Exemption Orders (Discretionary)
THE JEAN COUTU GROUP (PJC) INC.
2001 BCSECCOM 618
Headnote
Mutual Reliance Review System for Exemptive Relief Applications – Issuer is a “connected issuer,” but not a “related issuer,” of the registrants that are to act as underwriters in a proposed distribution of securities of the Issuer – Issuer is not a “specified party” as defined in proposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts – Registrant underwriters exempted from independent underwriter requirements provided that, at the time of the distribution, the issuer is not a “specified party” as defined in the proposed Instrument, and, in the case of each registrant, is not a “related issuer.”
Applicable British Columbia Provisions
Securities Act,R.S.B.C. 1996, c. 418, s. 48
Securities Rules, B.C. Reg. 194/97, s. 78(2)(b)
IN THE MATTER OF THE CANADIAN SECURITIES LEGISLATION OF THE PROVINCES OF ALBERTA, BRITISH COLUMBIA, NEWFOUNDLAND, QUÉBEC AND ONTARIO
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF THE JEAN COUTU GROUP (PJC) INC.
AND
IN THE MATTER OF HOLDING 29527 CANADA LTD.
AND
IN THE MATTER OF NATIONAL BANK FINANCIAL INC.
DESJARDINS SECURITIES INC.
TD SECURITIES INC.
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authority or regulator (the "Decision Makers") in each of the province of Alberta, British Columbia, Newfoundland, Québec and Ontario (the "Jurisdictions") has received an application from National Bank Financial Inc. ("NBF"), Desjardins Securities Inc. ("Desjardins") and TD Securities Inc. ("TD") (collectively, the "Underwriters") for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the restrictions against acting as an underwriter with respect to the conflict interest rules contained in the Legislation (the "Independent Underwriter Requirement") shall not apply to the Underwriters in connection with a proposed public secondary offering (the "Offering") whereby the Underwriters offer to purchase from Holding 29527 Canada Ltd. ("29527") Class A subordinate voting shares (the "Shares") of The Jean Coutu Group (PJC) Inc. ("PJC") by way of a short form prospectus (the "Prospectus") to be filed with all securities commissions in Canada.
AND WHEREAS pursuant to the Mutual Reliance System for Exemptive Relief Applications (the "System"), the Québec Securities Commission is the Principal Regulator for this application.
AND WHEREAS the Underwriters have represented to the Decision Makers that:
1. PJC is a company that was continued under Part IA of the Companies Act (Québec) and its head office is located in Longueuil, Québec. PJC is one of North America's largest organization specializing in the distributions and retailing of pharmaceutical and parapharmaceutical products.
2. PJC is a reporting issuer in all provinces of Canada and its shares are listed for trading on The Toronto Stock Exchange and is not in default of any of the requirements under the Legislation.
3. 29527 is a corporation incorporated under the Canada Business Corporation Act (Canada), directly controlled by Mr. Jean Coutu, and is not a reporting issuer in any provinces of Canada.
4. It is expected that PJC will file on April 25, 2001 a preliminary short form prospectus (the "Preliminary Prospectus") in connection with the Offering of the Shares for a consideration of $62,500,000. The prospectus will be filed will all securities commissions in Canada under the Mutual Reliance Review System for Prospectuses with Québec as its designated jurisdiction and intends to file a final short form Prospectus on or about May 7, 2001.
5. The proportionate share of the Offering to be underwritten by each of the members of the underwriting syndicate is as follows:
| Underwriter | Proportionate Share |
| NBF | 40% |
| BMO Nesbitt Burns Inc. ("BMO") | 15% |
| Desjardins | 15% |
| Merrill Lynch Canada Inc. ("Merrill") | 12% |
| Scotia Capital Inc. ("Scotia") | 12% |
| TD | 6% |
6. NBF is an indirect, wholly-owned subsidiary of the National Bank of Canada, Desjardins is a wholly-owned subsidiary of Desjardins-Laurentian Limited Corporation, an indirect subsidiary of Caisse centrale Desjardins du Québec and TD is a wholly-owned subsidiary of The Toronto-Dominion Bank. National Bank of Canada, Caisse centrale Desjardins du Québec and The Toronto-Dominion Bank are hereinafter referred to as the "Related Banks".
7. PJC currently has credit facilities and a term loan (the "Loan Facilities") with a syndicate of financial institutions which include the Related Banks. As at April 20, 2001, the indebtedness of PJC to such financial institutions under these facilities and term loan was, in the aggregate, approximately $94.93 million. PJC has also guaranteed the reimbursement of certain bank loans contracted by franchisees in an approximate amount of $33.23 million as at April 20, 2001. Furthermore, PJC is committed to purchase equipment held by some of its franchisees pursuant to buyback agreements. As at April 20, 2001, financing related to the equipment amounted to approximately $835,000.
8. By virtue of the Loan Facilities, and as PJC is a related issuer of 29527 (as such term is defined in the Proposed Multi-Jurisdictional Instrument 33-105 entitled Underwriting Conflicts (the "Proposed Conflicts Instrument"), 29527 may be considered a connected issuer (as such term is defined in the Proposed Conflicts Instrument) of certain of the Underwriters, thus the Underwriters do not comply with the proportionate requirement of the Legislation.
9. PJC is not a "related issuer" of any of the Underwriters (as such term is defined in the Proposed Conflicts Instrument) nor is PJC a "specified party" (as such term is defined in the Proposed Conflicts Instrument).
10. 29527 is not a "related issuer" of any of the Underwriters (as such term is defined in the Proposed Conflicts Instrument) nor is 29527 a "specified party" (as such term is defined in the Proposed Conflicts Instrument).
11. Each of the members of the underwriting syndicate, including BMO, Scotia and Merrill, have participated in the drafting of the Prospectus and in the due diligence related to the Offering.
12. PJC is in good financial condition.
13. In connection with the Offering, PJC is neither a "related issuer" nor a "connected issuer", as such terms are defined in the Legislation, in respect of either BMO, Scotia and Merrill.
14. In connection with the Offering, 29527 is neither a "related issuer" nor a "connected issuer", as such terms are defined in the Legislation, in respect of either BMO, Scotia and Merrill.
15. PJC will not receive any proceeds from the sale of the Shares by 29527. The Related Banks did not participate in the decision to make the Offering nor in the determination of the terms of the Offering or the use of proceeds thereof.
16. The Underwriters will not benefit in any matter from the Offering other than the payment of their fee in connection with the Offering.
17. The disclosure required by Schedule C of the Proposed Conflicts Instrument will be contained in the Preliminary Prospectus and in the Prospectus and the certificate in such prospectus will be signed by each of the members of the underwriting syndicate.
AND WHEREAS pursuant to the System, this MRRS Decision Document evidences the decision of each Decision Maker (the "Decision");
AND WHEREAS each Decision Maker is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the Decision has been met;
AND WHEREAS each Decision Maker is being satisfied to do so would not be prejudicial to the public interest;
IT IS THE DECISION by the Decision Maker pursuant to the Legislation that that Independent Underwriter Requirement shall not apply to the Underwriters in connection with the Offering provided that neither PJC nor 29527 is a related issuer, as defined in the Proposed Conflicts Instrument, to the Underwriters at the time of the Offering and that neither PJC nor 29527 is a specified party, as defined in the Proposed Conflicts Instrument, at the time of the Offering .
Dated in Montreal, this 7, day of May, 2001
Le directeur général et chef de l’exploitation,
Jacques Labelle