregate,
financially material to TD Securities, and do not give TD
Securities any financial incentive in respect of the conclusions
reached in the Valuation or the Fairness Opinion. There are no
understandings or agreements between TD Securities and
DundeeWealth, Scotiabank, Dundee Corporation, or any other
Interested Party with respect to future financial advisory or
investment banking business. TD Securities may in the future, in
the ordinary course of its business, perform financial advisory
or investment banking services for DundeeWealth, Scotiabank,
Dundee Corporation, or any other Interested Party. TD Bank and
TD Securities, may in the future, in the ordinary course of
their business, provide banking services or credit facilities to
DundeeWealth, Scotiabank, Dundee Corporation, or any other
Interested Party.
TD Securities acts as a trader and dealer, both as principal and
agent, in major financial markets and, as such, may have and may
in the future, in the ordinary course of its business, have
positions in the securities of any Interested Party and, from
time to time, may have executed or may execute transactions on
behalf of such companies or other clients for which it may have
received or may receive compensation. As an investment dealer,
TD Securities conducts research on securities and may, in the
ordinary course of its business, provide research reports and
investment advice to its clients on investment matters,
including matters with respect to the Transaction, DundeeWealth,
Scotiabank, Dundee Corporation, or any Interested Party.
Scope
of Review
In connection with the Valuation and Fairness Opinion, TD
Securities reviewed and relied upon (without attempting to
verify independently the completeness or accuracy of) or carried
out, among other things, the following:
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1.
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a draft of the Support Agreement dated November 21, 2010;
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2.
|
a draft of the lock-up agreement between Scotiabank, Dundee
Corporation, Dundee Capital Corporation, Mr. Ned Goodman,
and Mr. David Goodman (the
“Lock-up
Agreement”) dated November 21, 2010;
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3.
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audited financial statements of DundeeWealth as at and for the
years ended December 31, 2007, 2008, and 2009, and of
Scotiabank as at and for the years ended October 31, 2007,
2008, and 2009;
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4.
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unaudited interim financial statements and management’s
discussion and analysis of DundeeWealth as at and for the three
month periods ended March 31, 2010, June 30, 2010 and
September 30, 2010, and of Scotiabank as at and for the
three month periods ended January 31, 2010, April 30,
2010, and July 31, 2010;
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5.
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annual reports, annual information forms, and management
information and proxy circulars of DundeeWealth for the years
ended December 31, 2007, 2008, and 2009, and of Scotiabank
for the years ended October 31, 2007, 2008, and 2009;
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6.
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for DundeeWealth, the final short form prospectuses regarding
its 5.10% Series 1 Notes dated September 18, 2009, and
its 4.75% Cumulative Redeemable First Preference Shares,
Series 1 dated March 6, 2007, and for Scotiabank, the
short form base shelf prospectus dated April 16, 2008, as
amended, and the prospectus supplement for its Non-cumulative
5-year Rate
Reset Preferred Shares Series 30, dated March 31,
2010;
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7.
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various internal financial reports of DundeeWealth prepared by
management of the Company;
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8.
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the 2010 budget for DundeeWealth prepared by management of the
Company;
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9.
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unaudited projected financial information, segmented by business
line, for DundeeWealth for the years ending December 31,
2010, through December 31, 2015, prepared by management of
the Company;
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Member of TD Bank Financial Group
B-3
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10.
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discussions with senior management of DundeeWealth and
Scotiabank with respect to the information referred to above and
other issues considered relevant;
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11.
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representations contained in a certificate dated
November 21, 2010, from senior officers of DundeeWealth;
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12.
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discussions with legal counsel to DundeeWealth and Scotiabank;
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13.
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discussions with the Special Committee and legal counsel to the
Special Committee;
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14.
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discussions with the financial advisor to Dundee Corporation;
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15.
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various research publications prepared by equity research
analysts regarding the asset management industry, banking
industry and public companies considered relevant;
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16.
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public information relating to the business, operations,
financial performance and stock trading history of DundeeWealth,
Scotiabank, and other selected public companies considered
relevant;
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17.
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public information with respect to certain other transactions of
a comparable nature considered relevant; and
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18.
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such other corporate, industry, and financial market
information, investigations and analyses as TD Securities
considered necessary or appropriate in the circumstances.
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TD Securities has not, to the best of its knowledge, been denied
access by DundeeWealth to any information requested by TD
Securities. As the auditors of DundeeWealth and Scotiabank
declined to permit TD Securities to rely upon information
provided by them as part of any due diligence review, TD
Securities did not meet with the auditors and has assumed the
accuracy, completeness and fair presentation of and has relied
upon, without independent verification, the audited financial
statements of DundeeWealth and Scotiabank and the reports of the
auditors thereon.
Prior
Valuations
DundeeWealth has represented to TD Securities that there have
been no valuations or appraisals relating to DundeeWealth or any
affiliate or any of their respective material assets or
liabilities made in the preceding 24 months and in the
possession or control of DundeeWealth other than those which
have been provided to TD Securities or, in the case of
valuations known to DundeeWealth which it does not have within
its possession or control, notice of which has not been given to
TD Securities.
General
Assumptions and Limitations
With the Special Committee’s acknowledgement and agreement
as provided for in the Engagement Agreement, TD Securities
has relied upon the accuracy, completeness and fair presentation
of all data and other information obtained by it from public
sources, provided to it by or on behalf of DundeeWealth,
provided to it by or on behalf of Scotiabank, or otherwise
obtained by TD Securities, including the certificate identified
below (collectively, the “Information”). The Valuation
and Fairness Opinion are conditional upon such accuracy,
completeness and fair presentation. Subject to the exercise of
professional judgment, and except as expressly described herein,
TD Securities has not attempted to verify independently the
accuracy, completeness or fair presentation of any of the
Information.
With respect to the budgets, forecasts, projections or estimates
provided to TD Securities and used in its analyses,
TD Securities notes that projecting future results is
inherently subject to uncertainty. TD Securities has assumed,
however, that such budgets, forecasts, projections and estimates
were prepared using the assumptions identified therein which
TD Securities has been advised are (or were at the time of
preparation and continue to be), in the opinion of DundeeWealth,
reasonable in the circumstances.
Member of TD Bank Financial Group
B-4
Senior officers of DundeeWealth have represented to TD
Securities in a certificate dated November 21, 2010, among
other things, that: (i) DundeeWealth has no information or
knowledge of any facts public or otherwise not specifically
provided to TD Securities relating to DundeeWealth or the
Transaction which would reasonably be expected to affect
materially the Valuation and Fairness Opinion; (ii) with
the exception of forecasts, projections or estimates referred to
in subparagraph (iv) below, the Information in respect of
DundeeWealth and its affiliates in connection with the
Transaction is or, in the case of historical Information was, at
the date of preparation (or, in the case of Information which
may have been subsequently corrected, at the date of such
correction), true, complete and correct in all material respects
and did not and does not contain any untrue statement of a
material fact and does not omit to state a material fact
necessary to make the Information not misleading in the light of
circumstances in which it was provided; (iii) to the extent
that any of the Information identified in subparagraph
(ii) above is historical, there have been no changes in any
material facts or new material facts since the respective dates
thereof which have not been disclosed to TD Securities or
updated by more current information provided to TD Securities by
DundeeWealth or otherwise publicly disclosed by DundeeWealth,
and there has been no material change, financial or otherwise in
the financial condition, assets, liabilities (contingent or
otherwise), business, operations or prospects of DundeeWealth
and no material change has occurred in the Information or any
part thereof which would have or which would reasonably be
expected to have a material effect on the Valuation and Fairness
Opinion; (iv) any portions of the Information provided to
TD Securities (or filed on SEDAR) which constitute forecasts,
projections or estimates were prepared using the assumptions
identified therein, which, in the reasonable opinion of
DundeeWealth, are (or were at the time of preparation and
continue to be) reasonable in the circumstances; (v) there
have been no valuations or appraisals relating to DundeeWealth
or any affiliate or any of their respective material assets or
liabilities made in the preceding 24 months and in the
possession or control of DundeeWealth other than those which
have been provided to TD Securities or, in the case of
valuations known to DundeeWealth which it does not have within
its possession or control, notice of which has not been given to
TD Securities; (vi) there have been no verbal or written
offers or serious negotiations for or transactions involving any
material property of DundeeWealth or any of its affiliates
during the preceding 24 months which have not been
disclosed to TD Securities; (vii) since the dates on which
the Information was provided to TD Securities (or filed on
SEDAR), no material transaction has been entered into by
DundeeWealth or any of its affiliates; (viii) other than as
disclosed in the Information, neither DundeeWealth nor any of
its affiliates has any material contingent liabilities and there
are no actions, suits, claims, proceedings, investigations or
inquiries pending or threatened against or affecting the
Transaction, DundeeWealth or any of its affiliates at law or in
equity or before or by any federal, national, provincial, state,
municipal or other governmental department, commission, bureau,
board, agency or instrumentality which may, in any way,
materially adversely affect DundeeWealth or its affiliates or
the Transaction; (ix) all financial material, documentation
and other data concerning the Transaction, DundeeWealth and its
affiliates, including any projections or forecasts provided to
TD Securities, were prepared on a basis consistent in all
material respects with the accounting policies applied in the
most recent audited consolidated financial statements of
DundeeWealth; (x) there are no agreements, undertakings,
commitments or understanding (whether written or oral, formal or
informal) relating to the Transaction, except as have been
disclosed in complete detail to TD Securities; (xi) the
contents of any and all documents prepared in connection with
the Transaction for filing with regulatory authorities or
delivery or communication to securityholders of DundeeWealth
(collectively, the “Disclosure Documents”) have been,
are and will be (as of the date of such Disclosure Documents)
true, complete and correct in all material respects and have not
and will not (as of the date of such Disclosure Documents)
contain any misrepresentation (as defined in the Securities Act
(Ontario)) and the Disclosure Documents have complied, comply
and will comply (as of the date of such Disclosure Documents) in
all material respects with all applicable requirements under
applicable laws; (xii) DundeeWealth has complied in all
material respects with the Engagement Agreement; and
(xiii) to the best of its knowledge, information and belief
after due inquiry, there is no plan or proposal for any material
change (as defined in the Securities Act (Ontario)) in the
affairs of DundeeWealth which have not been disclosed to TD
Securities.
In preparing the Valuation and Fairness Opinion, TD Securities
has made several assumptions, including that all final or
executed versions of documents will conform in all material
respects to the drafts provided to TD Securities, conditions
precedent to the completion of the Transaction can be satisfied
in due course, all consents, permissions, exemptions or orders
of relevant regulatory authorities or third parties will be
obtained, without adverse condition or qualification, the
procedures being followed to implement the Transaction are valid
and effective, the Take-over Bid Circular and the
Directors’ Circular will be distributed to the
securityholders of DundeeWealth entitled to receive them in
accordance with all applicable laws, the disclosure in the
Take-over Bid Circular and the Directors’ Circular will be
accurate, in all material
Member of TD Bank Financial Group
B-5
respects, and will comply, in all material respects, with the
requirements of all applicable laws, and the DCM Shares to be
distributed to Shareholders will be freely tradeable by
Shareholders substantially concurrently with the acquisition of
Common Shares by Scotiabank pursuant to the Offer. In preparing
the Valuation and Fairness Opinion, TD Securities noted that the
Special Shares, Series C and Special Shares, Series D are
convertible at the option of the Company into Common Shares on a
one for one basis and has therefore assumed that the Special
Shares, Series C and Special Shares, Series D have the same
value as Common Shares. In its analysis in connection with the
preparation of the Valuation and Fairness Opinion, TD Securities
made numerous assumptions with respect to industry performance,
general business and economic conditions, and other matters,
many of which are beyond the control of TD Securities,
DundeeWealth, Scotiabank or their respective affiliates. Among
other things, TD Securities has assumed the accuracy,
completeness and fair presentation of and has relied upon,
without independent verification, the financial statements
forming part of the Information. All financial figures in this
Valuation and Fairness Opinion are in Canadian dollars unless
otherwise stated.
The Valuation and Fairness Opinion have been provided for the
use of the Special Committee and the Board of Directors and are
not intended to be, and do not constitute, a recommendation that
any Shareholders tender their Common Shares to the Offer. The
Valuation and Fairness Opinion may not be used by any other
person or relied upon by any other person other than the Special
Committee and the Board of Directors without the express prior
written consent of TD Securities. The Valuation and Fairness
Opinion do not address the relative merits of the Transaction as
compared to other transactions or business strategies that might
be available to DundeeWealth, nor do they address the underlying
business decision to implement the Transaction. TD Securities
expresses no opinion with respect to future trading prices of
securities of DundeeWealth or Scotiabank. In considering
fairness, from a financial point of view, TD Securities
considered the Transaction from the perspective of Shareholders
other than the
Locked-Up
Shareholders generally and did not consider the specific
circumstances of any particular Shareholder, including with
regard to income tax considerations. The Valuation and Fairness
Opinion are rendered as of November 21, 2010, on the basis
of securities markets, economic and general business and
financial conditions prevailing on that date and the condition
and prospects, financial and otherwise, of DundeeWealth and
Scotiabank and their respective subsidiaries and affiliates as
they were reflected in the Information provided or otherwise
available to TD Securities. Any changes therein may affect the
Valuation and Fairness Opinion and, although TD Securities
reserves the right to change or withdraw the Valuation and
Fairness Opinion in such event, it disclaims any undertaking or
obligation to advise any person of any such change that may come
to its attention, or update the Valuation and Fairness Opinion
after such date. In preparing the Valuation and Fairness
Opinion, TD Securities was not authorized to solicit, and did
not solicit, interest from any other party with respect to the
acquisition of Common Shares or other securities of
DundeeWealth, or any business combination or other extraordinary
transaction involving DundeeWealth, nor did TD Securities
negotiate with any party in connection with any such transaction.
The preparation of a valuation or a fairness opinion is a
complex process and is not necessarily amenable to partial
analysis or summary description. TD Securities believes that its
analyses must be considered as a whole and that selecting
portions of the analyses or the factors considered by it,
without considering all factors and analyses together, could
create an incomplete view of the process underlying the
Valuation and the Fairness Opinion. Accordingly, this Valuation
and Fairness Opinion should be read in its entirety.
Overview
of DundeeWealth
DundeeWealth is a Canadian public wealth management company
which provides investment management, securities brokerage,
financial planning and investment advisory services to advisors,
institutions, corporations and foundations. DundeeWealth has
three main businesses: (i) investment management;
(ii) financial advisory; and (iii) capital markets.
DundeeWealth’s investment management business consists of
creating, managing, packaging and administering investment
portfolios and providing internal and third-party management and
advisory services. Revenues are derived primarily from
management and performance fees charged for the management of
investment products (including mutual funds, pooled funds and
closed-end funds, third-party assets, tax-assisted investment
products and private and institutional client accounts) and,
accordingly, are primarily influenced by assets under management
(“AUM”). As at October 31, 2010,
DundeeWealth’s investment management segment had total AUM
of $43.6 billion.
Member of TD Bank Financial Group
B-6
DundeeWealth’s independent financial advisory business is a
network of full service, independent financial planning and
investment professionals, who provide a wide range of wealth
management products and services to individuals and businesses
across Canada. An open architecture approach provides investment
products created by third party entities as well as by the
investment management business of DundeeWealth. Revenues are
derived primarily from commissions, service fees and
administration fees relating to the sale of investment and
insurance products, predominantly mutual funds. As at
October 31, 2010, the independent retail advisors had total
assets under administration of $24.4 billion.
The capital markets business of DundeeWealth is conducted
through Dundee Securities and operates under the Dundee Capital
Markets brand. The principal activities included in this
business unit are investment banking, institutional equities
sales and trading and investment research, and corporate
financial advisory services. It also includes proprietary equity
trading as well as retail fixed income and foreign exchange
activities. Consistent with DundeeWealth’s financial
reporting practices beginning in 2010, for purposes of the
Valuation, the Company’s corporate advisor segment has been
included as part of Dundee Capital Markets rather than as part
of the Company’s financial advisory business. As at
October 31, 2010, the corporate advisor segment had
$2.8 billion of assets under administration and
$826 million of assets under management with portfolio
manager licensed financial advisors.
Although DundeeWealth has three main businesses, for purposes of
the Valuation, the investment management and independent
financial advisory businesses are combined into one segment
called “Investment Management”. Corporate overhead
expenses that are not specifically allocated to the three main
businesses are also included in the Investment Management
segment. For purposes of considering the value of Dundee Capital
Markets as part of the Consideration, the Company’s CMP and
Canada Dominion Resources flow-through limited partnership
operations and CMP Gold Trust (collectively,
“CMP/CDR”) and their associated AUM of
$449 million as at October 31, 2010, have been
reallocated from the Investment Management segment to Dundee
Capital Markets and certain other balance sheet adjustments have
been made consistent with the steps being undertaken to
implement the DundeeWealth Special Distribution.
Historical
Financial Information
The following table summarizes DundeeWealth’s consolidated
operating results for the fiscal years ended December 31,
2007, 2008, and 2009, the last twelve months (“LTM”)
ended September 30, 2010, and the 9 months ended
September 30, 2009, and September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
LTM
|
|
|
9 Months
|
|
|
9 Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
($ millions)
|
|
Dec. 31, 2007
|
|
|
Dec. 31, 2008
|
|
|
Dec. 31, 2009
|
|
|
Sept. 30, 2010
|
|
|
Sept. 30, 2010
|
|
|
Sept. 30, 2009
|
|
|
Revenue
|
|
$
|
1,004.1
|
|
|
$
|
819.4
|
|
|
$
|
779.5
|
|
|
$
|
937.0
|
|
|
$
|
688.8
|
|
|
$
|
531.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1)
|
|
|
275.3
|
|
|
|
138.6
|
|
|
|
184.7
|
|
|
|
297.1
|
|
|
|
219.0
|
|
|
|
106.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from continuing operations
|
|
|
87.5
|
|
|
|
(186.8
|
)
|
|
|
51.6
|
|
|
|
98.1
|
|
|
|
86.9
|
|
|
|
40.4
|
|
|
|
(1) |
Reported earnings before interest, taxes, depreciation and
amortization.
|
Member of TD Bank Financial Group
B-7
The following table summarizes DundeeWealth’s consolidated
balance sheet as at December 31, 2009, and
September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
($ millions)
|
|
2009
|
|
|
2010
|
|
Cash and Cash Equivalents
|
|
$
|
419.4
|
|
|
$
|
521.5
|
|
Accounts Receivable
|
|
|
146.0
|
|
|
|
111.2
|
|
Client Accounts Receivable
|
|
|
401.8
|
|
|
|
585.1
|
|
Trading Securities Owned
|
|
|
123.6
|
|
|
|
110.2
|
|
Available-for-sale
Securities
|
|
|
135.7
|
|
|
|
162.5
|
|
Deferred Sales Commissions
|
|
|
237.0
|
|
|
|
256.6
|
|
Capital and Other Assets
|
|
|
39.6
|
|
|
|
32.6
|
|
Goodwill and Other Intangible Assets
|
|
|
687.8
|
|
|
|
685.6
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,190.8
|
|
|
$
|
2,465.3
|
|
|
|
|
|
|
|
|
|
|
Bank Indebtedness
|
|
$
|
4.8
|
|
|
$
|
4.5
|
|
Accounts Payable and Accrued Liabilities
|
|
|
165.6
|
|
|
|
173.3
|
|
Client Deposits and Related Liabilities
|
|
|
472.6
|
|
|
|
667.1
|
|
Trading Securities Sold Short
|
|
|
23.1
|
|
|
|
28.8
|
|
Income Taxes Payable
|
|
|
5.5
|
|
|
|
0.7
|
|
Notes Payable
|
|
|
198.0
|
|
|
|
198.3
|
|
Preference Shares
|
|
|
207.8
|
|
|
|
208.1
|
|
Future Income Tax Liabilities
|
|
|
20.2
|
|
|
|
30.4
|
|
Non-Controlling Interest
|
|
|
0.4
|
|
|
|
0.4
|
|
Shareholders’ Equity
|
|
|
1092.7
|
|
|
|
1153.6
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
2,190.8
|
|
|
$
|
2,465.3
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2010, DundeeWealth had 121,315,541
Common Shares outstanding; 508,571 Special Shares, Series C
outstanding; 250,000 Special Shares, Series D outstanding;
27,000,000 Special Shares, Series F outstanding; 2,315,454
options outstanding; 1,270,247 deferred share units outstanding;
1,661,849 bonus shares outstanding; and 5,453,668 First
Preference Shares, Series X.
DundeeWealth
Common Shares Trading Information
The Common Shares are listed on the Toronto Stock Exchange (the
“TSX”) under the symbol DW. The following table sets
forth, for the periods indicated, the high and low closing
prices quoted and the volume traded on the TSX:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Prices ($)
|
|
|
Volume
|
|
Period
|
|
High
|
|
|
Low
|
|
|
(millions)
|
|
|
November 2009
|
|
$
|
13.80
|
|
|
$
|
12.25
|
|
|
|
2.0
|
|
December 2009
|
|
|
13.89
|
|
|
|
13.11
|
|
|
|
2.5
|
|
January 2010
|
|
|
15.00
|
|
|
|
14.05
|
|
|
|
2.7
|
|
February 2010
|
|
|
14.63
|
|
|
|
13.52
|
|
|
|
3.4
|
|
March 2010
|
|
|
15.12
|
|
|
|
13.51
|
|
|
|
4.3
|
|
April 2010
|
|
|
15.04
|
|
|
|
14.36
|
|
|
|
2.6
|
|
May 2010
|
|
|
14.46
|
|
|
|
13.29
|
|
|
|
3.8
|
|
June 2010
|
|
|
15.53
|
|
|
|
13.22
|
|
|
|
8.7
|
|
July 2010
|
|
|
13.85
|
|
|
|
13.25
|
|
|
|
2.0
|
|
August 2010
|
|
|
14.21
|
|
|
|
12.90
|
|
|
|
3.0
|
|
September 2010
|
|
|
14.57
|
|
|
|
13.23
|
|
|
|
4.6
|
|
October 2010
|
|
|
16.50
|
|
|
|
14.50
|
|
|
|
3.9
|
|
November 1, 2010 to November 19, 2010
|
|
|
19.47
|
|
|
|
16.79
|
|
|
|
4.0
|
|
November 1, 2009 to November 19, 2010
|
|
|
19.47
|
|
|
|
12.25
|
|
|
|
47.5
|
|
Member of TD Bank Financial Group
B-8
The closing price of the Common Shares on the TSX on
November 19, 2010, one trading day prior to announcement of
the Transaction, was $19.47.
Overview
of Scotiabank
Scotiabank is one of North America’s premier financial
institutions and Canada’s most international bank. With
close to 70,000 employees, Scotiabank Group and its affiliates
serve approximately 14.6 million customers in 50 countries
around the world. Scotiabank offers a diverse range of products
and services and had more than $523 billion in assets as at
July 31, 2010. Scotiabank has four main business lines:
Canadian Banking, International Banking, Scotia Capital and
Global Wealth Management.
Canadian Banking provides a full range of banking and investing
services across Canada. Retail and small business banking
provides mortgages, loans, credit cards, investments, insurance
and
day-to-day
banking products to individuals and small businesses. Commercial
banking delivers a full product suite to medium and large
businesses, including banking, cash management, lending and
leasing.
International Banking encompasses Scotiabank’s retail and
commercial banking operations in more than 40 countries outside
Canada. International Banking operates in the following
geographic regions: the Caribbean and Central America, Mexico,
Latin America and Asia.
Scotia Capital provides corporate lending, equity underwriting
and mergers and acquisitions advisory services, as well as
capital markets products and services such as fixed income,
derivatives, prime brokerage, securitization, foreign exchange,
equity sales, trading and research, and, through ScotiaMocatta,
precious metals sales and trading.
Global Wealth Management provides a full range of products and
services including: retail brokerage (discretionary,
non-discretionary, and self-directed); investment management
advice; mutual funds and savings products; and financial, trust
and estate planning; as well as private client services for
affluent customers.
Historical
Financial Information
The following table summarizes Scotiabank’s consolidated
operating results for the fiscal years ended October 31,
2007, 2008, and 2009, the last twelve months ended July 31,
2010, and the 9 months ended July 31, 2009, and 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
LTM
|
|
|
9 Months
|
|
|
9 Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
($ millions)
|
|
Oct. 31, 2007
|
|
|
Oct. 31, 2008
|
|
|
Oct. 31, 2009
|
|
|
July 31, 2010
|
|
|
July 31, 2010
|
|
|
July 31, 2009
|
|
|
Net Interest Income
|
|
$
|
7,098
|
|
|
$
|
7,574
|
|
|
$
|
8,328
|
|
|
$
|
8,477
|
|
|
$
|
6,378
|
|
|
$
|
6,229
|
|
Total Revenue
|
|
|
12,490
|
|
|
|
11,876
|
|
|
|
14,457
|
|
|
|
15,298
|
|
|
|
11,563
|
|
|
|
10,722
|
|
Non-interest Expenses
|
|
|
6,994
|
|
|
|
7,296
|
|
|
|
7,919
|
|
|
|
8,063
|
|
|
|
5,999
|
|
|
|
5,855
|
|
Net Income Available to Common Shareholders
|
|
|
3,994
|
|
|
|
3,033
|
|
|
|
3,361
|
|
|
|
3,851
|
|
|
|
2,998
|
|
|
|
2,508
|
|
The following table summarizes Scotiabank’s consolidated
balance sheet as at October 31, 2009, and July 31,
2010:
|
|
|
|
|
|
|
|
|
|
|
Oct. 31,
|
|
|
July 31,
|
|
($ billions)
|
|
2009
|
|
|
2010
|
|
Cash
|
|
$
|
43.3
|
|
|
$
|
50.0
|
|
Securities
|
|
|
135.1
|
|
|
|
144.8
|
|
Loans
|
|
|
266.3
|
|
|
|
279.0
|
|
Other Assets
|
|
|
51.9
|
|
|
|
49.6
|
|
Total Assets
|
|
$
|
496.5
|
|
|
$
|
523.4
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
350.4
|
|
|
$
|
365.2
|
|
Other Liabilities
|
|
|
121.3
|
|
|
|
131.7
|
|
Shareholders’ Equity
|
|
|
24.8
|
|
|
|
26.5
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
496.5
|
|
|
$
|
523.4
|
|
|
|
|
|
|
|
|
|
|
Member of TD Bank Financial Group
B-9
As at July 31, 2010, Scotiabank had 1,038,101,000
Scotiabank Common Shares outstanding and 23,268,000 options
outstanding.
Scotiabank
Common Shares Trading Information
Scotiabank Common Shares are listed on the TSX and on the New
York Stock Exchange (the “NYSE”) under the symbol BNS.
The following table sets forth, for the periods indicated, the
high and low closing prices quoted and the volume traded on the
TSX and NYSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSX
|
|
|
NYSE
|
|
|
|
Closing Price (C$)
|
|
|
Volume
|
|
|
Closing Price (US$)
|
|
|
Volume
|
|
Period
|
|
High
|
|
|
Low
|
|
|
(millions)
|
|
|
High
|
|
|
Low
|
|
|
(millions)
|
|
|
November 2009
|
|
$
|
49.24
|
|
|
$
|
46.22
|
|
|
|
57.7
|
|
|
$
|
47.03
|
|
|
$
|
42.72
|
|
|
|
10.2
|
|
December 2009
|
|
|
49.72
|
|
|
|
47.45
|
|
|
|
69.8
|
|
|
|
47.46
|
|
|
|
44.68
|
|
|
|
7.1
|
|
January 2010
|
|
|
48.93
|
|
|
|
44.60
|
|
|
|
60.8
|
|
|
|
46.84
|
|
|
|
42.10
|
|
|
|
8.8
|
|
February 2010
|
|
|
48.01
|
|
|
|
44.84
|
|
|
|
48.4
|
|
|
|
46.10
|
|
|
|
41.84
|
|
|
|
6.9
|
|
March 2010
|
|
|
51.82
|
|
|
|
48.26
|
|
|
|
75.0
|
|
|
|
50.59
|
|
|
|
46.26
|
|
|
|
8.3
|
|
April 2010
|
|
|
52.18
|
|
|
|
50.00
|
|
|
|
70.7
|
|
|
|
52.08
|
|
|
|
49.79
|
|
|
|
6.8
|
|
May 2010
|
|
|
52.69
|
|
|
|
48.02
|
|
|
|
71.8
|
|
|
|
52.19
|
|
|
|
45.66
|
|
|
|
14.4
|
|
June 2010
|
|
|
51.55
|
|
|
|
48.69
|
|
|
|
68.0
|
|
|
|
50.28
|
|
|
|
46.02
|
|
|
|
14.5
|
|
July 2010
|
|
|
52.44
|
|
|
|
47.85
|
|
|
|
61.4
|
|
|
|
50.38
|
|
|
|
45.48
|
|
|
|
10.0
|
|
August 2010
|
|
|
52.03
|
|
|
|
49.25
|
|
|
|
69.3
|
|
|
|
50.85
|
|
|
|
46.87
|
|
|
|
7.9
|
|
September 2010
|
|
|
54.92
|
|
|
|
51.25
|
|
|
|
72.7
|
|
|
|
53.30
|
|
|
|
48.72
|
|
|
|
9.4
|
|
October 2010
|
|
|
55.52
|
|
|
|
53.88
|
|
|
|
50.0
|
|
|
|
54.45
|
|
|
|
52.73
|
|
|
|
6.7
|
|
Nov. 1, 2010 to Nov. 19, 2010
|
|
|
54.70
|
|
|
|
52.63
|
|
|
|
50.7
|
|
|
|
54.55
|
|
|
|
51.32
|
|
|
|
5.1
|
|
Nov. 1, 2009 to Nov. 19, 2010
|
|
|
55.52
|
|
|
|
44.60
|
|
|
|
826.1
|
|
|
|
54.55
|
|
|
|
41.84
|
|
|
|
116.0
|
|
The closing price of the Scotiabank Common Shares on the TSX on
November 19, 2010, one trading day prior to announcement of
the Transaction, was $54.69.
Definition
of Value
TD Securities determined the fair market value of the Common
Shares as part of the Valuation. For purposes of the Valuation,
fair market value is defined as the monetary consideration that,
in an open and unrestricted market, a prudent and informed buyer
would pay a prudent and informed seller, each acting at
arm’s length with the other and under no compulsion to act.
In accordance with MI
61-101, TD
Securities has made no downward adjustment to the fair market
value of the Common Shares to reflect the liquidity of the
Common Shares, the effect of the Transaction, or the fact that
the Common Shares held by individual Shareholders do not form
part of a controlling interest. Values determined on the
foregoing basis represent “en bloc” values, that is,
values that an acquiror of 100% of the Common Shares would be
expected to pay in an open auction of the Company.
MI 61-101
requires that a formal valuation include a valuation of any
non-cash consideration being offered as part of a transaction
that is subject to MI
61-101,
except in certain circumstances outlined in MI
61-101. TD
Securities has therefore included a valuation of the
Consideration as part of the Valuation. With respect to the
Scotiabank Common Shares that form part of the Consideration, TD
Securities understands that a formal valuation of the Scotiabank
Common Shares is not required pursuant to MI
61-101 as
further discussed herein. With respect to the DCM Shares that
form part of the Consideration, TD Securities notes that
individual DundeeWealth Shareholders other than the
Locked-Up
Shareholders that receive DCM Shares as part of the
Consideration will not be in a position to effect an en bloc
sale of Dundee Capital Markets. TD Securities believes that it
is appropriate in the circumstances to determine the market
trading value of the DCM Shares as part of the Consideration.
The market trading value of the DCM Shares represents the
anticipated settled trading value of such securities following
implementation of the Transaction and excludes the effect of
changes in securities markets, interest rates, and economic,
general business and financial conditions which generally
influence the price of securities. Market trading values
generally reflect minority discount values that are lower than
en
Member of TD Bank Financial Group
B-10
bloc values. The prohibitions in MI
61-101
regarding downward adjustments to reflect liquidity, the effect
of the Transaction, or the fact that the securities being valued
do not form part of a controlling interest described in the
preceding paragraph apply only to the Common Shares and do not
apply to the valuation of the Consideration. However,
TD Securities has determined the market trading value of
the DCM Shares as part of the Consideration directly and has
made no explicit downward adjustments for such effects.
Approach
to Value
The Valuation is based upon techniques and assumptions that TD
Securities considers appropriate in the circumstances for the
purposes of arriving at an opinion as to the range of fair
market value of the Common Shares and the range of market
trading value of the DCM Shares that form part of the
Consideration. Fair market value of the Common Shares and market
trading value of the DCM Shares were analyzed on a going concern
basis and were expressed as an amount per Common Share.
Valuation
Methodologies
In preparing the Valuation, TD Securities relied primarily upon
three methodologies:
|
|
|
|
1.
|
comparable precedent transactions analysis;
|
|
|
2.
|
discounted cash flow (“DCF”) analysis; and
|
|
|
3.
|
market trading multiples analysis.
|
Comparable
Precedent Transactions Analysis
TD Securities applied the comparable precedent transactions
methodology to DundeeWealth’s Investment Management and
Dundee Capital Markets segments in order to arrive at its
conclusion regarding the fair market value of the Common Shares.
TD Securities did not apply the comparable precedent
transactions methodology to DundeeWealth’s Dundee Capital
Markets segment in order to arrive at its conclusion regarding
the market trading value of the DCM Shares as this methodology
reflects en bloc values. TD Securities identified and reviewed
16 comparable precedent transactions involving Canadian mutual
fund companies and 7 comparable precedent transactions involving
Canadian capital markets businesses for which there was
sufficient public information to derive valuation multiples.
Ideally, comparable precedent transactions considered would be
comparable in terms of operating characteristics, growth
prospects, risk profile and size. TD Securities considered
enterprise value to earnings before interest, taxes,
depreciation and amortization (“EBITDA”) to be the
primary valuation multiple when applying the comparable
precedent transactions methodology to DundeeWealth’s
Investment Management segment and enterprise value to AUM to be
a secondary valuation multiple. TD Securities considered price
to earnings to be the primary valuation multiple when applying
the comparable precedent transactions methodology to
DundeeWealth’s Dundee Capital Markets segment and price to
book value to be a secondary valuation multiple.
Discounted
Cash Flow Analysis
TD Securities applied the DCF methodology to DundeeWealth’s
Investment Management and Dundee Capital Markets segments in
order to arrive at its conclusion regarding the fair market
value of the Common Shares. TD Securities also applied the DCF
methodology to DundeeWealth’s Dundee Capital Markets
segment in order to arrive at its conclusion regarding the
market trading value of the DCM Shares. The DCF methodology
reflects the growth prospects and risks inherent in each asset
by taking into account the amount, timing and relative certainty
of projected free cash flows expected to be generated by the
asset. The DCF approach requires that certain assumptions be
made regarding, among other things, future free cash flows,
discount rates and terminal values. The possibility that some of
the assumptions will prove to be inaccurate is one factor
involved in the determination of the discount rates to be used
in establishing a range of values. TD Securities’ DCF
analysis of DundeeWealth’s Investment Management segment
involved discounting to a present value the projected unlevered
after tax free cash flows from September 30, 2010, until
December 31, 2015, including a terminal value determined as
at December 31, 2015, utilizing an appropriate weighted
average cost of capital (“WACC”) as the discount rate.
TD Securities’ DCF analysis of DundeeWealth’s Dundee
Capital Markets segment involved discounting to a present value
the projected levered after tax free cash flows from
September 30, 2010, until December 31, 2015, including
a terminal value determined as at December 31, 2015,
utilizing an appropriate cost of
Member of TD Bank Financial Group
B-11
equity as the discount rate. When considering the en bloc value
of Dundee Capital Markets in order to arrive at its conclusion
regarding the fair market value of the Common Shares, TD
Securities selected a terminal value that reflected the en bloc
value of Dundee Capital Markets as part of DundeeWealth as at
December 31, 2015. When considering the market trading
value of Dundee Capital Markets in order to arrive at its
conclusion regarding the market trading value of the DCM Shares,
TD Securities selected a terminal value that reflected the
market trading value of Dundee Capital Markets as a standalone
entity as at December 31, 2015.
Market
Trading Multiples Analysis
TD Securities applied the market trading multiples methodology
to DundeeWealth’s Dundee Capital Markets segment in order
to arrive at its conclusion regarding the market trading value
of the DCM Shares. TD Securities identified and reviewed two
Canadian and five U.S. publicly traded broker/dealers and
derived appropriate valuation multiples for such companies based
on the market trading prices of their common shares. Ideally,
comparable public companies considered would be comparable in
terms of operating characteristics, growth prospects, risk
profile and size. TD Securities considered price to earnings to
be the primary valuation multiple when applying the market
trading multiples methodology to DundeeWealth’s Dundee
Capital Markets segment and price to book value to be a
secondary valuation multiple.
TD Securities also reviewed the market trading multiples of
selected Canadian mutual fund companies and other asset managers
that it considered relevant to determine whether a market
trading multiples analysis of DundeeWealth’s Investment
Management segment might imply values which exceed the values
determined by the comparable precedent transactions and DCF
methodologies. Based on this review, TD Securities concluded
that the market trading multiples analysis implied values that
were generally below the values determined by the other
methodologies. Given the foregoing and the fact that market
trading prices generally reflect minority discount values, TD
Securities did not rely on this methodology in order to arrive
at its conclusion regarding the fair market value of the Common
Shares.
TD
Securities Base Case Forecast
As a basis for the development of the projected free cash flows
for TD Securities’ DCF analysis and various forecast value
drivers for TD Securities’ comparable precedent
transactions and market trading multiples analyses,
TD Securities reviewed unaudited projected operating and
financial information for DundeeWealth on a segment by segment
basis provided by management of the Company (the
“Management Forecast”). TD Securities reviewed the
relevant underlying assumptions including, but not limited to,
gross sales of mutual funds, redemptions, market appreciation,
advisory fees, compensation and other operating costs, revenue
from new issuances and other capital market activities, and
corporate overhead. These assumptions were reviewed in
comparison to sources considered relevant including detailed
discussions with DundeeWealth senior management. From this
review TD Securities developed its own base case forecast
(the “TD Securities Base Case Forecast”),
formed independently with the benefit of its understanding of
the assumptions behind the Management Forecast. The major
differences between the assumptions made by TD Securities and
the assumptions underlying the Management Forecast are that TD
Securities selected more conservative growth rates for gross
sales and average management fee percentages for equity and
balanced mutual funds, net performance fee revenue growth and
Dundee Capital Markets’ revenue from its core capital
markets and corporate advisors activities.
With respect to DundeeWealth’s Dundee Capital Markets
segment, TD Securities considered two separate scenarios as part
of the TD Securities Base Case Forecast: a combined scenario
where Dundee Capital Markets continues to be wholly-owned by
DundeeWealth (the “Combined Scenario”) and a
standalone scenario where Dundee Capital Markets becomes a
separate, publicly-traded company (the “Standalone
Scenario”). The Standalone Scenario reflects lower earnings
and cash flow than the Combined Scenario due to
(i) additional management oversight and public company
costs, and (ii) the reduction of certain business
activities for which Dundee Capital Markets earns revenue from
DundeeWealth’s Investment Management segment that may not
continue if the two operations were segregated. The Combined
Scenario is utilized in TD Securities’ comparable precedent
transactions and DCF analysis as part of the valuation of the
Common Shares. The Standalone Scenario is utilized in TD
Securities’ market trading multiples analysis and DCF
analysis as part of the valuation of the Consideration. The
impact of the reallocation of CMP/CDR has not been explicitly
reflected in the Standalone Scenario and as a result the
contribution of these operations to the market trading value of
the DCM Shares has been calculated separately.
Member of TD Bank Financial Group
B-12
Benefits
to a Purchaser of Acquiring 100% of the Common Shares
In accordance with MI
61-101, TD
Securities reviewed and considered whether any distinctive
material value would accrue to Scotiabank or any other purchaser
through the acquisition of all of the Common Shares. TD
Securities concluded that there would be synergies available to
Scotiabank and to certain other potential acquirors in the
mutual fund industry that would potentially acquire 100% of the
Common Shares in order to achieve a business combination with
DundeeWealth. Specifically, TD Securities considered synergies
that might accrue as a result of: (i) savings of direct
costs resulting from being a publicly-listed entity;
(ii) savings of other corporate expenses including, but not
limited to, senior management, legal, finance, and human
resources expenses; and (iii) reduced operating costs
and/or capital expenditures resulting from rationalizing such
costs and expenditures between DundeeWealth’s operations
and the operations of the acquiror. Based on discussions with
management of DundeeWealth, TD Securities estimated the amount
of synergies that would be achievable by Scotiabank and other
potential acquirors and the one-time costs required to achieve
such synergies.
In assessing the amount of synergies to include in the valuation
of the Common Shares, TD Securities considered the amount of
synergies that could be achieved by the mutual fund industry
participants that would potentially acquire 100% of the Common
Shares and the amount of synergies the successful acquiror
(which might be Scotiabank or one of the other industry
participants) might pay for in an open auction of the Company.
TD Securities believes that there are a number of potential
purchasers of DundeeWealth including Scotiabank and other
Canadian banks or insurance companies that could achieve a
certain base level of synergies (the “Base Case
Synergies”). TD Securities believes that there may be
certain potential mutual fund industry acquirors of DundeeWealth
(which may include Scotiabank) that could achieve additional
synergies above the amount of the Base Case Synergies, but that
such acquirors would be reluctant to share the value of any
excess synergies with the Shareholders of DundeeWealth because
such excess would be available to only a small number of
potential acquirors who may or may not participate in an open
auction of the Company. TD Securities concluded that the
successful acquiror in an open auction of DundeeWealth might pay
for 100% of the Base Case Synergies and has therefore reflected
this amount and 100% of the one-time costs required to achieve
such synergies in its valuation of the Common Shares. Based on
the foregoing and discussions with DundeeWealth senior
management, TD Securities estimated annual pre-tax Base Case
Synergies of $30 million and reflected 100% of this amount,
net of the estimated costs to achieve such synergies, in its DCF
analysis.
Summary
of TD Securities Base Case Forecast
The following is a summary of the TD Securities Base Case
Forecast:
Investment
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct. 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31
|
|
|
Year Ending Dec. 31,
|
|
($ millions)
|
|
2010F
|
|
|
2011F
|
|
|
2012F
|
|
|
2013F
|
|
|
2014F
|
|
|
2015F
|
|
|
Assets Under Management
|
|
$
|
41,852
|
|
|
$
|
46,417
|
|
|
$
|
51,132
|
|
|
$
|
55,481
|
|
|
$
|
59,586
|
|
|
$
|
64,042
|
|
Assets Under Administration
|
|
|
23,780
|
|
|
|
25,555
|
|
|
|
27,470
|
|
|
|
29,536
|
|
|
|
31,763
|
|
|
|
34,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
214.9
|
|
|
$
|
923.6
|
|
|
$
|
1,008.4
|
|
|
$
|
1,089.8
|
|
|
$
|
1,168.5
|
|
|
$
|
1,249.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Management Base EBITDA
|
|
$
|
65.6
|
|
|
$
|
303.6
|
|
|
$
|
341.0
|
|
|
$
|
364.8
|
|
|
$
|
387.5
|
|
|
$
|
405.5
|
|
Performance Fee EBITDA
|
|
|
21.3
|
|
|
|
23.6
|
|
|
|
27.0
|
|
|
|
31.0
|
|
|
|
35.6
|
|
|
|
40.9
|
|
Corporate and Other EBITDA
(1)
|
|
|
(20.0
|
)
|
|
|
1.7
|
|
|
|
2.3
|
|
|
|
4.0
|
|
|
|
5.9
|
|
|
|
8.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total EBITDA
|
|
$
|
66.9
|
|
|
$
|
328.9
|
|
|
$
|
370.4
|
|
|
$
|
399.7
|
|
|
$
|
428.9
|
|
|
$
|
454.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes financial advisory and corporate segments as well as
intersegment eliminations and synergies. 25% of annual synergies
assumed to be achieved in the final quarter of 2010 and 100%
each year thereafter. One-time costs to achieve synergies
assumed to be incurred in 2010.
|
Member of TD Bank Financial Group
B-13
Dundee
Capital Markets — Combined Scenario
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct. 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31
|
|
|
Year Ending Dec. 31,
|
|
($ millions)
|
|
2010F
|
|
|
2011F
|
|
|
2012F
|
|
|
2013F
|
|
|
2014F
|
|
|
2015F
|
|
|
Total Revenue
|
|
$
|
29.9
|
|
|
$
|
124.5
|
|
|
$
|
134.4
|
|
|
$
|
143.8
|
|
|
$
|
151.8
|
|
|
$
|
159.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Capital Markets EBITDA
(1)
|
|
$
|
8.6
|
|
|
$
|
33.3
|
|
|
$
|
36.5
|
|
|
$
|
39.8
|
|
|
$
|
42.2
|
|
|
$
|
44.3
|
|
Other Capital Markets EBITDA
(2)
|
|
|
6.0
|
|
|
|
21.7
|
|
|
|
23.0
|
|
|
|
24.0
|
|
|
|
25.0
|
|
|
|
25.9
|
|
Selling, General & Admin. Expenses
|
|
|
(8.4
|
)
|
|
|
(34.9
|
)
|
|
|
(36.1
|
)
|
|
|
(37.3
|
)
|
|
|
(38.6
|
)
|
|
|
(39.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total EBITDA
|
|
$
|
6.1
|
|
|
$
|
20.1
|
|
|
$
|
23.4
|
|
|
$
|
26.5
|
|
|
$
|
28.6
|
|
|
$
|
30.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Income
|
|
$
|
3.7
|
|
|
$
|
11.2
|
|
|
$
|
12.6
|
|
|
$
|
14.8
|
|
|
$
|
18.8
|
|
|
$
|
21.3
|
|
|
|
(1)
|
Core Capital Markets EBITDA includes EBITDA from investment
banking and institutional sales and trading businesses.
|
(2)
|
Other Capital Markets EBITDA includes EBITDA from principal
trading, FX trading and corporate advisors.
|
Dundee
Capital Markets — Standalone Scenario
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct. 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31
|
|
|
Year Ending Dec. 31,
|
|
($ millions)
|
|
2010F
|
|
|
2011F
|
|
|
2012F
|
|
|
2013F
|
|
|
2014F
|
|
|
2015F
|
|
|
Total Revenue
|
|
$
|
27.5
|
|
|
$
|
114.9
|
|
|
$
|
123.7
|
|
|
$
|
132.8
|
|
|
$
|
140.4
|
|
|
$
|
147.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Capital Markets EBITDA
(2)
|
|
$
|
8.6
|
|
|
$
|
32.6
|
|
|
$
|
35.2
|
|
|
$
|
38.4
|
|
|
$
|
40.8
|
|
|
$
|
42.8
|
|
Other Capital Markets EBITDA
(3)
|
|
|
4.4
|
|
|
|
16.2
|
|
|
|
17.4
|
|
|
|
18.3
|
|
|
|
19.1
|
|
|
|
19.9
|
|
Selling, General & Admin. Expenses
|
|
|
(9.2
|
)
|
|
|
(37.5
|
)
|
|
|
(38.7
|
)
|
|
|
(40.0
|
)
|
|
|
(41.4
|
)
|
|
|
(42.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total EBITDA
|
|
$
|
3.8
|
|
|
$
|
11.3
|
|
|
$
|
13.9
|
|
|
$
|
16.7
|
|
|
$
|
18.5
|
|
|
$
|
19.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
2.2
|
|
|
$
|
5.0
|
|
|
$
|
5.8
|
|
|
$
|
7.8
|
|
|
$
|
11.6
|
|
|
$
|
13.9
|
|
|
|
(1)
|
The Standalone Scenario forecast does not reflect the
reallocation of CMP/CDR from the Investment Management segment
to Dundee Capital Markets.
|
(2)
|
Core Capital Markets EBITDA includes EBITDA from investment
banking and institutional sales and trading businesses.
|
(3)
|
Other Capital Markets EBITDA includes EBITDA from principal
trading, FX trading and corporate advisors.
|
Valuation
of the Common Shares
Comparable
Precedent Transactions Analysis
TD Securities applied the comparable precedent transactions
methodology to DundeeWealth’s Investment Management and
Dundee Capital Markets segments and then adjusted for the value
impact of the Company’s other assets and liabilities to
determine the resulting implied value per Common Share.
Member of TD Bank Financial Group
B-14
The comparable precedent transactions involving companies in the
Canadian mutual fund industry which were identified and reviewed
by TD Securities are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise
|
|
|
Transaction Multiple
|
|
|
|
Target
|
|
Value (EV)
|
|
|
EV/LTM
|
|
|
|
|
Date
|
|
Acquiror
|
|
($ millions)
|
|
|
EBITDA
|
|
|
EV/AUM
|
|
|
20-May-09
|
|
Mavrix Fund Management
|
|
$
|
10
|
|
|
|
nmf
|
|
|
|
4.0
|
%
|
|
|
GrowthWorks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06-Oct-08
|
|
CI Financial (37% stake)
|
|
$
|
7,215
|
|
|
|
10.3x
|
|
|
|
11.5
|
%
|
|
|
Bank of Nova Scotia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24-Sept-07
|
|
DundeeWealth
|
|
$
|
2,791
|
|
|
|
12.3x
|
|
|
|
9.7
|
%
|
|
|
CI Financial Income Fund
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18-Sept-07
|
|
DundeeWealth (18% stake)
|
|
$
|
2,413
|
|
|
|
10.6x
|
|
|
|
8.4
|
%
|
|
|
Bank of Nova Scotia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7-Nov-05
|
|
Clarington Corp.
|
|
$
|
261
|
|
|
|
13.2x
|
|
|
|
6.0
|
%
|
|
|
Industrial Alliance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04-Nov-04
|
|
BLC — Edmond de Rothschild
|
|
$
|
73
|
|
|
|
na
|
|
|
|
4.2
|
%
|
|
|
Industrial Alliance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15-Jan-04
|
|
P.J. Doherty
|
|
$
|
12
|
|
|
|
11.2x
|
|
|
|
1.3
|
%
|
|
|
AGF Management Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22-Aug-03
|
|
Synergy Asset Management
|
|
$
|
116
|
|
|
|
7.5x
|
|
|
|
8.3
|
%
|
|
|
CI Fund Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12-Jul-02
|
|
StrategicNova
|
|
$
|
175
|
|
|
|
na
|
|
|
|
7.3
|
%
|
|
|
DundeeWealth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11-Jun-02
|
|
Altamira
|
|
$
|
467
|
|
|
|
11.0x
|
|
|
|
8.3
|
%
|
|
|
National Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22-May-02
|
|
Spectrum / Diversico
|
|
$
|
857
|
|
|
|
9.0x
|
|
|
|
6.5
|
%
|
|
|
CI Fund Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29-Jan-01
|
|
Mackenzie Financial
|
|
$
|
3,584
|
|
|
|
9.1x
|
|
|
|
9.7
|
%
|
|
|
Investors Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-Aug-00
|
|
Global Strategy Holding
|
|
$
|
438
|
|
|
|
12.2x
|
|
|
|
7.2
|
%
|
|
|
AGF Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26-Jul-00
|
|
Bissett & Associates
|
|
$
|
133
|
|
|
|
10.8x
|
|
|
|
2.3
|
%
|
|
|
Templeton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
09-May-00
|
|
Trimark
|
|
$
|
2,269
|
|
|
|
7.9x
|
|
|
|
9.1
|
%
|
|
|
AMVESCAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Mar-00
|
|
Perigee
|
|
$
|
303
|
|
|
|
12.0x
|
|
|
|
1.4
|
%
|
|
|
Legg Mason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
|
|
|
|
10.5x
|
|
|
|
6.6
|
%
|
Mean (Excluding High / Low)
|
|
|
|
|
|
|
10.6x
|
|
|
|
6.6
|
%
|
|
|
(1) |
Terminated transaction.
|
Member of TD Bank Financial Group
B-15
The comparable precedent transactions involving Canadian
broker/dealers which were identified and reviewed by TD
Securities are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Transaction Multiple
|
|
|
|
Target
|
|
Value
|
|
|
Price/LTM
|
|
|
|
|
Date
|
|
Acquiror
|
|
($ millions)
|
|
|
Earnings
|
|
|
Price/Book
|
|
|
4-Mar-10
|
|
Genuity Capital Markets
|
|
$
|
286
|
|
|
|
13.4x
|
|
|
|
9.5x
|
|
|
|
Canaccord Financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-Oct-07
|
|
Westwind Partners
|
|
$
|
148
|
|
|
|
15.6x
|
|
|
|
4.7x
|
|
|
|
Thomas Weisel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26-Sept-07
|
|
Orion Financial
|
|
$
|
147
|
|
|
|
5.6x
|
|
|
|
na
|
|
|
|
Macquarie Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7-Nov-00
|
|
Newcrest Capital
|
|
$
|
224
|
|
|
|
na
|
|
|
|
3.5x
|
|
|
|
TD Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17-Jun-99
|
|
First Marathon
|
|
$
|
713
|
|
|
|
17.6x
|
|
|
|
1.8x
|
|
|
|
National Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22-Jun-98
|
|
Midland Walwyn
|
|
$
|
1,250
|
|
|
|
21.0x
|
|
|
|
3.4x
|
|
|
|
Merrill Lynch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-Aug-96
|
|
Richardson Greenshields
|
|
$
|
480
|
|
|
|
na
|
|
|
|
1.9x
|
|
|
|
Royal Bank of Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
|
|
|
|
14.6x
|
|
|
|
4.1x
|
|
Mean (Excluding High / Low)
|
|
|
|
|
|
|
15.5x
|
|
|
|
3.4x
|
|
The process of analyzing valuation multiples implied by
comparable precedent transactions and applying these valuation
multiples to the Company’s business segments involved
certain judgments concerning the financial and operating
characteristics of the companies acquired in these transactions
compared to DundeeWealth’s business segments. Given
differences in business mix, economic and market conditions,
growth prospects and risks inherent in the comparable precedent
transactions identified, TD Securities did not consider any
specific precedent transactions to be directly comparable to the
Company’s Investment Management and Dundee Capital Markets
segments. TD Securities believes that the unsolicited offer by
CI Financial Income Fund for DundeeWealth in September 2007
represents the most comparable transaction available to the
Company’s Investment Management segment. However, TD
Securities noted that significant changes had occurred in
DundeeWealth’s Investment Management operations and in
economic and market conditions since the time of the CI
Financial Income Fund offer. Based on the foregoing and a review
of all of the comparable precedent transactions identified, TD
Securities selected appropriate valuation multiples and applied
such multiples to the corresponding value drivers for the
Company’s business segments.
Member of TD Bank Financial Group
B-16
The following is a summary of TD Securities’ comparable
precedent transactions analysis of DundeeWealth’s
Investment Management segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
Base
|
|
|
Multiple
|
|
|
Enterprise Value
|
|
Value Driver
|
|
Amount
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
LTM Base EBITDA
|
|
$
|
207.8
|
|
|
|
11.5x
|
|
|
|
13.5x
|
|
|
$
|
2,389.2
|
|
|
$
|
2,804.8
|
|
LTM Performance Fee EBITDA
|
|
|
21.7
|
|
|
|
5.8x
|
|
|
|
6.8x
|
|
|
|
124.8
|
|
|
|
146.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,514.0
|
|
|
$
|
2,951.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010F Base EBITDA
|
|
$
|
214.3
|
|
|
|
11.0x
|
|
|
|
13.0x
|
|
|
$
|
2,357.0
|
|
|
$
|
2,785.6
|
|
2010F Performance Fee EBITDA
|
|
|
19.7
|
|
|
|
5.5x
|
|
|
|
6.5x
|
|
|
|
108.4
|
|
|
|
128.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,465.5
|
|
|
$
|
2,913.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011F Base EBITDA
|
|
$
|
275.3
|
|
|
|
9.0x
|
|
|
|
11.0x
|
|
|
$
|
2,477.8
|
|
|
$
|
3,028.4
|
|
2011F Performance Fee EBITDA
|
|
|
23.6
|
|
|
|
4.5x
|
|
|
|
5.5x
|
|
|
|
106.0
|
|
|
|
129.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,583.9
|
|
|
$
|
3,158.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUM — Oct. 31, 2010
|
|
$
|
43,562
|
|
|
|
6.0
|
%
|
|
|
7.0
|
%
|
|
$
|
2,613.7
|
|
|
$
|
3,049.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Enterprise Value Range
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,450.0
|
|
|
$
|
3,000.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of TD Securities’ comparable
precedent transactions analysis of DundeeWealth’s Dundee
Capital Markets segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
Base
|
|
|
Multiple
|
|
|
Equity Value
|
|
Value Driver
|
|
Amount
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
LTM Net Income
|
|
$
|
17.3
|
|
|
|
11.0x
|
|
|
|
13.0x
|
|
|
$
|
189.9
|
|
|
$
|
224.4
|
|
2010 Net Income
|
|
|
14.2
|
|
|
|
11.0x
|
|
|
|
13.0x
|
|
|
|
156.6
|
|
|
|
185.1
|
|
2011 Net Income
(1)
|
|
|
13.6
|
|
|
|
10.0x
|
|
|
|
12.0x
|
|
|
|
135.8
|
|
|
|
163.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Equity Value Range
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150.0
|
|
|
$
|
180.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Excludes the impact of acquisitions.
|
Summary
of Comparable Precedent Transactions Analysis
The following is a summary of the results of TD Securities’
comparable precedent transactions analysis of
DundeeWealth’s Investment Management and Dundee Capital
Markets segments and the adjustments made by TD Securities
for DundeeWealth’s other assets and liabilities to
determine the resulting implied value per Common Share:
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
($ millions, except per share
data)
|
|
Low
|
|
|
High
|
|
|
Selected Enterprise Value Range for Investment Management
|
|
$
|
2,450.0
|
|
|
$
|
3,000.0
|
|
Selected Equity Value Range for Dundee Capital Markets
|
|
|
150.0
|
|
|
|
180.0
|
|
Net Cash
(1)
|
|
|
184.2
|
|
|
|
184.2
|
|
Preferred Shares
|
|
|
(153.5
|
)
|
|
|
(153.5
|
)
|
Acquisition of Non-Controlling Interest
|
|
|
(15.0
|
)
|
|
|
(15.0
|
)
|
Investments
|
|
|
162.5
|
|
|
|
162.5
|
|
|
|
|
|
|
|
|
|
|
Equity Value
|
|
$
|
2,778.2
|
|
|
$
|
3,358.2
|
|
Fully Diluted Shares Outstanding
|
|
|
159.0
|
|
|
|
159.0
|
|
|
|
|
|
|
|
|
|
|
Implied Equity Value per Share
|
|
$
|
17.47
|
|
|
$
|
21.12
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Net excess cash excludes cash required for Dundee Capital
Markets operations.
|
Member of TD Bank Financial Group
B-17
DCF
Analysis
TD Securities applied the DCF methodology to DundeeWealth’s
Investment Management and Dundee Capital Markets segments and
then adjusted for the value impact of the Company’s other
assets and liabilities to determine the resulting implied value
per Common Share. Projected unlevered after-tax free cash flows
for the Company’s Investment Management segment were
discounted based on an appropriate WACC for the segment. The
WACC for Investment Management was calculated based upon the
segment’s after-tax cost of debt and equity, weighted based
upon an assumed optimal capital structure. The assumed optimal
capital structure was determined based upon a review of the
capital structures of comparable companies and the risks
inherent in the Investment Management segment and the mutual
fund industry. The cost of debt for Investment Management was
calculated based on the risk-free rate of return and an
appropriate borrowing spread to reflect credit risk. TD
Securities used the capital asset pricing model
(“CAPM”) approach to determine the appropriate cost of
equity. The CAPM approach calculates the cost of equity with
reference to the risk-free rate of return, the volatility of
equity prices relative to a benchmark (“beta”) and the
equity risk premium. TD Securities reviewed a range of
unlevered betas for DundeeWealth and a group of comparable
companies in order to select the appropriate beta for the
Investment Management segment. The selected unlevered beta was
levered using the optimal capital structure and was then used to
calculate the cost of equity. The base assumptions used by
TD Securities in estimating the WACC for the Investment
Management segment were as follows:
|
|
|
|
|
Cost of Debt
|
|
|
|
|
Risk Free Rate
(10-Year
Government of Canada Bonds)
|
|
|
3.1%
|
|
Borrowing Spread
|
|
|
2.4%
|
|
Pre-tax Cost of Debt
|
|
|
5.5%
|
|
Tax Rate
|
|
|
30.0%
|
|
After Tax Cost of Debt
|
|
|
3.9%
|
|
|
|
|
|
|
Cost of Equity
|
|
|
|
|
Risk Free Rate
(10-Year
Government of Canada Bonds)
|
|
|
3.1%
|
|
Equity Risk Premium
|
|
|
5.0%
|
|
Size Premium
(1)
|
|
|
1.1%
|
|
Unlevered Beta
|
|
|
1.00
|
|
Levered Beta
|
|
|
1.04
|
|
After Tax Cost of Equity
|
|
|
9.4%
|
|
|
|
|
|
|
WACC
|
|
|
|
|
Optimal Capital Structure (% Debt)
|
|
|
5.0%
|
|
WACC
|
|
|
9.1%
|
|
|
|
(1) |
Source: 2010 Ibbotson Cost of Capital Yearbook (mid-cap risk
premium).
|
Based upon the foregoing and taking into account sensitivity
analysis on the variables discussed above and the assumptions
used in the TD Securities Base Case Forecast, TD Securities
determined the appropriate WACC for the Investment Management
segment to be in the range of 8.5% to 9.5%.
Projected levered after-tax free cash flows for the
Company’s Dundee Capital Markets segment were discounted
based on an appropriate cost of equity for the segment
determined using the CAPM approach. TD Securities reviewed a
range of unlevered betas for a group of comparable
broker/dealers in order to select the appropriate beta for
Dundee Capital Markets. The selected unlevered beta was levered
using the optimal capital structure determined based upon a
review of the capital structures of comparable broker/dealers
and the risks inherent in the Dundee Capital Markets segment and
the
Member of TD Bank Financial Group
B-18
broker/dealer industry and was then used to calculate the cost
of equity. The base assumptions used by TD Securities in
estimating the cost of equity for the Dundee Capital Markets
segment were as follows:
|
|
|
|
|
Cost of Equity
|
|
|
|
|
Risk Free Rate
(10-Year
Government of Canada Bonds)
|
|
|
3.1%
|
|
Equity Risk Premium
|
|
|
5.0%
|
|
Size Premium
(1)
|
|
|
4.0%
|
|
Unlevered Beta
|
|
|
1.25
|
|
Levered Beta
|
|
|
1.30
|
|
After Tax Cost of Equity
|
|
|
13.6%
|
|
|
|
(1) |
Source: 2010 Ibbotson Cost of Capital Yearbook (micro-cap risk
premium).
|
Based on the foregoing and taking into account sensitivity
analysis on the variables discussed above and the assumptions
used in the TD Securities Base Case Forecast, TD Securities
determined the appropriate WACC for the Dundee Capital Markets
segment to be in the range of 13.0% to 14.0%.
TD Securities developed a terminal enterprise value for the
Investment Management segment and a terminal equity value for
the Dundee Capital Markets segment based on a review of
comparable precedent transactions and taking into account the
growth prospects and risks for each segment beyond the terminal
year. TD Securities considered the implied growth rates into
perpetuity of the free cash flows following the end of the
forecast period to be reasonable in the circumstances.
The following is a summary of the unlevered after-tax free cash
flows projected for the Investment Management segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct. 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31
|
|
|
Year Ending Dec. 31,
|
|
($ millions)
|
|
2010F
|
|
|
2011F
|
|
|
2012F
|
|
|
2013F
|
|
|
2014F
|
|
|
2015F
|
|
|
Free Cash Flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total EBITDA
|
|
$
|
66.9
|
|
|
$
|
328.9
|
|
|
$
|
370.4
|
|
|
$
|
399.7
|
|
|
$
|
428.9
|
|
|
$
|
454.4
|
|
Commissions Financed
|
|
|
(23.3
|
)
|
|
|
(99.5
|
)
|
|
|
(95.5
|
)
|
|
|
(98.9
|
)
|
|
|
(103.8
|
)
|
|
|
(110.5
|
)
|
Unlevered Cash Taxes
|
|
|
(17.2
|
)
|
|
|
(70.6
|
)
|
|
|
(77.0
|
)
|
|
|
(83.1
|
)
|
|
|
(89.2
|
)
|
|
|
(96.1
|
)
|
Capital Expenditures
|
|
|
(1.7
|
)
|
|
|
(17.5
|
)
|
|
|
(17.5
|
)
|
|
|
(12.6
|
)
|
|
|
(12.7
|
)
|
|
|
(12.8
|
)
|
Changes in Working Capital
|
|
|
0.1
|
|
|
|
(3.8
|
)
|
|
|
(2.2
|
)
|
|
|
(0.3
|
)
|
|
|
(0.4
|
)
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unlevered Free Cash Flow
|
|
$
|
24.9
|
|
|
$
|
137.5
|
|
|
$
|
178.1
|
|
|
$
|
204.8
|
|
|
$
|
222.9
|
|
|
$
|
235.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the enterprise value of the
Investment Management segment implied by TD Securities’ DCF
analysis:
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
($ millions)
|
|
Low
|
|
|
High
|
|
|
Assumptions
|
|
|
|
|
|
|
|
|
WACC
|
|
|
8.5%
|
|
|
|
9.5%
|
|
Terminal Value EBITDA Multiple (EBITDA excluding Performance
Fees)
|
|
|
8.0x
|
|
|
|
10.0x
|
|
Terminal Value EBITDA Multiple (Performance Fee EBITDA)
|
|
|
4.0x
|
|
|
|
5.0x
|
|
|
|
|
|
|
|
|
|
|
DCF Analysis
|
|
|
|
|
|
|
|
|
Net Present Value
|
|
|
|
|
|
|
|
|
Unlevered After-tax Free Cash Flows
|
|
$
|
795.8
|
|
|
$
|
776.0
|
|
Terminal Value
|
|
|
2,262.5
|
|
|
|
2,695.1
|
|
|
|
|
|
|
|
|
|
|
Enterprise Value
|
|
$
|
3,058.3
|
|
|
$
|
3,471.1
|
|
|
|
|
|
|
|
|
|
|
Member of TD Bank Financial Group
B-19
As part of the DCF analysis of the Investment Management
segment, TD Securities performed sensitivity analysis on certain
key assumptions as outlined below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact on
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Management
|
|
|
Impact on Value
|
|
|
|
|
|
|
Enterprise Value
(1)
|
|
|
per Share
(1)
|
|
Variable
|
|
Sensitivity
|
|
|
($ millions)
|
|
|
($)
|
|
|
WACC
|
|
|
+ 0.5%
|
|
|
– $
|
68.8
|
|
|
– $
|
0.43
|
|
|
|
|
– 0.5%
|
|
|
+ $
|
70.7
|
|
|
+ $
|
0.44
|
|
Terminal EBITDA Multiple
|
|
|
+/– 0.5x
|
|
|
+/– $
|
138.0
|
|
|
+/– $
|
0.87
|
|
Mutual Fund AUM Growth %
|
|
|
+ 10.0%
|
|
|
+ $
|
116.3
|
|
|
+ $
|
0.73
|
|
|
|
|
– 10.0%
|
|
|
– $
|
113.1
|
|
|
– $
|
0.71
|
|
|
|
(1) |
Impact is calculated relative to values calculated at the
midpoint WACC and midpoint terminal EBITDA multiple.
|
The following is a summary of the levered after-tax free cash
flow projected for the Dundee Capital Markets segment under the
Combined Scenario:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct. 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31
|
|
|
Year Ending Dec. 31,
|
|
($ millions)
|
|
2010F
|
|
|
2011F
|
|
|
2012F
|
|
|
2013F
|
|
|
2014F
|
|
|
2015F
|
|
|
Revenue
|
|
$
|
29.9
|
|
|
$
|
124.5
|
|
|
$
|
134.4
|
|
|
$
|
143.8
|
|
|
$
|
151.8
|
|
|
$
|
159.0
|
|
EBITDA
|
|
|
6.1
|
|
|
|
20.1
|
|
|
|
23.4
|
|
|
|
26.5
|
|
|
|
28.6
|
|
|
|
30.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
3.7
|
|
|
$
|
11.2
|
|
|
$
|
12.6
|
|
|
$
|
14.8
|
|
|
$
|
18.8
|
|
|
$
|
21.3
|
|
Required Change in Retained Earnings for
Capital Purposes
|
|
|
1.0
|
|
|
|
4.0
|
|
|
|
(6.6
|
)
|
|
|
(6.4
|
)
|
|
|
(4.2
|
)
|
|
|
(3.4
|
)
|
Acquisitions
|
|
|
|
|
|
|
(10.0
|
)
|
|
|
(5.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow to Equity
|
|
$
|
4.7
|
|
|
$
|
5.2
|
|
|
$
|
1.0
|
|
|
$
|
8.4
|
|
|
$
|
14.6
|
|
|
$
|
17.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the en bloc equity value of the
Dundee Capital Markets segment implied by TD Securities’
DCF analysis:
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
($ millions)
|
|
Low
|
|
|
High
|
|
|
Assumptions
|
|
|
|
|
|
|
|
|
Cost of Equity
|
|
|
13.0
|
%
|
|
|
14.0
|
%
|
Terminal Value Earnings Multiple
|
|
|
11.0
|
x
|
|
|
13.0
|
x
|
|
|
|
|
|
|
|
|
|
DCF Analysis
|
|
|
|
|
|
|
|
|
Net Present Value
|
|
|
|
|
|
|
|
|
Levered After-tax Free Cash Flows
|
|
$
|
35.5
|
|
|
$
|
34.6
|
|
Terminal Value
|
|
|
123.4
|
|
|
|
139.2
|
|
|
|
|
|
|
|
|
|
|
Equity Value
|
|
$
|
158.9
|
|
|
$
|
173.8
|
|
|
|
|
|
|
|
|
|
|
Member of TD Bank Financial Group
B-20
As part of the DCF analysis of the Dundee Capital Markets
segment, TD Securities performed sensitivity analysis on certain
key assumptions as outlined below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact on Dundee
|
|
|
|
|
|
|
|
|
|
Capital Markets
|
|
|
Impact on Value
|
|
|
|
|
|
|
Equity Value
(1)
|
|
|
per Share
(1)
|
|
Variable
|
|
Sensitivity
|
|
|
($ millions)
|
|
|
($)
|
|
|
Cost of Equity
|
|
|
+ 0.5%
|
|
|
– $
|
3.4
|
|
|
– $
|
0.02
|
|
|
|
|
– 0.5%
|
|
|
+ $
|
3.5
|
|
|
+ $
|
0.02
|
|
Terminal Price to Earnings Multiple
|
|
|
+/– 0.5x
|
|
|
+/– $
|
5.5
|
|
|
+/– $
|
0.03
|
|
Total Revenue
|
|
|
+ 10.0%
|
|
|
+ $
|
22.7
|
|
|
+ $
|
0.14
|
|
|
|
|
– 10.0%
|
|
|
– $
|
22.4
|
|
|
– $
|
0.14
|
|
|
|
(1) |
Impact is calculated relative to values calculated at the
midpoint cost of equity and midpoint terminal price to earnings
multiple.
|
Summary
of DCF Analysis
The following is a summary of the results of TD Securities’
DCF analysis of DundeeWealth’s Investment Management and
Dundee Capital Markets segments and the adjustments made by TD
Securities for DundeeWealth’s other assets and liabilities
to determine the resulting implied value per Common Share:
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
($ millions, except per share
data)
|
|
Low
|
|
|
High
|
|
|
Enterprise Value Range for Investment Management
|
|
$
|
3,058.3
|
|
|
$
|
3,471.1
|
|
Equity Value Range for Dundee Capital Markets
|
|
|
158.9
|
|
|
|
173.8
|
|
Net Cash
(1)
|
|
|
184.2
|
|
|
|
184.2
|
|
Preferred Shares
|
|
|
(153.5
|
)
|
|
|
(153.5
|
)
|
Acquisition of Non-Controlling Interest
|
|
|
(15.0
|
)
|
|
|
(15.0
|
)
|
Investments
|
|
|
162.5
|
|
|
|
162.5
|
|
|
|
|
|
|
|
|
|
|
Equity Value
|
|
$
|
3,395.3
|
|
|
$
|
3,823.1
|
|
Fully Diluted Shares Outstanding
|
|
|
159.0
|
|
|
|
159.0
|
|
|
|
|
|
|
|
|
|
|
Equity Value Per Share
|
|
$
|
21.35
|
|
|
$
|
24.04
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Net excess cash excludes cash required for Dundee Capital
Markets operations.
|
Valuation
of the Common Shares Summary
The following is a summary of the range of fair market values of
the Common Shares resulting from the comparable precedent
transactions analysis and DCF analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value Based
|
|
|
|
|
|
|
on Precedent
|
|
|
Value Based on
|
|
|
|
Transactions Analysis
|
|
|
DCF Analysis
|
|
($ millions, except per share
data)
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Enterprise Value Range for Investment Management
|
|
$
|
2,450.0
|
|
|
$
|
3,000.0
|
|
|
$
|
3,058.3
|
|
|
$
|
3,471.1
|
|
Equity Value Range for Dundee Capital Markets
|
|
|
150.0
|
|
|
|
180.0
|
|
|
|
158.9
|
|
|
|
173.8
|
|
Adjustments for Other Assets and Liabilities
|
|
|
178.2
|
|
|
|
178.2
|
|
|
|
178.2
|
|
|
|
178.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity Value
|
|
$
|
2,778.2
|
|
|
$
|
3,358.2
|
|
|
$
|
3,395.3
|
|
|
$
|
3,823.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Value Per Share
|
|
$
|
17.47
|
|
|
$
|
21.12
|
|
|
$
|
21.35
|
|
|
$
|
24.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member of TD Bank Financial Group
B-21
In arriving at its opinion as to the fair market value of the
Common Shares, TD Securities placed equal emphasis on the
precedent transactions analysis and the DCF analysis in
determining the low end of the fair market value range and
placed greater emphasis on the DCF analysis in determining the
high end of the fair market value range.
Valuation
Conclusion
Based upon and subject to the foregoing, TD Securities is of the
opinion that, as of November 21, 2010, the fair market
value of the Common Shares is in the range of $19.50 to $23.50
per Common Share.
Valuation
of the Consideration
Market
Trading Multiples Analysis
TD Securities applied the market trading multiples methodology
to DundeeWealth’s Dundee Capital Markets segment. The
comparable publicly traded broker/dealers which were identified
and reviewed by TD Securities are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Market Trading Multiples
|
|
Company
|
|
Capitalization
|
|
|
P/E LTM
|
|
|
P/ 2010E
|
|
|
P/ 2011E
|
|
|
|
(C$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
Canadian Broker/Dealers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMP Capital
|
|
|
$956.7
|
|
|
|
12.3x
|
|
|
|
12.0x
|
|
|
|
12.1x
|
|
Canaccord Genuity
|
|
|
864.0
|
|
|
|
na
|
|
|
|
13.2x
|
|
|
|
10.9x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian Average
|
|
|
|
|
|
|
12.3x
|
|
|
|
12.6x
|
|
|
|
11.5x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Broker/Dealers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Piper Jaffray
|
|
|
$477.1
|
|
|
|
21.9x
|
|
|
|
26.4x
|
|
|
|
13.3x
|
|
Raymond James
|
|
|
3,704.3
|
|
|
|
16.2x
|
|
|
|
13.2x
|
|
|
|
11.1x
|
|
Morgan Stanley
|
|
|
38,759.9
|
|
|
|
nmf
|
|
|
|
10.6x
|
|
|
|
8.6x
|
|
Goldman Sachs
|
|
|
90,596.9
|
|
|
|
9.4x
|
|
|
|
12.0x
|
|
|
|
9.3x
|
|
Jefferies Group
|
|
|
4,199.9
|
|
|
|
17.8x
|
|
|
|
21.0x
|
|
|
|
16.3x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Average
|
|
|
|
|
|
|
16.3x
|
|
|
|
16.7x
|
|
|
|
11.7x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The process of analyzing valuation multiples implied by
comparable publicly traded companies and applying these
valuation multiples to the Company’s Dundee Capital Markets
segment involved certain judgments concerning the financial and
operating characteristics of the comparable companies compared
to Dundee Capital Markets. Given differences in business mix,
growth prospects and risks inherent in the comparable companies
identified, TD Securities did not consider any specific company
to be directly comparable to Dundee Capital Markets. Based on a
review of all of the comparable companies identified, TD
Securities selected appropriate valuation multiples and applied
such multiples to the corresponding value drivers for the
Company’s Dundee Capital Markets segment.
Member of TD Bank Financial Group
B-22
The following is a summary of TD Securities’ market trading
multiples analysis of DundeeWealth’s Dundee Capital Markets
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except per share
data)
|
|
Base
|
|
|
Multiple
|
|
|
Equity Value
|
|
Value Driver
|
|
Amount
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
LTM Net Income
|
|
$
|
9.9
|
|
|
|
9.0x
|
|
|
|
11.0x
|
|
|
$
|
89.3
|
|
|
$
|
109.2
|
|
2010 Net Income
|
|
|
7.8
|
|
|
|
9.0x
|
|
|
|
11.0x
|
|
|
|
70.3
|
|
|
|
85.9
|
|
2011 Net Income
(1)
|
|
|
7.3
|
|
|
|
8.0x
|
|
|
|
10.0x
|
|
|
|
58.6
|
|
|
|
73.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMP/CDR Annualized EBITDA
(2)
|
|
|
2.8
|
|
|
|
3.0x
|
|
|
|
5.0x
|
|
|
|
8.3
|
|
|
|
13.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Equity Value Range
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75.0
|
|
|
$
|
95.0
|
|
Fully Diluted Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159.0
|
|
|
|
159.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Equity Value per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.47
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excludes the impact of acquisitions.
|
(2)
|
Earnings from CMP/CDR are not included in the net income
indicated for Dundee Capital Markets on a standalone basis. As a
result, the indicative values derived for these operations are
additive to the indicative values derived from net income.
|
DCF
Analysis
TD Securities applied the DCF methodology to DundeeWealth’s
Capital Markets segment. In order to determine an appropriate
market trading value of Dundee Capital Markets, TD Securities
utilized the levered after-tax free cash flows of Dundee Capital
Markets under the Standalone scenario, the same cost of equity
range as under the en bloc DCF analysis, and a terminal equity
value based on a review of valuation multiples of comparable
publicly traded companies. The following is a summary of the
levered after-tax free cash flows projected for Dundee Capital
Markets under the Standalone Scenario:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct. 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31
|
|
|
Year Ending Dec. 31,
|
|
($ millions)
|
|
2010F
|
|
|
2011F
|
|
|
2012F
|
|
|
2013F
|
|
|
2014F
|
|
|
2015F
|
|
|
Revenue
|
|
$
|
27.5
|
|
|
$
|
114.9
|
|
|
$
|
123.7
|
|
|
$
|
132.8
|
|
|
$
|
140.4
|
|
|
$
|
147.2
|
|
EBITDA
|
|
|
3.8
|
|
|
|
11.3
|
|
|
|
13.9
|
|
|
|
16.7
|
|
|
|
18.5
|
|
|
|
19.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
2.2
|
|
|
$
|
5.0
|
|
|
$
|
5.8
|
|
|
$
|
7.8
|
|
|
$
|
11.6
|
|
|
$
|
13.9
|
|
Required Change in Retained Earnings for
Capital Purposes
|
|
|
1.5
|
|
|
|
5.7
|
|
|
|
(8.8
|
)
|
|
|
(9.8
|
)
|
|
|
(6.2
|
)
|
|
|
(4.8
|
)
|
Acquisitions
|
|
|
|
|
|
|
(10.0
|
)
|
|
|
(5.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow to Equity
|
|
$
|
3.6
|
|
|
$
|
0.6
|
|
|
$
|
(8.0
|
)
|
|
$
|
(1.9
|
)
|
|
$
|
5.4
|
|
|
$
|
9.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member of TD Bank Financial Group
B-23
The following is a summary of the market trading value of Dundee
Capital Markets implied by TD Securities’ DCF analysis:
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
($ millions, except per share
data)
|
|
Low
|
|
|
High
|
|
|
Assumptions
|
|
|
|
|
|
|
|
|
Cost of Equity
|
|
|
13.0
|
%
|
|
|
14.0
|
%
|
Terminal Value Earnings Multiple
|
|
|
9.0
|
x
|
|
|
11.0
|
x
|
|
|
|
|
|
|
|
|
|
DCF Analysis
|
|
|
|
|
|
|
|
|
Net Present Value
|
|
|
|
|
|
|
|
|
Levered After-tax Free Cash Flows
|
|
$
|
4.9
|
|
|
$
|
4.7
|
|
Terminal Value
|
|
|
65.7
|
|
|
|
76.7
|
|
|
|
|
|
|
|
|
|
|
Equity Value
|
|
$
|
70.6
|
|
|
$
|
81.3
|
|
CMP/CDR Equity Value
(1)
|
|
|
8.3
|
|
|
|
13.8
|
|
|
|
|
|
|
|
|
|
|
Total Equity Value
|
|
$
|
78.8
|
|
|
$
|
95.1
|
|
Fully Diluted Shares Outstanding
|
|
|
159.0
|
|
|
|
159.0
|
|
|
|
|
|
|
|
|
|
|
Equity Value Per Share
|
|
$
|
0.50
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Free cash flow to equity from CMP/CDR is not included in the
free cash flow to equity indicated for Dundee Capital Markets on
a standalone basis. As a result, the indicative values derived
for these operations using the comparable precedent transactions
approach have been added to the values implied by TD
Securities’ DCF analysis of the rest of Dundee Capital
Markets.
|
As part of the DCF analysis of Dundee Capital Markets, TD
Securities performed sensitivity analysis on certain key
assumptions as outlined below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact on Dundee
|
|
|
|
|
|
|
|
|
|
Capital Markets
|
|
|
Impact on Value
|
|
|
|
|
|
|
Equity Value
(1)
|
|
|
per Share
(1)
|
|
Variable
|
|
Sensitivity
|
|
|
($ millions)
|
|
|
($)
|
|
|
Cost of Equity
|
|
|
+ 0.5%
|
|
|
– $
|
1.7
|
|
|
– $
|
0.01
|
|
|
|
|
– 0.5%
|
|
|
+ $
|
1.8
|
|
|
+ $
|
0.01
|
|
Terminal P/E Multiple
|
|
|
+/– 0.5x
|
|
|
+/– $
|
3.6
|
|
|
+/– $
|
0.02
|
|
Revenue
|
|
|
+ 10.0%
|
|
|
+ $
|
9.7
|
|
|
+ $
|
0.06
|
|
|
|
|
– 10.0%
|
|
|
– $
|
9.5
|
|
|
– $
|
0.06
|
|
|
|
(1) |
Impact is calculated relative to values calculated at the
midpoint cost of equity and midpoint terminal price to earnings
multiple.
|
Based upon the foregoing, TD Securities selected a value range
of $0.50 to $0.60 for the contribution to the value of the
Consideration of one DCM Share.
Contribution
to Value of the Scotiabank Common Shares
MI 61-101
requires that a formal valuation include a valuation of any
non-cash consideration being offered as part of a transaction
that is subject to MI
61-101,
except in certain circumstances outlined in MI
61-101. In
relation to the Offer, TD Securities understands that a
formal valuation of the Scotiabank Common Shares is not required
pursuant to MI
61-101 (and
TD Securities therefore did not prepare a formal valuation
of the Scotiabank Common Shares) for the following reasons:
|
|
|
|
1.
|
The Scotiabank Common Shares are securities of a reporting
issuer for which there is a published market;
|
|
|
2.
|
Scotiabank states in the Take-over Bid Circular that it has no
knowledge of any material information concerning Scotiabank, or
concerning the Scotiabank Common Shares, that has not been
generally disclosed;
|
Member of TD Bank Financial Group
B-24
|
|
|
|
3.
|
A liquid market (as such term is defined for the purposes of MI
61-101)
exists for the Scotiabank Common Shares;
|
|
|
4.
|
The total number of Scotiabank Common Shares that could be
issued pursuant to the Offer constitute 25% or less than the
number of Scotiabank Common Shares outstanding immediately
before the Offer;
|
|
|
5.
|
The Scotiabank Common Shares issued under the Offer will be
freely tradeable at the time the Offer is completed; and
|
|
|
6.
|
TD Securities is of the opinion that a valuation of the
Scotiabank Common Shares is not required.
|
TD Securities has independently confirmed items 1, 3, and 4
above. In forming its views under item 6 above,
TD Securities considered, among other things, that:
(a) Scotiabank Common Shares have a substantial market
capitalization and market float of approximately
$57 billion; (b) Scotiabank Common Shares are widely
held by both retail and institutional shareholders and
Scotiabank is actively followed by at least 18 equity research
analysts; (c) the average combined trading volume of the
Scotiabank Common Shares on the TSX and NYSE since
November 1, 2009, is approximately 3.5 million
Scotiabank Common Shares per day; (d) the maximum number of
Scotiabank Common Shares to be issued pursuant to the Offer is
31.9 million, representing approximately 3.1% of the
outstanding Scotiabank Common Shares and approximately 9.1x the
average daily trading volume since November 1, 2009; and
(e) during TD Securities’ review of the Transaction,
it was not made aware of any material information other than the
Transaction, which has not been publicly disclosed which would
reasonably be expected to materially affect the market trading
price of the Scotiabank Common Shares.
Based upon the foregoing, TD Securities believes that recent
market trading prices of the Scotiabank Common Shares are an
appropriate indicator of their value for purposes of determining
their contribution to the value of the Consideration.
TD Securities analyzed the current and average trading prices of
the Scotiabank Common Shares over various periods as summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Low
|
|
|
High
|
|
|
Close/
|
|
Period
|
|
Volume
|
|
|
Price
|
|
|
Price
|
|
|
VWAP
(1)
|
|
|
Close: November 19, 2010
|
|
|
3,514,118
|
|
|
$
|
53.82
|
|
|
$
|
54.76
|
|
|
$
|
54.69
|
|
5 Days
|
|
|
2,919,718
|
|
|
|
52.63
|
|
|
|
54.69
|
|
|
|
53.30
|
|
10 Days
|
|
|
3,958,229
|
|
|
|
52.63
|
|
|
|
54.70
|
|
|
|
53.88
|
|
20 Days
|
|
|
3,089,152
|
|
|
|
52.63
|
|
|
|
54.70
|
|
|
|
54.06
|
|
30 Days
|
|
|
2,850,561
|
|
|
|
52.63
|
|
|
|
55.52
|
|
|
|
54.29
|
|
|
|
(1) |
Closing price on November 19, 2010, and volume weighted
average price for the other periods indicated.
|
TD Securities believes that the closing price of the Scotiabank
Common Shares on November 19, 2010, is relevant in that it
represents the most current market assessment of the value of a
Scotiabank Common Share prior to announcement of the
Transaction. TD Securities believes that the volume weighted
average trading prices of the Scotiabank Common Shares over
recent periods are also relevant as they reflect the actual
number of shares traded at various prices over a sustained
period of time. TD Securities understands that Scotiabank and
Dundee Corporation utilized the 20 day VWAP to imply the
value of 0.2497 of a Scotiabank Common Share in their
negotiations and in the press release announcing the
Transaction. Based upon the foregoing, TD Securities selected a
value range of $13.50 to $13.66 for the contribution to the
value of the Consideration of 0.2497 of a Scotiabank Common
Share.
Contribution
to Value of $5.00 Cash or Scotiabank Reset Preferred
Shares
Pursuant to the Offer, Shareholders can elect to receive either
(i) $5.00 in cash, or (ii) 0.2 of a Scotiabank Reset
Preferred Share for each Common Share tendered as part of the
Offer Consideration received. TD Securities notes that
DundeeWealth Shareholders other than the
Locked-Up
Shareholders will have no restriction on the amount of cash they
can elect to receive and has therefore reflected $5.00 in its
analysis as the contribution of this component of the
Consideration to the value of the Consideration. TD Securities
expresses no view on the market trading value of the
Member of TD Bank Financial Group
B-25
Scotiabank Reset Preferred Shares and makes no recommendation as
to whether any individual Shareholder should elect to receive
$5.00 in cash or 0.2 of a Scotiabank Reset Preferred Share for
any Common Shares such Shareholder may choose to tender to the
Offer.
Valuation
of the Consideration Summary
The following is a summary of the range of market trading value
of the components of the Consideration and the resulting total
value of the Consideration:
|
|
|
|
|
|
|
|
|
Component of
Consideration
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Low
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|
|
High
|
|
|
0.2497 of a Scotiabank Common Share
|
|
$
|
13.50
|
|
|
$
|
13.66
|
|
$5.00 Cash or 0.2 of a Scotiabank Reset Preferred Share
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5.00
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|
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5.00
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DundeeWealth Special Distribution Consideration
|
|
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2.00
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|
|
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2.00
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One DCM Share
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|
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0.50
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|
|
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0.60
|
|
|
|
|
|
|
|
|
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Total
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$
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21.00
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|
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$
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21.26
|
|
|
|
|
|
|
|
|
|
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Valuation
of the Consideration Conclusion
Based upon and subject to the foregoing, TD Securities is of the
opinion that, as of November 21, 2010, the value of the
Consideration is in the range of $21.00 to $21.25 per Common
Share.
Fairness
Opinion
Approach
to Fairness
In considering the fairness of the Consideration to be received
by the DundeeWealth Shareholders, other than the
Locked-Up
Shareholders, in connection with the Transaction, TD Securities
principally considered and relied upon:
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|
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1.
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a comparison of the value of the Consideration to the fair
market value of the Common Shares as determined in the
Valuation; and
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|
2.
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a comparison of the premiums implied by the Consideration to the
trading prices of the Common Shares prior to announcement of the
Transaction to the premiums implied by selected precedent
transactions involving mutual fund companies and selected
acquisition of remaining interest transactions.
|
Comparison
of the Value of the Consideration to the Fair Market Value of
the Common Shares
The value of the Consideration to be received by the
Shareholders, other than the
Locked-Up
Shareholders, in connection with the Transaction is within the
range of fair market value of the Common Shares as at
November 21, 2010, as determined by TD Securities in the
Valuation.
Comparison
of Implied Premiums
TD Securities calculated the premiums implied by the value of
the Consideration determined in the Valuation to the trading
prices of the Common Shares prior to announcement of the
Transaction and compared such premiums to the premiums implied
by selected precedent transactions involving Canadian mutual
fund companies and selected acquisition of remaining interest
transactions. TD Securities considered premiums calculated based
on the following periods: (i) closing price one day prior
to the announcement, (ii) closing price one week prior to
announcement, and (iii) closing price four weeks prior to
announcement.
Member of TD Bank Financial Group
B-26
The following is a summary of the premiums implied by the
selected precedent transactions involving Canadian mutual fund
companies and the selected acquisition of remaining interest
transactions compared to the premiums implied by the value of
the Consideration:
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|
|
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|
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|
|
|
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|
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Premium
|
|
|
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1 Day
|
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1 Week
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|
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4 Weeks
|
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Precedent Transactions Involving Canadian Mutual
Fund Companies
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
|
|
|
5.5
|
%
|
|
|
3.3
|
%
|
|
|
(1.4
|
%)
|
Median
|
|
|
11.3
|
%
|
|
|
16.1
|
%
|
|
|
10.1
|
%
|
High
|
|
|
52.1
|
%
|
|
|
55.8
|
%
|
|
|
97.4
|
%
|
Average
|
|
|
19.4
|
%
|
|
|
20.3
|
%
|
|
|
29.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Remaining Interest Transactions
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
|
|
|
2.8
|
%
|
|
|
2.7
|
%
|
|
|
(3.8
|
%)
|
Median
|
|
|
21.2
|
%
|
|
|
22.8
|
%
|
|
|
23.8
|
%
|
High
|
|
|
53.4
|
%
|
|
|
54.5
|
%
|
|
|
55.9
|
%
|
Average
|
|
|
20.1
|
%
|
|
|
23.0
|
%
|
|
|
24.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums Implied by the Value of the Consideration
|
|
|
|
|
|
|
|
|
|
|
|
|
Low – $21.00
|
|
|
7.9
|
%
|
|
|
15.1
|
%
|
|
|
29.6
|
%
|
High – $21.25
|
|
|
9.1
|
%
|
|
|
16.4
|
%
|
|
|
31.2
|
%
|
|
|
(1)
|
Based on 7 precedent transactions since January 1, 2000,
identified by TD Securities involving a public Canadian mutual
fund company target.
|
(2)
|
Based on 20 precedent transactions since January 1, 2000,
identified by TD Securities in which an acquiror owning at least
10% of a target successfully acquired the remaining interest in
the target held by public shareholders and where the implied
equity value of the target was greater than $1 billion.
|
The range of premiums identified in the 27 transactions
considered is very wide. Although each transaction had its own
particular circumstances and TD Securities did not consider any
specific transaction to be directly comparable to the
Transaction, TD Securities believes that the transactions
considered, in the aggregate, provide a useful comparison
benchmark. TD Securities noted that the one day and one week
premiums implied by the value of the Consideration are generally
in the low end of the range while the four week premiums are
consistent with the middle of the range of the premiums implied
by the selected precedent transactions involving Canadian mutual
fund companies and selected acquisition of remaining interest
transactions.
Fairness
Opinion Conclusion
Based upon and subject to the foregoing, TD Securities is of the
opinion that, as of November 21, 2010, the Consideration to
be received by the Shareholders, other than the
Locked-Up
Shareholders, in connection with the Transaction is fair, from a
financial point of view, to such Shareholders.
Yours very truly,
TD SECURITIES INC.
Member of TD Bank Financial Group
B-27
The Depositary for the Offer is:
COMPUTERSHARE INVESTOR SERVICES INC.
|
|
|
For Delivery by Mail:
|
|
For Delivery by Registered Mail, Courier or by Hand:
|
|
|
|
P.O. Box 7021
31 Adelaide Street East
Toronto, Ontario M5C 3H2
Attention: Corporate Actions
|
|
100 University Avenue, 9th Floor
Toronto, Ontario M5J 2Y1
Attention: Corporate Actions
|
Toll Free:
1-800-564-6253
International: 1-514-982-7555
E-mail:
corporateactions@computershare.com
The Information Agent for the Offer is:
|
|
|
By Mail
|
|
By Registered, by Hand or by Courier
|
|
|
|
The Exchange Tower
130 King Street West, Suite 2950,
P.O. Box 361
Toronto, Ontario
M5X 1E2
|
|
The Exchange Tower
130 King Street West, Suite 2950,
Toronto, Ontario
M5X 1E2
|
North American Toll Free Phone: 1-866-851-9601
E-mail:
contactus@kingsdaleshareholder.com
Facsimile:
416-867-2271
Toll Free Facsimile: 1-866-545-5580
Outside North America, Banks and Brokers Call Collect:
416-867-2272