proposing to acquire Eveready reasonably be expected to have affected the market's assessment
of Eveready's prospects and, therefore, reasonably be expected to have a significant effect on the
market price of Eveready Shares?
[510] We do not doubt that information that an entity is seriously contemplating the acquisition
by way of take-over, merger or otherwise of a publicly-traded company would generally have a
significant effect on the market price of the target company's securities – were such information
to be publicly disclosed, the market would almost invariably react positively. As the BCSC
noted in Re Bennett, 1996 CarswellBC 3106 (at para. 486), "[t]he market always expects a
premium to be paid for shares to be bought under a take over bid" and "[t]he market would
always expect that the premium would significantly affect the price of the shares." Further, as
noted in Bennett (at para. 489), information about a potential acquisition could very often have a
significant effect on the market price of the target company's securities:
During August and September 1988, the fact Merlo and Doman were having serious discussions
about a merger and the facts regarding the negotiations, including price and timing and other
matters, were all facts that could reasonably be expected to significantly affect the market price of
the Doman shares and, therefore, were material facts within the definition of material fact in
section 1(1) and were material facts in the affairs of Doman Industries under section 68(1)(b) [of
the British Columbia Securities Act]. We already know the effect that the rumours of a take over
had on the market price for Doman shares. It is a reality that information related to take over
negotiations very often could significantly affect the market price of the shares if disclosed to the
market. As a consequence, responsible market participants go to great lengths to ensure
confidentiality about negotiations until they are able to announce a deal. They will keep the group
who have access to information as small as possible. They will watch the trading in the shares
affected, so that they will know immediately of any unusual trading. If there is unusual trading,
and it appears to be related to the negotiations, they then deal with the unfortunate situation where
an announcement may need to be made, notwithstanding that a deal has not been made between
the parties. They will watch who trades the shares affected. Most certainly they would have
alerted all those involved in the negotiations to the provisions of section 68. Sadly, it appears to
us that these negotiations were conducted without these matters in mind.
[511] Accordingly, in our view, news of a publicly-traded company's acquisition by way of
take-over, merger or otherwise would always be a material fact. Similarly, we think it obvious
that news of the real potential for such, whether or not specifying the identity of the potential
acquirer or the potential acquisition price or both, would typically be a material fact. Concerning
the latter, we note that in S.E.C. v. Mayhew, 121 F.3d 44 (2d Cir. 1997) a purchaser of securities
who was given information, but not the specifics, regarding a potential merger was found to
know material information: "Although Mayhew was not given the specific details of the merger,
a lesser level of specificity is required because he knew the information came from an insider
and that the merger discussions were actual and serious." The OSC applied this reasoning in Re
Donnini (2002), 25 OSCB 6225 at para. 152 in finding that the respondent knew material facts –
he "may not have been aware of all the specifics of the negotiation but he knew it was being
undertaken at the highest level . . . he knew that the negotiations were actual and serious".
[512] For these reasons, we are satisfied that the Proposed Acquisition, whether or not
completed, would reasonably be expected to have a significant effect on the market price of
Eveready Shares. This finding, we note, is corroborated by the fact that on 29 April 2009, when
the Proposed Acquisition was first generally disclosed, the price of Eveready Shares increased