Exemption Orders (Discretionary)
THE JEAN COUTU GROUP (PJC)
2001 BCSECCOM 165
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief granted from the independent underwriting requirements in connection with a trade in securities on the basis that the Issuer is a "connected issuer" but not a "related issuer" nor a "specified party" as defined in the Draft Multi-Jurisdictional Instrument 33-105 and satisfies the requirements set out in Part 3.
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, QUEBEC 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)
AND
IN THE MATTER OF NATIONAL BANK FINANCIAL INC.
BMO NESBITT BURNS INC.
RBC DOMINION SECURITIES INC.
TD SECURITIES INC.
DESJARDINS SECURITIES INC.
MRRS DECISION DOCUMENT
WHEREAS an application has been received by the Alberta Securities Commission, the British Columbia Securities Commission, the Securities Commission of Newfoundland, the Québec Securities Commission and the Ontario Securities Commission (the “Commissions”) from National Bank Financial Inc. (“NBF”), BMO Nesbitt Burns (“BMO”), RBC Dominion Securities inc. (“RBC”), TD Securities Inc. (“TD”) and Desjardins Securities Inc. (“Desjardins”) (collectively, the “Underwriters”) for a decision pursuant to the Canadian securities legislation (the “Legislation”) of Alberta, British Columbia, Newfoundland, Québec and Ontario (the “Jurisdictions”) that the restrictions against acting as an underwriter with respect to the conflict interest rules contained in the Legislation (“Independent Underwriter Requirement”) shall not apply to the Underwriters in connection with a proposed public offering (the “Offering”) by The Jean Coutu Group (PJC) Inc. (“PJC”) of Class A subordinate voting shares (the “Shares”) 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 Commissions 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 parapharmaceuticals products.
2. PJC is a reporting issuer in all provinces of Canada and its shares are listed for trading on The Toronto Stock Exchange.
3. It is expected that PJC will file on December 18, 2000 a preliminary short form prospectus (the “Preliminary Prospectus”) in order to issue 6 500 000 shares for a consideration of $146 250 000. The prospectus is filed with all securities commissions in Canada under the Mutual Reliance Review System for Prospectuses with Quebec as its designated jurisdiction and intends to file a final short form Prospectus on or about December 27, 2000.
4. The proportionate share of the Offering to be underwritten by each of the Underwriters is as follows:
| Underwriter | Proportionate Share |
 | |
| NBF | 40% |
| Merrill Lynch Canada Inc. (“Merrill”), | 14% |
| Scotia Capital Inc. (“Scotia”) | 14% |
| BMO | 10% |
| RBC | 10% |
| TD | 10% |
| Desjardins | 2% |
| |
6. 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 December 13, 2000, the indebtedness of the Company to such financial institutions under these facilities and term loan was, in the aggregate, approximately $167.8 million. The Company has also guaranteed the reimbursement of certain bank loans contracted by franchisees in an approximate amount of $36.7 million as at December 13, 2000. Furthermore, the Company is committed to purchase equipment held by some of its franchisees pursuant to buyback agreements. As at November 30, 2000, financing related to the equipment amounted to approximately $22.6 million.
7. By virtue of the Loan Facilities, PJC may be considered a connected issuer (as that term is defined in the Proposed Multi-Jurisdictional Instrument 33-105 entitled Underwriting Conflicts (the “Proposed Conflicts Instrument”) of certain of the Underwriters, thus the Underwriters do not comply with the proportionate requirement of the Legislation.
8. PJC is not a “related issuer” of any of the Underwriters as that term is defined in the Proposed Conflicts Instrument nor is PJC a “specified party” as that term is defined in the Proposed Conflicts Instrument.
9. Each of the underwriters including Scotia and Merrill have participated in the drafting of the Prospectus and in the due diligence related to the Offering.
10. PJC is in good financial condition and is not under any immediate financial pressure to complete the Offering.
11. 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 Scotia and Merrill.
12. The net proceeds of the Offering will be applied to working capital for general corporate purposes, including acquisitions. 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.
13. The Underwriters will not benefit in any matter from the Offering other than the payment of their fee in connection with the Offering.
14. 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 Underwriters.
AND WHEREAS pursuant to the Policy 12-201, this Decision Document evidences the decision of each Decision Maker;
AND WHEREAS each Decision Maker is satisfied that conditions or circumstances exist which are required by the Legislation to enable the Decision Maker to make the decision.
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 the Independent Underwriter Requirement shall not apply to the Underwriters in connection with the Offering provided that PJC is not a related issuer, as defined in the Proposed Conflicts Instrument, to the Underwriters at the time of the Offering and is not a specified party, as defined in the Proposed Conflicts Instrument at the time of the Offering.
DATED at Montréal, this 28 day of December, 2000.
Le directeur général et chef de l’explotation,
Me Jacques Labelle