Resolute has been ordered to pay a price 82% higher than what it originally offered for Fibrek.
On November 28, 2011, Resolute announced an unsolicited take-over bid to acquire Fibrek at a price of $1.00 per share with an adjusted value of $0.87, supported by irrevocable hard lock-up agreements with 3 shareholders holding 46.3 % of Fibrek’s shares, one of which was also a shareholder of Resolute
A group of minority shareholders owning collectively 12% of Fibrek exercised their right to dissent from the transaction as provided for at Article 190 of the Canada Business Corporations Act, as the price offered to them by Resolute was not reflective of the fair value of their Fibrek shares.
In a decision dated February 2, 2024, the Quebec Court of Appeal determined the fair value of Fibrek following its hostile takeover by Resolute. The Court of Appeal held that the $0.87 price originally offered by Resolute was not reflective of fair value and ordered Resolute to pay $1.5973 per Fibrek share, which represents an 82% increase in value for the minority shareholders of Fibrek.
The Court of Appeal also dismissed Resolute’s request to reduce the legal interest and indemnity that accrued since August 30, 2012, on the fair value. With interest and legal indemnity, Fibrek’s minority shareholders will receive $2.50 per share, a 184% increase over what Resolute offered the dissenting shareholders originally in 2012.
The Court of Appeal held that the price offered by Resolute did not take into consideration the value of an important contract Fibrek had entered into with Hydro Quebec, which generated significant EBITDA. The Court of Appeal determined that this contract increased the value of Fibrek by $0.80 per share and subtracted $0.08 for environmental liabilities not disputed on appeal and therefore increased the fair value of Fibrek’s shares to 1.5973 per share.
With regards to legal interest and additional indemnity Court of Appeal holds that the trial judge could exercise the discretion conferred upon him pursuant to the Canada Business Corporations Act and granted legal interest and indemnity on the fair value price accruing since 2012. The Court of Appeal dismissed Resolute’s argument that the trial judge should have applied a lower interest rate to the fair value, such as prime lending rates or Resolute’s cost to borrow.
The Trial Judgment
The trial judge had fixed the fair value at $1.99 per share in Fibrek, plus legal interest and additional indemnity accruing as at August 30, 2012, determining that Resolute’s bid price did not reflect fair value.
This case is an important example of the Court’s not wavering to intervene in appraisal remedies to protect the interests of minority shareholders who are expropriated of their shares.
To read the judgment click here: https://canlii.ca/t/k2m59
