ALBERTA SECURITIES COMMISSION  
DECISION  
Citation: Re Bison Acquisition Corp., 2021 ABASC 188  
Date: 20211221  
Bison Acquisition Corp. and Brookfield Infrastructure Corporation Exchange  
Limited Partnership  
-and-  
Inter Pipeline Ltd. and Pembina Pipeline Corporation  
Kari Horn  
Panel:  
Tom Cotter  
Timothy Robson  
Danielle Mayhew  
Tracy Clark  
Representation:  
Tonya Fleming  
for Commission Staff  
Shane D'Souza  
Kara Smyth  
John Osler  
Robert Richardson  
William Main  
for Bison Acquisition Corp. and Brookfield  
Infrastructure Corporation Exchange Limited  
Partnership  
Jeffrey Sharpe  
Andrew Sunter  
Paul Chiswell  
Joanne Luu  
for Inter Pipeline Ltd.  
David Tupper  
Alyssa J. Duke  
for Pembina Pipeline Corporation  
Gordon Tarnowsky, Q.C.  
for the Special Committee of the Board of  
Inter Pipeline Ltd.  
5998105.1  
July 9, 2021  
Submissions Completed:  
July 12, 2021  
Date of Oral Decision:  
December 21, 2021  
Date of Written Reasons:  
TABLE OF CONTENTS  
I.  
INTRODUCTION ...............................................................................................................1  
BACKGROUND .................................................................................................................2  
II.  
A.  
Parties and Witnesses...............................................................................................2  
1.  
2.  
3.  
4.  
Brookfield Entities.......................................................................................2  
IPL................................................................................................................2  
Pembina........................................................................................................3  
Staff..............................................................................................................4  
B.  
Submissions and Evidence.......................................................................................4  
III.  
IV.  
CHRONOLOGY OF SIGNIFICANT EVENTS.................................................................4  
PRELIMINARY MATTERS.............................................................................................13  
A.  
B.  
Confidentiality .......................................................................................................13  
Admissibility and Weight of Certain Evidence .....................................................13  
1.  
2.  
Background................................................................................................13  
Arguments of the Parties............................................................................14  
(a)  
(b)  
Brookfield ......................................................................................14  
IPL..................................................................................................15  
3.  
Analysis and Conclusions..........................................................................16  
V.  
THE APPLICATIONS ......................................................................................................18  
A.  
B.  
C.  
The Brookfield Application...................................................................................18  
The IPL Application ..............................................................................................19  
The Pembina Application ......................................................................................21  
VI.  
GENERAL PRINCIPLES .................................................................................................21  
A.  
B.  
C.  
D.  
The ASC's Public Interest Jurisdiction ..................................................................21  
The Business Judgment Rule.................................................................................24  
Swaps.....................................................................................................................24  
The Take-Over Bid Regime...................................................................................25  
1.  
2.  
Overview....................................................................................................25  
2016 Amendments to the Take-Over Bid Regime.....................................26  
(a)  
(b)  
(c)  
(d)  
Relevant 2016 Amendments..........................................................26  
Minimum Initial Deposit Period....................................................26  
Minimum Tender Condition ..........................................................26  
Early Warning Regime ..................................................................26  
3.  
Acquisitions by Offeror During Take-Over Bid........................................27  
E.  
Voting Threshold for a Plan of Arrangement ........................................................28  
VII. THE BROOKFIELD APPLICATION ..............................................................................28  
A. Defensive Tactics General ..................................................................................28  
1.  
2.  
Governing Principles .................................................................................28  
Arguments of the Parties............................................................................29  
(a)  
(b)  
(c)  
Brookfield ......................................................................................29  
IPL and Pembina............................................................................30  
Staff................................................................................................30  
3.  
Brief Conclusion........................................................................................30  
B.  
C.  
D.  
The IPL SRPs.........................................................................................................31  
1.  
Additional Background and Evidence .......................................................31  
(a)  
(b)  
General...........................................................................................31  
Expert Evidence.............................................................................32  
(i)  
(ii)  
Brookfield ..........................................................................32  
IPL......................................................................................33  
2.  
3.  
Applicable Law..........................................................................................33  
Arguments of the Parties............................................................................36  
(a)  
(b)  
(c)  
Brookfield ......................................................................................36  
IPL and Pembina............................................................................37  
Staff................................................................................................38  
4.  
Analysis and Conclusion............................................................................39  
The Break Fee........................................................................................................42  
1.  
Additional Background and Evidence .......................................................42  
(a)  
(b)  
General...........................................................................................42  
Expert Evidence.............................................................................45  
(i)  
(ii)  
Brookfield ..........................................................................45  
IPL......................................................................................47  
2.  
3.  
Applicable Law..........................................................................................48  
Arguments of the Parties............................................................................49  
(a)  
(b)  
(c)  
Brookfield ......................................................................................49  
IPL and Pembina............................................................................50  
Staff................................................................................................53  
4.  
Analysis and Conclusion............................................................................53  
Fairness of the Strategic Review............................................................................55  
1.  
Additional Background and Evidence .......................................................55  
(a)  
(b)  
General...........................................................................................55  
Expert Evidence.............................................................................56  
(i)  
(ii)  
Brookfield ..........................................................................56  
IPL......................................................................................56  
2.  
3.  
Applicable Law..........................................................................................57  
Arguments of the Parties............................................................................57  
(a)  
(b)  
Brookfield ......................................................................................57  
IPL..................................................................................................59  
4.  
Analysis and Conclusion............................................................................61  
VIII. THE IPL APPLICATION AND THE PEMBINA APPLICATION.................................63  
A. Additional Legal Principles ...................................................................................63  
1.  
CSA Proposals and Amendments..............................................................63  
(a)  
(b)  
(c)  
History............................................................................................63  
Puri's Comments ............................................................................65  
Mitts' Comments............................................................................65  
2.  
Sears Decision ...........................................................................................66  
(a)  
(b)  
(c)  
History............................................................................................66  
Puri's Comments ............................................................................67  
Mitts' Comments............................................................................67  
3.  
4.  
Empty Voting and Hidden Ownership.......................................................68  
(a)  
(b)  
(c)  
Overview........................................................................................68  
Puri's Comments ............................................................................68  
Mitts' Comments............................................................................68  
Materiality..................................................................................................68  
B.  
Additional Background and Evidence ...................................................................70  
1.  
2.  
3.  
4.  
5.  
6.  
7.  
Swap Agreements ......................................................................................70  
IPL Swap Disclosure to IPL ......................................................................70  
IPL Swap Public Disclosure and Associated Concerns.............................71  
BMO's Swap Activities..............................................................................76  
BMO NB's Engagement as Financial Advisor ..........................................76  
Puri Report.................................................................................................76  
Mitts Report ...............................................................................................77  
(a)  
(b)  
Scope..............................................................................................77  
US Decision in CSX.......................................................................77  
C.  
D.  
Arguments of the Parties........................................................................................78  
1.  
2.  
3.  
IPL and Pembina........................................................................................78  
Brookfield ..................................................................................................80  
Staff............................................................................................................80  
Analysis..................................................................................................................81  
1.  
Hidden Ownership and Empty Voting.......................................................81  
(a)  
(b)  
Hidden Ownership .........................................................................81  
Empty Voting.................................................................................81  
2.  
Effect of Hidden Ownership and Empty Voting........................................82  
(a)  
(b)  
EWR Disclosure.............................................................................82  
General Disclosure of IPL Swaps..................................................83  
(i)  
(ii)  
Background........................................................................83  
Context...............................................................................83  
(iii) Discussion..........................................................................85  
(A)  
Disclosure Brookfield Offer, IPL Shareholder  
Letters ....................................................................85  
Disclosure June 4 News Release.........................86  
Disclosure Relationship with BMO....................86  
(B)  
(C)  
(c)  
(d)  
Clearly Abusive .............................................................................88  
(i)  
(ii)  
Entire Context....................................................................88  
EWR Threshold .................................................................88  
(iii) Brookfield's Disclosure Generally.....................................90  
"Animating Principles" ..................................................................91  
E.  
F.  
Conclusion .............................................................................................................91  
Remedies for Disclosure Contraventions and Clearly Abusive Behaviour...........91  
1.  
2.  
3.  
General.......................................................................................................91  
Jurisdiction under Sections 179 and 198 of the Act ..................................91  
Orders Sought ............................................................................................92  
(a)  
Proposed Voting Order ..................................................................92  
(i) Arguments of the Parties....................................................92  
(A) IPL and Pembina....................................................92  
(B)  
(C)  
Brookfield ..............................................................93  
Staff........................................................................93  
(ii)  
Analysis..............................................................................93  
(iii) Conclusion .........................................................................93  
Proposed Brookfield Offer CTO....................................................93  
(b)  
(c)  
(d)  
(i)  
Arguments of the Parties....................................................93  
(A)  
(B)  
(C)  
IPL and Pembina....................................................93  
Brookfield ..............................................................93  
Staff........................................................................94  
(ii)  
Analysis..............................................................................94  
(iii) Conclusion .........................................................................94  
Proposed Disclosure Order ............................................................94  
(i)  
Arguments of the Parties....................................................94  
(A)  
(B)  
(C)  
IPL and Pembina....................................................94  
Brookfield ..............................................................95  
Staff........................................................................95  
(ii)  
Analysis..............................................................................96  
(iii) Conclusion .........................................................................97  
Proposed Minimum Tender Order.................................................98  
(i)  
Arguments of the Parties....................................................98  
(A)  
(B)  
(C)  
IPL and Pembina....................................................98  
Brookfield ..............................................................98  
Staff........................................................................98  
(ii)  
Analysis..............................................................................98  
(iii) Conclusion .......................................................................101  
IX.  
ORDER............................................................................................................................101  
1
I.  
[1]  
INTRODUCTION  
On July 9, 2021, we held a hearing (the Hearing) of three applications seeking orders under  
the Securities Act (Alberta) (the Act):  
a June 9, 2021 application (the Brookfield Application) by Bison Acquisition  
Corp. (Bison) and Brookfield Infrastructure Corporation Exchange Limited  
Partnership (BICELP) (Bison and BICELP are two of the several entities relevant  
to this matter that are connected to Brookfield Asset Management Inc. (BAM); we  
refer to all of those connected entities collectively as Brookfield);  
a June 18, 2021 cross-application (the IPL Application) by Inter Pipeline Ltd.  
(IPL); and  
a June 18, 2021 cross-application (the Pembina Application) by Pembina Pipeline  
Corporation (Pembina).  
[2]  
We refer to the Brookfield Application, the IPL Application, and the Pembina Application  
collectively as the Applications.  
[3]  
The Applications were made in connection with:  
an unsolicited take-over bid for the common shares of IPL (the IPL Shares) made  
by Brookfield on February 22, 2021 and varied on June 4 and June 21, 2021  
(respectively, the February 22 Offer, the June 4 Offer, and the June 21 Offer;  
and, collectively, the Brookfield Offer);  
provisions in IPL's May 8, 2017 shareholder rights plan, as reconfirmed by IPL  
shareholders on May 7, 2020 (the First SRP), and provisions in IPL's  
March 31, 2021 supplemental shareholder rights plan (the Supplemental SRP;  
and, together with the First SRP, the IPL SRPs);  
a May 31, 2021 plan of arrangement agreement between IPL and Pembina (the  
Pembina Arrangement), which included a termination fee of $350 million (the  
Break Fee) payable by IPL to Pembina in certain circumstances if the arrangement  
failed to proceed; and  
certain cash-settled total return swaps (Swaps) referencing IPL Shares  
(collectively, the IPL Swaps), entered into between Brookfield as swap investor  
and Bank of Montreal as swap dealer between June and October 2020. Bank of  
Montreal was not identified in any Brookfield disclosure of the IPL Swaps as of the  
date of the Hearing, and was referred to only as an unnamed "ISDA swap dealer"  
(ISDA is the International Swaps and Derivatives Association, Inc.). We use the  
term BMO to refer to various Bank of Montreal entities, including Bank of  
Montreal, BMO Nesbitt Burns Inc. (BMO NB), and BMO Capital Markets (BMO  
CM). According to the evidence, BMO CM is a trade name, which includes BMO  
and BMO NB. We do not differentiate among these unless stated otherwise.  
 
2
[4]  
On July 12, 2021, we delivered an oral ruling (the Oral Ruling) dismissing the Brookfield  
Application and granting certain relief under the IPL Application and the Pembina Application, as  
set out in an order of the same date cited as Re Bison Acquisition Corp., 2021 ABASC 107 (the  
Order). These are our reasons for the Oral Ruling and Order.  
II.  
A.  
BACKGROUND  
Parties and Witnesses  
1.  
Brookfield Entities  
[5]  
As noted, several connected Brookfield entities were relevant or mentioned in the evidence.  
We do not differentiate among them, unless stated otherwise.  
[6]  
Bison is an Alberta corporation and BICELP is an Alberta limited partnership. Each was  
established for the purpose of making the Brookfield Offer.  
[7]  
Brookfield acquired IPL Shares between March and October 2020. At the time of the  
February 22 Offer, Brookfield beneficially owned and exercised control and direction over  
41,848,857 IPL Shares, or approximately 9.75% of the 429,219,175 IPL Shares issued and  
outstanding as of February 19, 2021.  
[8]  
As of February 22, 2021, Brookfield also had economic exposure to 42,492,698 IPL Shares  
(the Swap Shares), or approximately 9.9% of the IPL Shares, through the IPL Swaps. The  
Brookfield Offer stated that Brookfield had no "right to vote, or direct or influence the voting,  
acquisition, or disposition of" any Swap Shares held by the swap dealer, and that "no person acting  
jointly or in concert with [Bison] beneficially owns or exercises control or direction over any  
securities of IPL".  
[9]  
Brian Baker (Baker) is a Managing Partner and Chief Investment Officer with Brookfield  
Infrastructure, which is BAM's "infrastructure investment management business". He was  
Brookfield's primary fact witness and swore two affidavits that were tendered into evidence at the  
Hearing: one dated June 17, 2021 (the Baker Affidavit) and one dated June 25, 2021. He was  
cross-examined on his affidavits on June 28, 2021.  
[10] Brookfield retained James Osler (Osler) to provide expert opinion evidence. He is one of  
the founding principals of Origin Merchant Partners, which was described as an independent  
Canadian financial advisory firm. He has approximately 27 years of experience in investment  
banking, including experience advising on large corporate transactions. Osler swore an affidavit  
on June 16, 2021 that appended his expert report dated June 16, 2021. Osler was cross-examined  
on his affidavit on June 28, 2021.  
2.  
IPL  
[11] At the time of the Hearing, IPL was an Alberta corporation in the petroleum transportation  
and natural gas liquids processing business. It owned and operated certain western Canadian  
energy infrastructure assets, including the Heartland Petrochemical Complex (the HPC). The HPC  
was described as North America's first integrated propane dehydrogenation and polypropylene  
facility that would convert propane into higher-value polypropylene.  
       
3
[12] The IPL Shares were listed and posted for trading on the TSX.  
[13] The evidence at the Hearing included an affidavit sworn by Margaret McKenzie  
(McKenzie) on June 22, 2021. During the time relevant to the Applications, McKenzie was an  
independent director and chair of IPL's board of directors (the IPL Board), as well as chair of the  
IPL Board's Special Committee (the Special Committee) formed in February 2021 to undertake  
a strategic review of IPL's options (the Strategic Review) and assist in responding to the  
Brookfield Offer. She was cross-examined on her affidavit on June 27, 2021.  
[14] William Quinn (Quinn) is the Executive Managing Director and Co-Head of Mergers and  
Acquisitions at TD Securities Inc. (TD Securities), which the IPL Board retained as its financial  
advisor in November 2020. Quinn was a senior member of the TD Securities advisory team that  
worked on this matter, and swore an affidavit on June 22, 2021 (the Quinn Affidavit).  
[15] Andrew Castaldo (Castaldo) is a Managing Director in the Global Mergers and  
Acquisitions, North America Group at J.P. Morgan Securities LLC, with authority to act on behalf  
of certain affiliates including J.P. Morgan Securities Canada Inc. (collectively, J.P. Morgan). The  
Special Committee retained J.P. Morgan as its financial advisor effective February 18, 2021, and  
Castaldo was the lead J.P. Morgan mergers and acquisitions (M&A) professional involved. He  
swore an affidavit on June 22, 2021 (the Castaldo Affidavit).  
[16] In addition to these fact witnesses, IPL retained two expert witnesses: Cameron Plewes  
(Plewes) and Poonam Puri (Puri), each of whom swore an affidavit on June 22, 2021 (the Plewes  
Affidavit and the Puri Affidavit, respectively).  
[17] Plewes is the president of Peters & Co. Limited, described as an independent investment  
dealer that specializes in investments in the Canadian energy industry. He is a Chartered  
Accountant, Chartered Financial Analyst, and Chartered Business Valuator, and indicated that he  
has been involved in numerous M&A transactions.  
[18] Puri is a professor at Osgoode Hall Law School, where she teaches corporate and securities  
law. Among other qualifications, she is the co-founder and Academic Director of an investor  
protection clinic that provides pro bono legal advice to investors, a former director and Head of  
Policy and Research at the University of Toronto's Capital Markets Institute, director of several  
public companies, and a former commissioner of the Ontario Securities Commission (the OSC).  
[19] Quinn, Castaldo, and Plewes were each cross-examined on their affidavits on  
June 27, 2021. Puri was not subject to cross-examination.  
3.  
Pembina  
[20] Pembina is an Alberta corporation that provides pipeline and midstream services and owns  
various facilities and infrastructure. Its common shares (the Pembina Shares) are listed and posted  
for trading on the TSX and the NYSE. Like IPL, Pembina's business includes the transportation,  
storage, and processing of natural gas.  
 
4
[21] Pembina's fact witness was J. Scott Burrows (Burrows), who swore an affidavit on  
June 22, 2021. He is Pembina's Senior Vice-President and Chief Financial Officer, and oversees  
Pembina's financial operations, corporate planning, capital market financings, and corporate  
development, including M&As.  
[22] Pembina's expert witness was Joshua Mitts (Mitts), an associate professor at Columbia  
Law School and the principal of M Analytics LLC, a financial economics consulting firm in New  
York. His June 22, 2021 affidavit appended his expert report of the same date (the Mitts Report).  
[23] Burrows and Mitts were cross-examined on their affidavits on June 24 and June 25, 2021,  
respectively.  
4.  
Staff  
[24] Staff (Staff) of the Alberta Securities Commission (the ASC) Corporate Finance division  
participated in the Hearing process but did not introduce any evidence.  
B.  
Submissions and Evidence  
[25] All of the aforementioned affidavits and cross-examination transcripts were entered into  
evidence at the Hearing with the exception of the Puri Affidavit, which is addressed later in these  
reasons. A June 25, 2021 affidavit sworn by a litigation clerk employed at the office of Brookfield's  
counsel and attaching certain documentation was also admitted into evidence, as were the  
undertaking responses from Baker's cross-examination.  
[26] Since there was no viva voce evidence led at the Hearing, all references in these reasons to  
a witness's cross-examination are references to cross-examinations on affidavits.  
[27] In addition to the evidence, we received written submissions from counsel for Brookfield,  
IPL, Pembina, and Staff. We heard oral submissions at the Hearing from the same parties, as well  
as from counsel for the Special Committee.  
III.  
CHRONOLOGY OF SIGNIFICANT EVENTS  
[28] The background facts of this matter were complex and involved numerous significant  
dates. For convenience we set them out in the form of a chronology of significant events.  
March 2020  
Brookfield identified IPL as an investment opportunity and  
began acquiring IPL Shares on the TSX  
April 24, 2020  
Brookfield (through two limited partnerships) executed two IPL  
Swap agreements with BMO (together, the Swap Agreements)  
(although no transactions occurred under the agreements until  
June 2020)  
June 2020  
Brookfield reached an ownership position of approximately 9%  
of the issued and outstanding IPL Shares, then began entering  
into IPL Swaps under the Swap Agreements for "further  
economic exposure" to IPL  
     
5
June 15, 2020  
Brookfield's first IPL Swaps with BMO were confirmed pursuant  
to two letter agreements on BMO CM letterhead (together, the  
IPL Swap Letter Agreements)  
Baker spoke with IPL's Vice-President, Corporate Development,  
Spil Kousinioris (Kousinioris); they had a general discussion  
regarding IPL and the HPC, and Baker suggested a follow-up  
discussion in early autumn  
June 18, 2020  
Brookfield's combined beneficial ownership of IPL Shares  
(39,917,357) and economic exposure to IPL Shares through the  
IPL Swaps (3,424,900) exceeded 10% (10.098%) of the total  
issued and outstanding IPL Shares (429,219,175)  
September 11, 2020 Baker and another Brookfield executive, Paul Hawksworth  
(Hawksworth), met with Kousinioris and IPL's President and  
Chief Executive Officer, Christian Bayle (Bayle), to discuss  
Brookfield's business, energy infrastructure trends, and  
challenges facing IPL  
October 5, 2020  
Brookfield stopped entering into IPL Swaps  
November 4, 2020  
Baker and Hawksworth met with Bayle and Kousinioris again;  
according to Baker, they told Bayle and Kousinioris that  
Brookfield was a significant shareholder of IPL, had additional  
economic exposure through the IPL Swaps, and was interested  
in "exploring a potential strategic acquisition of IPL"  
McKenzie confirmed that IPL first learned of Brookfield's  
interest in an acquisition on November 4, 2020, but stated that  
Bayle and Kousinioris did not remember Brookfield mentioning  
the IPL Swaps during their meeting, and that the IPL Board did  
not hear about the IPL Swaps until December  
November 5, 2020  
Baker called Kousinioris to offer another meeting and was told  
that Brookfield should submit a written expression of interest for  
the IPL Board to consider  
November 11, 2020 Brookfield sent IPL a letter confirming Brookfield's interest in  
exploring a potential strategic transaction and reiterating that  
Brookfield was one of IPL's largest investors  
November 18, 2020 Baker and another Brookfield executive, Sam Pollock (Pollock),  
spoke with Bayle and Richard Shaw, Q.C. (Shaw), McKenzie's  
predecessor as chair of the IPL Board; Bayle and Shaw asked  
6
Brookfield to send "an indicative non-binding proposal" to the  
IPL Board for consideration  
November 27, 2020 Brookfield sent a non-binding proposal (the November  
Proposal) to IPL that contemplated a consensual take-private  
acquisition whereby Brookfield would acquire all IPL Shares at  
a value of $17.00 to $17.50 per IPL Share (payable in cash and  
up to 10% in Brookfield Infrastructure Corporation (BIPC)  
shares (the BIPC Shares), which are listed and posted for trading  
on the TSX and the NYSE)  
The November Proposal attached a term sheet that indicated the  
deal would be subject to "customary, market terms, including  
(i) standard break-fee and reverse break-fee provisions, (ii) an  
agreed-upon go-shop mechanic, and (iii) other customary deal  
protections"; it did not mention the size of Brookfield's interest  
in IPL  
After receiving the November Proposal, the IPL Board retained  
counsel and TD Securities for legal and financial advice,  
respectively  
December 1, 2020  
Effective December 1, 2020, Brookfield engaged BMO NB as its  
financial advisor for the possible acquisition of IPL; the  
engagement was confirmed in a letter agreement on BMO CM  
letterhead dated January 27, 2021 (the BMO Engagement  
Letter), which provided for a $15 million completion fee  
payable to BMO NB on Brookfield's acquisition of IPL (the  
BMO Completion Fee)  
December 11, 2020  
December 18, 2020  
Call among Bayle, Shaw, Baker, and Pollock; IPL indicated that  
the value of the November Proposal was too low, but that it was  
open to further discussions at a higher value  
According to McKenzie, IPL first learned of the IPL Swaps  
during a conversation between Baker and Bayle  
Brookfield sent a revised non-binding proposal (the December  
Proposal) to IPL increasing the consideration to $18.25 per IPL  
Share (payable in cash and up to 20% in BIPC Shares), which  
represented a premium of 40% to 50% over the TSX trading  
prices for IPL Shares  
The December Proposal referred to Brookfield "as a shareholder  
with an economic interest in IPL of near 20%", and attached a  
7
term sheet with the same "customary, market terms" as the  
November Proposal  
January 8, 2021  
Call among Bayle, Shaw, Baker, and Pollock; IPL indicated that  
it was unwilling to have further discussions at the value set out  
in the December Proposal, and suggested that Brookfield meet  
with TD Securities to discuss Brookfield's valuation assumptions  
January 12, 2021  
January 25, 2021  
Baker, Hawksworth, and another Brookfield executive spoke to  
a representative from TD Securities regarding Brookfield's  
valuation assumptions  
IPL sent a letter to Brookfield stating that IPL would not move  
forward based on the December Proposal valuation and wanted  
a pre-emptive offer of $24 or more per IPL Share (the closing  
price for IPL Shares on the TSX that day was $13.36)  
January 27, 2021  
Bayle said that Baker told him Brookfield would respond to IPL's  
January 25 letter by the end of the next week or early the week  
following  
According to Baker, Brookfield concluded that IPL "had no  
serious intention of engaging with us", and began considering an  
unsolicited take-over bid  
February 10, 2021  
Pollock called Shaw and told him Brookfield thought the IPL  
Board was not meaningfully engaging with the December  
Proposal and that IPL shareholders deserved to know about it  
Brookfield issued a news release announcing its intention to  
make the February 22 Offer; McKenzie said that this news  
release was the first time Brookfield publicly mentioned its  
"aggregate economic interest" in IPL of 19.65%  
February 12, 2021  
February 18, 2021  
The IPL Board established the Special Committee comprised of  
IPL's independent directors  
IPL issued a news release announcing the Special Committee and  
IPL's commencement of the Strategic Review  
The Special Committee retained J.P. Morgan as its financial  
advisor  
February 22, 2021  
Brookfield made the February 22 Offer, at $16.50 cash or 0.206  
of a BIPC Share per IPL Share, each subject to proration based  
8
on a maximum of 76.2% cash ($4.9 billion) and 23.8% (or  
19,040,258) BIPC Shares; open for acceptance until June 7, 2021  
IPL issued a news release urging IPL shareholders not to take  
action regarding the February 22 Offer until the conclusion of the  
Strategic Review  
February 25, 2021  
Pembina's board of directors (the Pembina Board) met and  
discussed IPL's Strategic Review and a potential acquisition of  
certain IPL assets  
"early March 2021" Bayle and Pembina's Chief Executive Officer, Michael Dilger  
(Dilger), had preliminary discussions about a possible  
transaction  
March 7, 2021  
At a Special Committee meeting, TD Securities and J.P. Morgan  
gave their opinions that the February 22 Offer was inadequate  
Pembina asked IPL if it would agree to a break fee if a superior  
offer were provided  
March 9, 2021  
IPL filed a Directors' Circular dated March 8, 2021 (the March  
8 Directors' Circular), which recommended that IPL  
shareholders reject the February 22 Offer; it also called on  
Brookfield to make public disclosure of certain particulars  
concerning the IPL Swaps  
March 31, 2021  
April 10, 2021  
The IPL Board adopted the Supplemental SRP  
Dilger and the Pembina Board's chair, Randall Findlay  
(Findlay), had a call with Bayle and McKenzie; they discussed  
a potential all-share transaction whereby Pembina would acquire  
either all of IPL, or 100% of IPL's natural gas liquids (NGL)  
business and a partial interest in the HPC  
April 13, 2021  
April 15, 2021  
Brookfield sent a letter to IPL in an attempt to re-start discussions  
Dilger emailed IPL proposing that Pembina acquire a partial  
interest in the HPC and either 100% of IPL's NGL business or  
certain other assets  
April 20, 2021  
IPL sent a letter in response to Brookfield's April 13  
correspondence stating that while Brookfield's offers to date did  
not reflect fair value, IPL was open to Brookfield participating in  
the Strategic Review and submitting an improved offer; IPL also  
said that to receive non-public information about IPL, Brookfield  
9
would have to sign a non-disclosure agreement (the Definitive  
NDA) including standstill protections, as all other interested  
parties in receipt of IPL's non-public information had done  
April 21, 2021  
April 26, 2021  
Bayle told Dilger that IPL was not interested in Pembina's  
April 15 proposal, but was open to an en bloc bid  
BMO NB's Bradley Wells (Wells) advised Baker that the Special  
Committee's advisors told him that Brookfield would have to  
sign a preliminary NDA (the Pre-NDA) to govern negotiations  
of the Definitive NDA, and that the Definitive NDA would have  
to include a condition that Brookfield would not revoke or  
increase the consideration in the February 22 Offer without the  
Special Committee's approval  
According to McKenzie, TD Securities and J.P. Morgan offered  
to send Brookfield's advisors the proposed form of agreements,  
but Wells told them not to  
April 28, 2021  
April 29, 2021  
Brookfield issued a news release stating that IPL was not  
engaging in a manner that would allow Brookfield to be part of  
the Strategic Review, and that IPL was seeking unreasonable  
conditions for accessing due diligence information  
IPL issued a news release stating that Brookfield declined to  
receive a non-disclosure agreement and negotiate customary  
terms; it also stated that IPL would provide an update on the  
Strategic Review before the February 22 Offer expired on  
June 7, 2021  
May 10 or 11, 2021 Brookfield and IPL agreed to a Pre-NDA  
May 12 or 13, 2021 Brookfield and IPL executed a Definitive NDA  
May 14, 2021  
May 18, 2021  
Brookfield accessed IPL's data room  
Pembina engaged Scotia Capital as its financial advisor for a  
potential IPL acquisition and told IPL that Pembina was  
interested in acquisition via an all-share transaction  
May 19, 2021  
Dilger and Findlay advised McKenzie and Bayle that Pembina  
was authorized to pursue an all-share acquisition of IPL at a value  
of $18.00 per IPL Share  
Pembina entered into a confidentiality agreement with IPL to  
access IPL's data room; the agreement included a standstill  
10  
provision; after it was executed, Pembina commenced due  
diligence  
May 20, 2021  
May 25, 2021  
IPL entered into a reciprocal confidentiality agreement with  
Pembina to access Pembina's data room  
Pembina and IPL began to negotiate an all-share transaction  
under s. 193 of the Business Corporations Act (Alberta) (the  
ABCA); Pembina sought a $400 million break fee  
Brookfield made a revised proposal to IPL that included an  
option for IPL shareholders to continue to hold an interest in the  
HPC through a proposed separate Brookfield entity (the HPC  
GrowthCo)  
May 26, 2021  
The Special Committee met to consider the Pembina and  
Brookfield proposals, and decided neither one was in the best  
interests of IPL's shareholders  
Pembina made a management presentation to IPL; IPL advised  
that Pembina's proposal was not in IPL's best interests, but  
negotiations continued  
May 28, 2021  
May 29, 2021  
IPL proposed a reciprocal break fee of $300 million to Pembina  
Brookfield representatives had meetings with IPL  
representatives to discuss the HPC and the merits of the proposed  
BIPC Share consideration  
Baker and other Brookfield representatives had a call with  
McKenzie and other IPL representatives to discuss the HPC  
GrowthCo proposal; according to Baker, Brookfield got the  
strong impression that the IPL Board was not interested  
Pembina proposed a break fee of $350 million and IPL proposed  
a reciprocal break fee in the same amount; Burrows, Dilger, and  
Findlay presented a revised offer to the Special Committee (the  
Revised Pembina Offer) at a value of approximately $18.80 per  
IPL Share  
May 30, 2021  
McKenzie asked Pembina for further improvements to its offer,  
including confirmation that monthly dividends would be raised,  
the exchange ratio would be increased to 0.505 of a Pembina  
Share per IPL Share, and a break fee of $250 million to  
$300 million payable to IPL would be included  
11  
Pembina revised its proposal by increasing the dividend,  
increasing the exchange ratio to 0.49325 (the mid-point between  
the 0.4815 Pembina proposed and the 0.505 IPL requested), and  
agreeing to a break fee of $300 million; the Special Committee  
met and agreed to continue discussions with Pembina to improve  
the Revised Pembina Offer even further  
According to Baker, McKenzie told him and Pollock that another  
bidder had made an en bloc offer and asked for Brookfield's "best  
and final offer"; she suggested that the offer should not reference  
the HPC GrowthCo proposal  
Brookfield made what it described as its "BEST AND FINAL  
OFFER" (original emphasis) at $19.00 or 0.219 of a BIPC Share  
per IPL Share, each subject to proration based on a maximum of  
73% cash ($5.4 billion) and 27% (or 23,000,000) BIPC Shares;  
open for acceptance until 12:00 p.m. EST May 31, 2021 (the  
May 30 Offer)  
The May 30 Offer indicated it would be subject to "[c]ustomary  
Brookfield . . . deal protections"  
May 31, 2021  
Castaldo of J.P. Morgan emailed Baker to advise that the IPL  
Board was still reviewing proposals and needed more time –  
Brookfield therefore extended the deadline for the May 30 Offer  
from 12:00 p.m. to 2:00 p.m. EST; later that day, Brookfield was  
informed that the IPL Board was inclined to accept the  
competing proposal but had not yet agreed to it; Brookfield  
responded that it would make a further improved offer, and sent  
another "BEST AND FINAL OFFER" at $19.50 or 0.225 of a  
BIPC Share per IPL Share, each subject to proration based on a  
maximum of 74% cash ($5.6 billion) and 26% (or 23,000,000)  
BIPC Shares; open for acceptance until 4:00 p.m. EST  
May 31, 2021 (the May 31 Offer)  
The May 31 Offer indicated it would be subject to "[c]ustomary  
Brookfield . . . deal protections"  
Pembina made the Final Pembina Proposal, which increased  
the exchange ratio to 0.50 of a Pembina Share per IPL Share  
(reflecting a value of $19.45 per IPL Share), confirmed the  
dividend increase, and provided for a reciprocal $350 million  
break fee  
The Special Committee met to consider the Final Pembina  
Proposal and Brookfield's May 31 Offer; the Special Committee  
12  
concluded that the Final Pembina Proposal was superior, and  
decided to recommend that the IPL Board approve entering the  
Pembina Arrangement  
Pembina and IPL entered into an exclusivity agreement and  
McKenzie informed Brookfield that IPL had entered exclusive  
negotiations with the competing bidder  
June 1, 2021  
June 2, 2021  
Pembina and IPL executed the Pembina Arrangement and  
announced it in a joint news release  
Brookfield issued a news release announcing its intention to vary  
the February 22 Offer "at a price per IPL [Share] currently valued  
at $19.75" (according to the Baker Affidavit, $19.75 was a  
typographical error the news release should have said $19.74)  
June 3, 2021  
June 4, 2021  
IPL issued a news release acknowledging Brookfield's intention,  
but confirming that it continued to recommend the Pembina  
Arrangement to IPL shareholders  
Brookfield made the June 4 Offer, at $19.50 cash, 0.225 of a  
BIPC Share, or 0.225 of a BICELP limited partnership unit  
(BICELP Unit) per IPL Share, each subject to proration based  
on a maximum of 74% cash ($5.56 billion) and 26% (or  
23,000,000) combined BIPC Shares and BICELP Units; open for  
acceptance until June 22, 2021  
Brookfield issued the Brookfield June 4 News Release  
June 10, 2021  
IPL issued a news release confirming its support for the Pembina  
Arrangement  
IPL filed a notice of change to the March 8 Directors' Circular  
dated June 9, 2021 (the June 9 Directors' Circular), and  
included commentary about the importance of retaining a 28%  
interest in the HPC under the Pembina Arrangement  
Brookfield filed the Brookfield Application  
June 18, 2021  
Brookfield issued a news release announcing its intention to vary  
the June 4 Offer by removing the limit on the cash consideration  
option (thus allowing IPL shareholders to elect 100% cash  
consideration without proration), and by increasing the  
consideration by up to $0.90 per IPL Share if the Break Fee were  
removed or decreased  
13  
IPL filed the IPL Application and Pembina filed the Pembina  
Application  
June 21, 2021  
IPL issued a news release acknowledging Brookfield's  
announcement, but confirming its continued support for the  
Pembina Arrangement  
Brookfield made the June 21 Offer, removing the proration on  
the cash consideration; the BIPC Share and BICELP Unit  
consideration remained the same as in the June 4 Offer; open for  
acceptance until July 13, 2021  
June 23, 2021  
Brookfield filed an application with the ASC seeking an  
exemption from s. 150(1)(b) of the ABCA regarding certain  
proxies solicited in connection with the shareholder vote on the  
Pembina Arrangement; the order was granted by the ASC's  
Corporate Finance division on June 29, 2021 (the Proxy  
Solicitation Order, cited as Re Inter Pipeline Ltd., 2021 ABASC  
100)  
June 25, 2021  
The IPL Board amended the Supplemental SRP so that it expired  
the day after the IPL shareholder vote on the Pembina  
Arrangement  
IV.  
A.  
PRELIMINARY MATTERS  
Confidentiality  
[29] On July 8, 2021, we issued a confidentiality order (the Confidentiality Order) under  
s. 221 of the Act (cited as Re Bison Acquisition Corp., 2021 ABASC 105) concerning certain  
defined Confidential Information that was provided to the ASC for the purposes of the  
Applications and the Hearing.  
[30] Under that order, the Confidential Information will be held in confidence by the ASC until  
otherwise ordered, unless it becomes publicly available by other means or the ASC is required by  
law to disclose it. Additionally, any facts from the Confidential Information included in the written  
submissions of Brookfield, IPL, or Pembina are not protected by the Confidentiality Order.  
B.  
Admissibility and Weight of Certain Evidence  
1. Background  
[31] Before arguing the merits of the Brookfield Application, Brookfield submitted that there  
were two preliminary issues: (i) whether the Puri Affidavit attaching her expert opinion (the Puri  
Report) should be admitted into evidence and, if it were, the weight it should be given; and (ii) the  
weight that should be given to the evidence and opinions of two of IPL's financial advisors,  
Castaldo and Quinn. Brookfield challenged the admissibility of the Puri Affidavit, and suggested  
that Castaldo's and Quinn's evidence should be given little weight.  
       
14  
[32] According to the Puri Report, Puri has significant experience with change of control  
transactions, and has previously testified on issues relating to corporate governance, securities  
regulation, and investor protection in Canada and other jurisdictions. IPL retained her to provide  
expert opinion evidence regarding the IPL Swaps and the Supplemental SRP. She described her  
mandate:  
From a capital markets public policy perspective and investor protection standpoint,  
comment on [Brookfield's] conduct in connection with, and any impact on investors and  
the integrity of the capital markets resulting from, the series of [IPL Swaps] that Brookfield  
. . . entered into with an unknown ISDA swap dealer between June and October 2020, as  
well as [Brookfield's] subsequent take-over bid for IPL and [Brookfield's] public disclosure  
in connection with [the IPL Swaps] and take-over bid; and  
From a capital markets public policy perspective and investor protection standpoint,  
comment on the [Supplemental SRP] that the [IPL Board] approved on March 31, 2021,  
subsequent to [Brookfield's] commencement of its take-over bid, including my views on  
whether the [Supplemental SRP] held, and continues to hold, any benefit to IPL  
shareholders and the integrity of the capital markets more generally.  
[33] While the Castaldo Affidavit and the Quinn Affidavit were accepted into evidence at the  
Hearing as mentioned, the Puri Affidavit was marked as an exhibit for identification only. We  
indicated that we would make our decision on the admissibility of the Puri Affidavit in the course  
of deciding the Applications and include our reasons for that ruling in this written decision.  
2.  
Arguments of the Parties  
[34] Brookfield and IPL were the only parties that made submissions on these issues.  
(a)  
Brookfield  
[35] According to Brookfield, Puri's expert opinion was unnecessary and an improper attempt  
to usurp this panel's role in this proceeding. In addition, Castaldo and Quinn lacked sufficient  
independence to provide reliable opinion evidence.  
[36] Brookfield acknowledged that pursuant to s. 29(f) of the Act, ASC hearing panels are not  
bound by the laws of evidence and have wide discretion as to what evidence to admit and the  
weight it should be given.  
[37] However, Brookfield suggested that when considering an evidentiary issue, there is  
authority for the proposition that ASC panels will generally take into account the policy reasons  
and legal requirements underlying the relevant evidentiary rules.  
[38] Brookfield cited the recent decision in Re Solar Income Fund Inc., 2021 ONSEC 2, and an  
OSC panel's conclusion that expert opinion evidence is presumptively inadmissible in commission  
proceedings unless it is necessary because the subject matter is outside the commission's expertise  
(at para. 55). Brookfield also relied on several past ASC panel decisions in which it was held that  
expert opinion evidence will be given little weight where it purports to reach a conclusion on the  
ultimate issue to be decided, or where it is not based on an independent analysis of the facts (see,  
for example, Re De Gouveia, 2013 ABASC 106 at para. 106 and Re Ironside, 2006 ABASC 1930  
at para. 424, aff'd. sub nom. Ironside v. Alberta (Securities Commission), 2009 ABCA 134).  
   
15  
[39] In light of these authorities, Brookfield submitted that Puri's opinion should not be admitted  
into evidence because we have specialized expertise and are capable of making the necessary  
determinations in this matter without the aid of expert evidence. In Brookfield's view, Puri opined  
on issues in which we are well-versed including public policy in the context of the capital market  
and investor protection and introduced legal argument disguised as opinion evidence. Brookfield  
argued that Puri also went outside the role of an expert witness by giving her opinion as to what  
she believes the law should be concerning two issues relevant to the Applications, equity interests  
and beneficial share ownership.  
[40] Brookfield took issue with the Castaldo Affidavit and the Quinn Affidavit because they  
were submitted as fact affidavits, and in Brookfield's assessment, their content was more akin to  
expert opinion evidence. Because Castaldo and Quinn served as the financial advisors to the  
Special Committee and to the IPL Board respectively, Brookfield submitted that they had an  
interest in the outcome of the Applications and could not be considered independent or neutral.  
Therefore, any opinion evidence (as opposed to fact evidence) they gave should be given little, if  
any, weight.  
(b)  
IPL  
[41] IPL argued that this panel should consider all of the relevant evidence led and use our broad  
discretion as to the weight to be given to that evidence. It disagreed that the approach to expert  
evidence applied by the OSC panel in Solar Income should be applied in Alberta, and pointed out  
that in Re Workum and Hennig, 2008 ABASC 363, aff'd. sub nom. Alberta (Securities  
Commission) v. Workum, 2010 ABCA 405, an ASC hearing panel admitted certain expert evidence  
despite finding that it was capable of conducting its own analysis on the pertinent issues.  
[42] Accordingly, IPL argued that we should admit and consider the expert evidence including  
the Puri Report that we find helpful, and afford it the weight we consider appropriate. IPL further  
pointed out that the Puri Report was tendered in part in response to the evidence given by  
Brookfield's expert, Osler, which IPL said similarly offered opinions on some of the issues we  
must determine in deciding the Applications.  
[43] As for the Castaldo Affidavit and the Quinn Affidavit, IPL emphasized that these  
individuals were its financial advisors during the relevant period, and that most of their evidence  
simply outlined the facts of their involvement. As financial advisors, they necessarily gave  
analyses and opinions at the time, and IPL argued that summarizing those analyses and opinions  
in their affidavits post facto did not make the affidavits opinion evidence in the legal sense.  
However, IPL argued, even if they did constitute opinion evidence, they could still be considered  
and made subject to weight.  
[44] IPL also disagreed that Castaldo and Quinn lacked independence, as the compensation paid  
to J.P. Morgan and TD Securities was not contingent on any particular party's successful  
acquisition of IPL. In their respective affidavits, Castaldo and Quinn confirmed that J.P. Morgan  
and TD Securities had no financial incentive to prefer one deal over another, as they would get  
their fees upon the completion of any transaction.  
 
16  
3.  
Analysis and Conclusions  
[45] It is well-established that as an expert tribunal, certain issues are within a securities  
commission panel's expertise, experience, and knowledge, and third-party expert evidence on  
those issues is not required (see, for example, Re Magna International Inc. (2010), 33 O.S.C.B.  
6013 at para. 40; Re Aitkens, 2018 ABASC 27 at para. 137; and Re Chilean Metals Inc.,  
2019 BCSECCOM 24 at paras. 77-79). However, ss. 29(e) and (f) of the Act make clear that ASC  
hearing panels have wide discretion to decide what evidence to admit and what weight it should  
be given. Those two subsections state:  
(e)  
(f)  
the [ASC] . . . shall receive that evidence that is relevant to the matter being heard;  
the laws of evidence applicable to judicial proceedings do not apply[.]  
[46] As Brookfield pointed out, although the laws of evidence do not apply, when making  
decisions about admissibility and weight, we generally consider the policy reasons underlying any  
relevant evidentiary rules and the legal requirements of those rules (as discussed in Re Sentinel  
Financial Management Corp., 2008 ABASC 477 at para. 10).  
[47] In R. v. Mohan, [1994] 2 S.C.R. 9, the Supreme Court of Canada (the SCC) held that in  
proceedings before the courts, expert evidence is admissible if: (i) it is relevant; (ii) it is necessary  
in that it is information outside the ordinary experience and knowledge of the trier of fact; (iii) no  
other exclusionary rule applies; and (iv) it is given by a properly qualified expert (see paras. 17  
and 21).  
[48] In Solar Income, the OSC panel relied on the Mohan criteria and declined to admit an  
expert report on the grounds that it was irrelevant and gave an opinion on an issue (the reasonable  
expectations of investors) that was for the panel to determine, and on which the panel did not  
require expert assistance (see paras. 6, 55, 92, 99, and 101-103).  
[49] However, this is not the position in Alberta. As IPL noted, in Workum and Hennig, the  
ASC panel admitted expert evidence that was not strictly necessary because the panel had the  
expertise to decide the issue itself. On appeal to the Alberta Court of Appeal, the appellants argued  
that the ASC panel erred in doing so, and relied on Mohan (see paras. 22 and 69). The Court  
dismissed the appeal and held that the Mohan criteria do not apply in the administrative law  
context, although it also indicated that consideration of the Mohan criteria may lead a tribunal to  
give more or less weight to the expert evidence at issue (at paras. 82-84).  
[50] Past ASC decisions indicate that even where expert evidence is not strictly necessary, a  
panel may admit and rely on it if it is helpful to the analysis, even if it simply confirms the panel's  
own views.  
[51] For example, in Workum and Hennig, the panel found that it was fully capable of  
conducting its own analysis and reaching its own conclusions without the expert evidence, but still  
referred to some of Staff's expert's testimony in its decision. The testimony confirmed the panel's  
conclusions, even though it did not "present or illuminate new and unknown principles" (at para.  
105).  
 
17  
[52] In Ironside, the panel accepted an expert "in the area of securities law" (at para. 78), and  
another "on the issue of materiality in the securities industry" (at para. 300), despite the fact that  
both were squarely within its own expertise.  
[53] At least one earlier OSC panel decision suggested a similar approach. In Re Biovail  
Corporation, 2010 ONSEC 21, the panel admitted expert evidence it concluded was not required  
or necessary on the basis that it may have been "relevant or useful" (at paras. 80, 201, 213, and  
238).  
[54] Even if admitted, an ASC panel is not bound by the expert evidence tendered. In Workum  
and Hennig, the panel specifically noted that the evidence was not determinative of the issues it  
had to decide and that it was not bound to accept all of the expert's opinions (at paras. 105 and  
108). In De Gouveia, the panel found that it was not bound by the expert's opinion on the ultimate  
issue, and that it remained the panel's task to consider and weigh that evidence along with all of  
the other relevant evidence (at paras. 66 and 71). The panel explained (at para. 104):  
We found Stewart [the expert] to be a credible witness. We gave great weight to her explanations  
of various trading practices and their consequences, and her testimony was of considerable  
assistance to us in our review of some of the documentary trading evidence. That said, we were not  
bound to accept her conclusions. Rather, we considered and analyzed all the evidence and reached  
our own conclusions, taking into account, but not dictated by, Stewart's opinions and conclusions.  
Although her conclusions did not dictate our findings, we regard the parallels between them as  
important corroboration of our analysis.  
[55] In view of the foregoing principles, we decided to exercise our discretion to admit the Puri  
Affidavit into evidence as Exhibit #19. While not strictly necessary given this panel's expertise  
and experience, we found Puri qualified to express her opinions and found some of those opinions  
both helpful and relevant to the issues before us. We did not consider ourselves bound by her  
evidence, but as will become apparent later in these reasons, we took her evidence on certain  
matters into account and gave it commensurate weight where we concluded it was appropriate and  
useful to do so, and where it corroborated our own independent conclusions. We gave her evidence  
little to no weight where her opinions were more in the nature of legal argument or policy  
recommendation.  
[56] As for the Castaldo Affidavit and the Quinn Affidavit, we agreed that both expressed  
opinions and even addressed some of the opinions given by Brookfield's expert witness, Osler, in  
a manner somewhat reminiscent of rebuttal expert reports. However, we also agreed with IPL that  
as its financial advisors at the relevant time, in recounting the facts of their involvement, Castaldo  
and Quinn necessarily referred to the advice and opinions they had given. That they confirmed  
their advice and opinions in their affidavits including by way of contrast with Osler's opinions –  
did not make the affidavits expert opinion evidence in the usual sense. Indeed, most of the fact  
witnesses expressed their personal views on the events that occurred and the issues raised.  
[57] In weighing their evidence on the matters at issue, we took into account the roles Castaldo  
and Quinn played in the events under consideration, as well as their M&A experience, the basis of  
their evidence, and its consistency with other reliable evidence. We took the same approach with  
all of the witnesses whose evidence was tendered at the Hearing, especially where one or more of  
the parties raised concerns about that evidence.  
18  
[58] Where these or other arguments or aspects of the evidence factored into our analysis, they  
are discussed further in later sections of this decision.  
V.  
A.  
THE APPLICATIONS  
The Brookfield Application  
[59] Initially, Brookfield applied for orders under ss. 179 and 198 of the Act in connection with  
what it described as the inappropriate defensive tactics taken by the IPL Board in response to the  
Brookfield Offer: adopting the Supplemental SRP and agreeing to pay Pembina the $350 million  
Break Fee. The precise relief sought was:  
(a)  
an order pursuant to section 198 of the [Act] that all trading cease in respect of any  
securities that are proposed to be issued or exchanged in connection with the rights issued  
under the IPL [SRPs], including the issuance of any IPL . . . Shares upon exercise of such  
rights;  
(b)  
(c)  
an order pursuant to section 179(1) of the [Act] restraining IPL from paying, and the IPL  
Board from causing or permitting IPL to pay, the . . . Break Fee to Pembina;  
an order pursuant to section 198 of the [Act] that all trading cease in respect of any  
securities that are proposed to be issued or exchanged in connection with the [Pembina]  
Arrangement, including, without limitation, in respect of the proposed transfer of all of the  
outstanding IPL . . . Shares to Pembina in exchange for [Pembina Shares] pursuant to the  
plan of arrangement attached as Schedule "A" to the [Pembina] Arrangement [a]greement;  
and  
(d)  
such further and other relief as the [ASC] deems appropriate.  
[60] In reply, IPL argued that the ASC does not have the jurisdiction to interfere with the  
payment of the Break Fee under s. 179 of the Act. That section states:  
179(1) On application by an interested person, if the [ASC] considers that a person has not  
complied or is not complying with this Part or the regulations, the [ASC] may make an  
order  
(a)  
(b)  
restraining the distribution of any document, record or materials used or issued in  
connection with a take-over bid or issuer bid,  
requiring an amendment to or variation of any document, record or materials used  
or issued in connection with a take-over bid or issuer bid and requiring the  
distribution of amended, varied or corrected information,  
(c)  
(d)  
directing any person or company to comply with this Part or the regulations,  
restraining any person or company from contravening this Part or the regulations,  
or  
(e)  
directing the directors and officers of any person or company to cause the person  
or company to comply with or to cease contravening this Part or the regulations.  
   
19  
(2)  
On application by an interested person, the [ASC] may order that a person or company is  
exempt from any requirement under this Part or the regulations if the [ASC] considers it  
would not be prejudicial to the public interest to do so.  
[61] Since s. 179 only applies "if the [ASC] considers that a person has not complied or is not  
complying with this Part [i.e., Part 14 of the Act, Take-over Bids and Issuer Bids] or the regulations  
[e.g., National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104)]", IPL pointed out  
that s. 179 did not apply here because Brookfield neither alleged nor proved that IPL breached or  
would breach the Act or regulations by agreeing to or paying the Break Fee. Further, it argued,  
only certain types of orders can be granted under s. 179, none of which would provide the relief  
sought by Brookfield.  
[62] Pembina agreed. In its view, to direct IPL not to pay the Break Fee to Pembina would be  
to direct IPL to breach a contract which is not within the ASC's jurisdiction.  
[63] Staff were of the same opinion. They stated that while the IPL SRPs and the Pembina  
Arrangement could be cease traded under s. 198 of the Act, s. 179 does not provide authority to  
restrain payment of the Break Fee.  
[64] Although Brookfield initially argued that s. 179(1) gives us the authority to grant the order  
sought on the basis that agreeing to the Break Fee was an improper defensive tactic, Staff pointed  
out that defensive tactics are addressed only in a policy, not in the Act or regulations. Moreover,  
Staff argued, the Pembina Arrangement did not fall under Part 14 because it was not a take-over  
bid or an issuer bid it was a plan of arrangement under s. 193 of the ABCA.  
[65] Staff submitted that we have the authority to cease trade the Pembina Arrangement if we  
determined that the Break Fee was clearly abusive of investors and the capital market. While doing  
so would effectively restrain payment of the Break Fee, Staff cautioned that it would also deprive  
IPL shareholders of the opportunity to choose the Pembina Arrangement.  
[66] While we agreed with IPL, Pembina, and Staff, we were not required to make a decision  
on the point. After listening to the other parties' arguments, Brookfield indicated at the Hearing  
that it had been persuaded by Staff's submissions and withdrew its application for relief under  
s. 179 of the Act. As a result, we considered the parties' arguments concerning the Break Fee solely  
in the context of orders permitted under s. 198.  
B.  
The IPL Application  
[67] IPL asserted that Brookfield's conduct in connection with the IPL Swaps was abusive of  
IPL shareholders and the capital market on four grounds:  
using the IPL Swaps to avoid early warning reporting obligations under NI 62-104;  
failing to make proper public disclosure regarding the IPL Swaps, including as  
required under NI 62-104;  
using the Swap Shares "held by a captive and compliant [swap] counterparty (which  
Brookfield [had] recently characterized as forming part of the 'Brookfield Block' in  
 
20  
its public disclosure) to try to defeat shareholder approval of the Pembina  
Arrangement"; and  
using the Swap Shares to try "to meet the minimum tender condition of 50% of IPL  
. . . Shares beneficially owned or over which control or direction is exercised by  
parties other than Brookfield or parties acting jointly or in concert with Brookfield",  
under s. 2.29.1(c) of NI 62-104.  
[68] The IPL Application sought the following relief in relation to the IPL Swaps under ss. 179  
and 198 of the Act:  
a s. 198 order directing Brookfield to issue a notice of change to the Brookfield  
Offer and provide public disclosure of:  
the material aspects of the IPL Swaps (including dates, parties, relationship  
between Brookfield and other parties, and fee arrangements);  
the terms and conditions of the IPL Swaps (including details of Brookfield's  
economic exposure and any option to acquire IPL Shares);  
the expiry or termination dates and events of the IPL Swaps (including  
anything that could give the swap dealer an incentive to tender Swap Shares  
to the Brookfield Offer); and  
the IPL Swap instruments or contracts  
(collectively, the Proposed Disclosure Order);  
a s. 179 or s. 198 order directing that the Swap Shares be considered beneficially  
owned or controlled by Brookfield or a person acting jointly or in concert with  
Brookfield for the purpose of s. 2.29.1(c) of NI 62-104 (and therefore excluding the  
Swap Shares from the minimum tender condition amount, which is discussed later  
in these reasons) (the Proposed Minimum Tender Order); and  
a ss. 198 and 199 order deeming the Swap Shares to be voted at the IPL  
shareholders meeting scheduled for July 29, 2021 regarding the Pembina  
Arrangement (the IPL Shareholders Meeting) in the same proportions for or  
against the arrangement as all other non-Brookfield-owned or controlled IPL  
Shares, or preventing the Swap Shares from being voted regarding the Pembina  
Arrangement (the Proposed Voting Order) (as s. 199 deals solely with  
administrative penalties, we assumed that IPL's reference to s. 199 here was an error  
and it is not addressed further in these reasons).  
[69] Initially, IPL also applied for relief under s. 179 of the Act on the basis that certain  
Brookfield entities should have signed the required certification for the Brookfield Offer.  
However, IPL withdrew this aspect of its application after Brookfield changed the certification.  
21  
C.  
The Pembina Application  
[70] Pembina adopted the IPL Application, and sought an additional order under s. 198 of the  
Act cease trading any securities proposed to be issued or exchanged in connection with the  
Brookfield Offer, including the proposed transfer of IPL Shares pursuant to the Brookfield Offer  
(the Proposed Brookfield Offer CTO).  
VI.  
A.  
GENERAL PRINCIPLES  
The ASC's Public Interest Jurisdiction  
[71] As mentioned, each of the Applications sought relief under s. 198 of the Act, which  
provides that the ASC may make a variety of orders if we consider that "it is in the public interest  
to do so". Similar provisions are included in securities regulatory statutes across Canada.  
[72] The leading case on Canadian securities commissions' public interest jurisdiction is the  
SCC's decision in Committee for the Equal Treatment of Asbestos Minority Shareholders v.  
Ontario (Securities Commission), 2001 SCC 37.  
[73] In Asbestos, the SCC considered an OSC panel's application of s. 127 of the Securities Act  
(Ontario) (the Ontario Act), that province's version of Alberta's s. 198. The SCC made the  
following findings:  
Section 127 of the Ontario Act provides the OSC with very wide discretionary  
power to intervene in the public interest in activities related to the Ontario capital  
market. The section's permissive language expresses a legislative intent "to leave it  
for the OSC to determine whether and how to intervene in a particular case" (at  
paras. 39 and 49).  
While no breach of the statute is required to trigger the section, the OSC's public  
interest jurisdiction "is not unlimited" (at paras. 41-42).  
The precise nature and scope of the public interest jurisdiction should be assessed  
by considering the OSC's mandate "to provide protection to investors from unfair,  
improper or fraudulent practices" and "to foster fair and efficient capital markets  
and confidence in the capital markets." Therefore, both "the fair treatment of  
investors" and "[t]he effect of an intervention in the public interest on capital market  
efficiencies and public confidence in the capital markets" should be considered  
before making an order in the public interest (at para. 41).  
In deciding whether to exercise its public interest discretion in the Asbestos case,  
the OSC panel below correctly considered whether the transactions at issue were  
"clearly abusive" of investors and the integrity of the capital market (at para. 52).  
[74] Similar principles were articulated some years prior to Asbestos. In Re Canadian Tire Corp.  
(1987), 10 O.S.C.B. 857, the hearing panel concluded that its public interest jurisdiction could be  
used "to deal with situations that are inconsistent with the best interests of investors or where a  
transaction constitutes a flagrant abuse of the marketplace" (at para. 124), and "to restrain a  
     
22  
transaction that is clearly abusive of investors and of the capital markets, whether or not that  
transaction constitutes a breach of the [Ontario Act], the regulations or a policy statement" (at para.  
130).  
[75] While such an intervention might be necessary to fulfill the OSC's mandate to regulate the  
capital market in the public interest and avoid a loss of confidence in the market, the Canadian  
Tire panel acknowledged that the power still must be used cautiously (at paras. 126, 130, and 151).  
It explained (at para. 154):  
Participants in the capital markets must be able to rely on the terms of the documents that form the  
basis of daily transactions. And it would wreak havoc in the capital markets if the [OSC] took to  
itself a jurisdiction to interfere in a wide range of transactions on the basis of its view of fairness  
through the use of the cease-trade power under s. 123 [now s. 127 of the Ontario Act]. . . . The  
[OSC's] mandate under s. 123 is not to interfere in market transactions under some presumed rubric  
of insuring fairness.  
[76] In Re Carnes, 2015 BCSECCOM 187, a panel of the British Columbia Securities  
Commission (the BCSC) similarly explained the need for caution (at para. 129):  
We recognize that when a panel issues an order in exercise of its public interest jurisdiction, the  
order has the effect of restraining or prohibiting conduct that is not prohibited specifically by  
legislation. Market participants should be able to structure their affairs within the context of the  
specific provisions of the [Securities Act (British Columbia) (the B.C. Act)], without fear of  
enforcement actions alleging wrongdoing that is not encoded in the [B.C.] Act, regulation or rules  
of the [BCSC].  
[77] According to the Canadian Tire panel, this is why the conduct or transaction in question  
must rise to the level of "clearly abusive" before the OSC's public interest jurisdiction is engaged  
(at para. 155):  
To invoke the public interest test of s. 123, particularly in the absence of a demonstrated breach of  
the [Ontario] Act, the regulations or a policy statement, the conduct or transaction must clearly be  
demonstrated to be abusive of shareholders in particular, and of the capital markets in general. A  
showing of abuse is something different from, and goes beyond, a complaint of unfairness. A  
complaint of unfairness may well be involved in a transaction that is said to be abusive, but they are  
different tests. Moreover, the abuse must be such that it can be shown to the [OSC]'s satisfaction  
that a question of the public interest is involved. That almost invariably will mean some showing of  
a broader impact on the capital markets and their operation.  
[78] It is in such a case that "the exercise of private legal rights must give way to broader  
considerations" namely, "the equitable operation of [Ontario's] capital markets" (Canadian Tire  
at para. 158).  
[79] These principles have been applied and reiterated in numerous Canadian securities  
commission decisions since Canadian Tire and Asbestos (see, for example, AbitibiBowater inc.  
(Produits forestiers Résolu) v. Fibrek inc., 2012 QCBDR 17 at paras. 96 and 98; Re Neo Material  
Technologies Inc. (2009), 32 O.S.C.B. 6941 at paras. 33-35; Re Patheon Inc., 2009 ONSEC 13 at  
para. 114; and Re ARC Equity Management (Fund 4) Ltd., 2009 ABASC 390 at paras. 65-67 and  
70).  
23  
[80] While it was not in dispute among the parties that the principles set out in Asbestos apply  
in Alberta, IPL further argued that in determining if certain conduct is abusive, the focus should  
be the effect of the conduct on investors and the integrity of the capital market, not the impugned  
party's subjective intent or motivations. It cited Re H.E.R.O. Industries Ltd. (1990), 13 O.S.C.B.  
3775, in which an OSC panel held that regardless of a party's motives, the more important question  
is the effect its actions had on the public interest. In that case, the effect was that one party would  
have received a premium for its shares while the other shareholders received nothing and lost the  
opportunity to tender to a competing bid. The panel therefore concluded that the conduct in  
question was clearly abusive of the integrity of the capital market (at paras. 28-29).  
[81] IPL also suggested that in addition to or as an alternative to the "clearly abusive" test, the  
ASC can intervene in the public interest on a broader basis where the letter of the applicable  
securities law, policy, or rule has been complied with, but the "animating principles" or spirit  
underlying those rules have not. IPL cited H.E.R.O. (at para. 18) and Patheon (at para. 116) in this  
regard, but the concept has also been referenced in other OSC decisions, including Re Magna  
International Inc., 2010 ONSEC 13 (at paras. 184 and 186) and Re VenGrowth Funds (Special  
Committee of Directors), 2011 ONSEC 17 (at para. 67).  
[82] In VenGrowth, for example, the panel found that one of the fundamental tenets of the take-  
over bid regime in Canada is that a shareholder's right to choose between competing proposed  
transactions must be protected. Therefore, a provision in support agreements entered into between  
the hostile offeror and target company shareholders that prevented the shareholders from later  
changing their minds and choosing a different transaction was found to have undermined an  
animating principle of the Ontario Act and, consequently, the public interest even though the  
hostile offeror's solicitation of the agreements was not contrary to Ontario securities laws and the  
panel concluded that there was no abuse (at para. 52, 54, 57-60, 62, and 67).  
[83] Brookfield disagreed that the "animating principles" standard had any application in this  
case. It argued that the ASC has not adopted that standard, whereas the "clearly abusive" standard  
was confirmed in Re Perpetual Energy Inc., 2016 ABASC 2 (at para. 46).  
[84] Brookfield also pointed out that in Re PointNorth Capital Inc., 2017 ABASC 121, the panel  
rejected PointNorth's argument that it should exercise its public interest jurisdiction on the basis  
that the conduct at issue was contrary to the "animating principles" of securities laws, which  
PointNorth contended was a standard lower than "clearly abusive" (at paras. 26 and 39).  
[85] The PointNorth panel noted the distinction drawn in some decisions between conduct on  
which securities laws are silent and where the "animating principles" standard could apply, if  
adopted and conduct falling into an area on which securities laws "articulate 'specific acts which  
constitute misconduct'" where the "clearly abusive" standard applies (at paras. 30, 34, and 36).  
Because Alberta securities laws "set out comprehensive and detailed requirements" for the conduct  
at issue in PointNorth (proxy solicitation and the conduct of brokers), the panel held that the  
appropriate test was whether the conduct was "clearly abusive of shareholders and of the capital  
market in general" (at paras. 37 and 39). It therefore did not decide whether the "animating  
principles" standard should be adopted in Alberta.  
24  
[86] As discussed later in these reasons, in granting the IPL Application and the Pembina  
Application in part, we were satisfied that Brookfield's conduct met the clearly abusive standard.  
Therefore, as in PointNorth, it was not necessary for us to decide whether the animating principles  
standard applies in Alberta in general, or applied in this case in particular.  
B.  
The Business Judgment Rule  
[87] Despite the broad discretion Canadian securities commissions have to act in the public  
interest, it is also true "that a degree of deference is owed to the decision of the board of directors  
of a market participant with respect to the issue under review" (Neo at para. 35). This is to give  
effect to the well-known "business judgment rule" that is also applied in the courts. The Court  
described the rule in Mudrick Capital Management LP v. Wright, 2019 ABQB 662 (at para. 92):  
The Business Judgment Rule is a rebuttable presumption, originating in US law, that the decisions  
of corporate directors are made on an informed basis and in good faith and therefore in the best  
interests of the company. Judges are not to second-guess the decisions of duly elected directors but  
rather, deferring to their autonomy and expertise, consider only whether the decision was  
reasonable, not whether it was perfect . . .  
[88] As long as a decision made by a board of directors falls within the range of reasonable  
alternatives in the circumstances, deference to the decision should be shown (Neo at para. 103; see  
also CW Shareholdings Inc. v. WIC Western International Communications Ltd. (1998), 39 O.R.  
(3d) 755 (Ont. Gen. Div.) (CW Shareholdings (Ont. Gen. Div.)) at para. 66, and Pente Investment  
Management Ltd. v. Schneider Corp. (1998), 42 O.R. (3d) 177 (ONCA) at paras. 34 and 36).  
[89] The Ontario Court (General Division) explained further in the context of a contested take-  
over bid (CW Shareholdings (Ont. Gen. Div.) at para. 62):  
The directors' actions are not to be judged against the perfect vision of hindsight, and should be  
measured against the facts as they existed at the time the impugned decision was made. In addition,  
the court should be reluctant to substitute its own opinion for that of the directors where the business  
decision was made in reasonable and informed reliance on the advice of financial and legal advisors  
appropriately retained and consulted in the circumstances.  
[90] In Pente, the Ontario Court of Appeal drew the same conclusion if a board acted on the  
advice of an independent committee that made an informed, good-faith recommendation as to the  
best available transaction for shareholders (at para. 38).  
[91] This is not to suggest that blind deference should be shown to any decision made by a board  
of directors in any circumstances, as Brookfield cautioned against in its written submissions. The  
board's decision must still be a reasonable one given the situation and the applicable law and  
policy. In the present context, that includes the overall objectives of the take-over bid regime.  
C.  
Swaps  
[92] We accepted the description of Swaps given by Mitts, Pembina's expert witness:  
A swap is a contract where two parties agree to exchange cash flows in the future. In a cash-settled  
total return swap, one party (the "buyer") agrees with the other party (the "counterparty") to  
exchange cash flows arising from an underlying asset, like shares of stock. The counterparty  
typically agrees to pay the buyer (a) interest, dividends or other distributions which are paid to  
   
25  
holders of the underlying asset and (b) any appreciation in the market value of the underlying asset  
upon expiration of the swap. Should the underlying asset decline in value, the buyer agrees to pay  
the difference to the counterparty.  
A typical cash-settled total return swap thus yields the buyer a financial payoff which is  
economically equivalent to buying the underlying asset, holding that asset for the duration that the  
swap contract is open, and selling the asset at the market price upon termination of the swap. Absent  
any hedging, the counterparty has a financial payoff which is the reverse of the buyer'sthat is,  
economically equivalent to selling the underlying asset and repurchasing that asset from the buyer  
at the market price upon termination of the swap. However, . . . a swap counterparty typically hedges  
its exposure to the underlying asset (including by purchasing the asset) and profits by charging a fee  
for acting as a dealer. [original emphasis; footnotes omitted]  
D.  
The Take-Over Bid Regime  
1.  
Overview  
[93] National Policy 62-203 Take-Over Bids and Issuer Bids (NP 62-203) sets out the objectives  
of the take-over bid regime in Canada (at s. 2.1):  
The [take-over bid regime in NI 62-104 and NP 62-203] is designed to establish a clear and  
predictable framework for the conduct of bids in a manner that achieves three primary objectives:  
equal treatment of offeree issuer security holders;  
provision of adequate information to offeree issuer security holders; and  
an open and even-handed bid process.  
[94] Section 1.1(2) of National Policy 62-202 Take-Over Bids Defensive Tactics (NP 62-202)  
also discusses the regime's objectives:  
The primary objective of the take-over bid provisions of Canadian securities legislation is the  
protection of the bona fide interests of the shareholders of the target company. A secondary objective  
is to provide a regulatory framework within which take-over bids may proceed in an open and even-  
handed environment. The take-over bid provisions should favour neither the offeror nor the  
management of the target company, and should leave the shareholders of the target company free to  
make a fully informed decision. The Canadian securities regulatory authorities are concerned that  
certain defensive measures taken by management of a target company may have the effect of  
denying to shareholders the ability to make such a decision and of frustrating an open take-over bid  
process.  
[95] Section 1.1(5) of NP 62-202 refers to the desirability of unrestricted auctions in the take-  
over bid context:  
The Canadian securities regulatory authorities consider that unrestricted auctions produce the most  
desirable results in take-over bids and they are reluctant to intervene in contested bids. However,  
they will take appropriate action if they become aware of defensive tactics that will likely result in  
shareholders being deprived of the ability to respond to a take-over bid or to a competing bid.  
[96] The regime requires an offeror to deliver a take-over bid circular to each target shareholder  
(NI 62-104 at s. 2.10). That circular must be in a required form (Form 62-104F1 Take-Over Bid  
Circular (Form 62-104F1)) and contain extensive specified disclosure to ensure that target  
shareholders have sufficient information from the offeror on which to base an informed decision.  
   
26  
It must also include a certificate stating that the circular contains no untrue statements or omissions  
of material facts.  
2.  
2016 Amendments to the Take-Over Bid Regime  
(a) Relevant 2016 Amendments  
[97] Take-over bid regime amendments and associated policy guidance came into force in  
Canada effective May 9, 2016 (the New Bid Regime). Three significant changes relevant to the  
Applications were:  
a mandatory minimum initial deposit period of 105 days from the date of the take-  
over bid (increased from the previous 35-day minimum) (see NI 62-104 at  
s. 2.28.1);  
a mandatory minimum tender condition of more than 50% (the Minimum Tender  
Condition) (see NI 62-104 at s. 2.29.1(c)); and  
a statement of the effect of potential deemed beneficial ownership of securities in  
certain circumstances under the early warning regime (the EWR) (see NP 62-203  
at s. 3.1 in the context of NI 62-104 at s. 5.2).  
(b)  
Minimum Initial Deposit Period  
[98] The mandatory minimum initial deposit period is the length of time an offeror must allow  
for target shareholders to decide whether to deposit their securities to a take-over bid. It allows the  
target and its shareholders time to analyze the take-over bid, and gives the target the opportunity  
to attract or search for rival bidders.  
[99] This period was increased from 21 days to 35 days in 2001, then increased to 105 days in  
2016. The 2016 increase affected the law relating to shareholder rights plans, as discussed later in  
this decision.  
(c)  
Minimum Tender Condition  
[100] Pursuant to s. 2.29.1(c) of NI 62-104, the Minimum Tender Condition prohibits an offeror  
from taking up securities deposited under a take-over bid unless:  
. . . more than 50% of the outstanding securities of the class that are subject to the bid, excluding  
securities beneficially owned, or over which control or direction is exercised, by the offeror or by  
any person acting jointly or in concert with the offeror, have been deposited under the bid and not  
withdrawn.  
[101] Brookfield originally made its offer subject to its own requirement that at least 66 2/3% of  
IPL Shares including those owned by Brookfield be deposited to the Brookfield Offer before  
it would take up those shares. That condition was removed in later iterations of the Brookfield  
Offer, leaving only the statutory Minimum Tender Condition.  
(d)  
Early Warning Regime  
[102] Take-over bid regulation includes the EWR. This requires an entity to file an early warning  
report once it acquires 10% or more of a company's issued and outstanding securities (see  
         
27  
NI 62-104 at s. 5.2). The EWR reporting requirement applies even if that entity is not planning to  
make a take-over bid at the time it reaches or exceeds 10%. After an entity files an early warning  
report, it must also make further disclosure of any increases or decreases of 2% or more in its  
beneficial ownership.  
[103] An EWR report alerts the market to a potential take-over bid and prevents "creeping take-  
overs", in which an entity acquires control of a company or gets close to a control position (through  
transactions such as private placements and market purchases that are exempt from take-over bid  
rules) without paying a premium for the target company's securities (see D. Johnston, K. Rockwell,  
and C. Ford, Canadian Securities Regulation, 5th ed. (Markham: LexisNexis, 2014) at  
para. 11.31). One criticism of Swaps is that they could effectively allow circumvention of the  
EWR, as IPL and Pembina alleged occurred here.  
[104] In discussing the purpose of the EWR, Staff referred to a September 4, 1998 Canadian  
Securities Administrators (the CSA) Notice (Proposed National Instrument: NI 62-103 The Early  
Warning System and Related Take-Over Bid and Insider Reporting Requirements) (at p. 2):  
The early warning system contained in the securities legislation of most jurisdictions requires  
disclosure of holdings of securities that exceed certain prescribed thresholds in order to ensure that  
the market is advised of accumulations of significant blocks of securities that may influence control  
of a reporting issuer. Dissemination of this information is important because the securities acquired  
can be voted or sold, and the accumulation of the securities may signal that a take-over bid for the  
issuer is imminent. In addition, accumulations may be material information to the market even when  
not made to change or influence control of the issuer. Significant accumulations of securities may  
affect investment decisions as they may effectively reduce the public float, which limits liquidity  
and may increase price volatility of the stock. Market participants also may be concerned about who  
has the ability to vote significant blocks as these can affect the outcome of control transactions, the  
constitution of the issuer's board of directors and the approval of significant proposals or  
transactions. The mere identity and presence of an institutional shareholder may be material to some  
investors.  
[105] Only beneficial ownership of voting or equity securities is currently subject to the EWR  
disclosure requirements. Interests in Swaps and similar derivatives are not subject to those  
requirements, although guidance added in 2016 to NP 62-203 (at s. 3.1) provides that beneficial  
ownership can be deemed in some circumstances, which would be relevant for EWR compliance:  
An investor that is a party to an equity swap or similar derivative arrangement may under certain  
circumstances have deemed beneficial ownership, or control or direction, over the referenced voting  
or equity securities. This could occur where the investor has the ability, formally or informally, to  
obtain the voting or equity securities or to direct the voting of voting securities held by any  
counterparties to the transaction. This determination would be relevant for compliance with the early  
warning and take-over bid requirements under [NI 62-104].  
[106] We discuss the interaction of Swaps with EWR requirements later in this decision.  
3.  
Acquisitions by Offeror During Take-Over Bid  
[107] After an offeror announces a take-over bid, it may not acquire any of the target securities  
outside of the take-over bid, subject to certain exceptions (NI 62-104 at s. 2.2). The exception  
relevant to this matter is the 5% Exemption, which permits an offeror to acquire another 5% of  
 
28  
the target's issued and outstanding securities as at the date of the take-over bid if certain conditions  
are met (see NI 62-104 at s. 2.2(3)).  
[108] As an OSC panel explained in Re Falconbridge Limited, 2006 ONSEC 21 (at para. 73):  
From a policy perspective, the purchases under the 5% Exemption contribute to liquidity in the  
target company's shares, provide all target shareholders with an equal opportunity to sell their target  
shares prior to conclusion of the bid, raise the market price of the shares, and encourage bidders to  
raise their offer prices.  
E.  
Voting Threshold for a Plan of Arrangement  
[109] Voting on the Pembina Arrangement at the July 29, 2021 IPL Shareholders Meeting was  
subject to the majority voting requirement set out at s. 193(6)(a) of the ABCA. At least 66 2/3%  
of the votes cast by shareholders voting on the resolution had to be in favour of the Pembina  
Arrangement for it to be approved.  
VII. THE BROOKFIELD APPLICATION  
A.  
Defensive Tactics General  
[110] As mentioned, the Brookfield Application challenged the defensive tactics taken by the  
IPL Board in response to the Brookfield Offer. Brookfield suggested that there were two broad  
issues for determination by this panel:  
Did the Supplemental SRP prejudice IPL shareholders, including Brookfield?  
Did the quantum of the Break Fee prejudice IPL shareholders?  
[111] We consider the IPL SRPs and the Break Fee in detail later in these reasons, but set out  
here some general principles concerning defensive measures and the parties' positions as to the  
application of those principles in this case.  
1.  
Governing Principles  
[112] As its title Take-Over Bids Defensive Tactics suggests, NP 62-202 sets out the views  
of Canadian securities regulators concerning defensive tactics that may be employed by a target  
company subject to a take-over bid. Sections 1.1(2) and (5) were cited above. The following  
additional portions of s. 1.1 are also relevant to the Brookfield Application:  
1.1(1) . . . Management of a target company may take one or more of the following actions in  
response to a bid that it opposes:  
1.  
2.  
Attempt to persuade shareholders to reject a take-over bid.  
Take action to maximize the return to shareholders including soliciting a higher  
bid from a third party.  
3.  
Take other defensive measures to defeat the bid.  
. . .  
(3)  
. . . Canadian securities regulatory authorities wish to advise participants in the capital  
markets that they are prepared to examine target company tactics in specific cases to  
       
29  
determine whether they are abusive of shareholder rights. Prior shareholder approval of  
corporate action would, in appropriate cases, allay such concerns.  
[113] These statements reflect the applicable case law. Canadian securities commission decisions  
have typically recognized that in discharging its fiduciary duty to the corporation, a target's board  
of directors may legitimately employ defensive measures such as shareholder rights plans in a  
genuine attempt to increase value for the target shareholders above that represented by a hostile  
bid (see, e.g., Re Royal Host Real Estate Investment Trust, [1999] 47 B.C.S.C.W.S. 43 at para. 73  
and Re Icahn Partners LP, 2010 BCSECCOM 432 at paras. 32-33 and 50).  
[114] Canadian courts have made similar observations. In Rogers Communications Inc. v.  
Maclean Hunter Ltd. (1994), 45 A.C.W.S. (3d) 1215 (Ont. Gen. Div.), the Court held, "[i]t is  
reasonable that a target board not roll over and play dead. If it were completely passive, it would  
be soundly criticized for not doing anything to maximize the situation for the target organization"  
(at para. 18). It also acknowledged that, "[l]egitimate actions of a target board (to maximize  
shareholder value) may thwart a complainant's bid" (at para. 23).  
[115] At the same time, however, commission panels have recognized that even if they are  
generally reluctant to do so, it may be necessary to exercise their public interest jurisdiction to  
constrain or dismantle defensive tactics that impede shareholders' ability to dispose of their shares  
as they wish or to choose a proposed transaction, including a hostile bid (see Re Canadian Jorex  
Ltd. (1992), 15 O.S.C.B. 257; Re Suncor Energy Inc., 2015 ABASC 984 at para. 13; and Royal  
Host at para. 73).  
[116] Whether a defensive tactic is appropriate will depend on the circumstances of the case (see  
CW Shareholdings (Ont. Gen. Div.) at paras. 57 and 97). The Ontario Court (General Division)  
described it as "a question of balance, proportionality and commercial reasonableness in the overall  
context of the take[-]over bid and the directors['] mandate to enhance and maximize value for the  
shareholders as a whole" (ibid. at para. 97).  
2.  
Arguments of the Parties  
(a) Brookfield  
[117] In Brookfield's submission, the IPL SRPs and the Break Fee undermined the objectives of  
the take-over bid regime set out in NP 62-202: the protection of the bona fide interests of the  
shareholders of the target company, and the provision of a regulatory framework within which  
take-over bids may proceed in an open and even-handed environment. It argued that IPL's  
defensive tactics constrained the auction, prejudiced Brookfield as both an IPL shareholder and a  
bidder, unfairly favoured the Pembina Arrangement, frustrated and undermined the Brookfield  
Offer, frustrated IPL shareholders from receiving an enhanced Brookfield Offer, and were  
generally abusive of IPL shareholders and the capital market.  
[118] Brookfield further argued that NP 62-202 indicates that defensive tactics during contested  
take-over bids are tolerated in Canada only to the extent that they give a target company's board  
of directors an opportunity to maximize shareholder value by seeking a better bid or alternative  
transaction. It brought the Brookfield Application arguing that relief from this panel was necessary  
to level the playing field by preventing IPL's defensive tactics from depriving IPL shareholders of  
Brookfield's best offer.  
   
30  
(b)  
IPL and Pembina  
[119] IPL suggested that the narrow issues on the Brookfield Application were whether the  
Supplemental SRP or the Break Fee was clearly abusive to IPL shareholders and the integrity of  
the capital market, and, if so, the appropriate relief to be granted. In its submission, neither was  
clearly abusive, and the Brookfield Application should be dismissed.  
[120] Pembina likewise disagreed with Brookfield's assertion that the Supplemental SRP and the  
Break Fee were improper defensive tactics. To the contrary, it argued, both promoted shareholder  
democracy, created choice for IPL shareholders, and helped overcome "the unfair advantage that  
Brookfield created with its abusive use of [IPL Swaps]". Neither the Supplemental SRP nor the  
Break Fee prejudiced IPL shareholders or the capital market, and therefore they did not raise public  
interest concerns that should be addressed by this panel.  
[121] IPL pointed out that defensive tactics are permissible under the take-over bid regime, and  
argued that they are appropriate where necessary to protect a target company and its shareholders.  
It submitted that the ASC should not get involved unless, as set out in NP 62-202, a defensive  
tactic will deprive the target shareholders of the ability to respond to a bid. Although NP 62-202  
also indicates that a secondary objective of the take-over bid regime is to provide a regulatory  
framework within which take-over bids may proceed in an open and even-handed environment,  
IPL argued that that provision is intended for the benefit of shareholders, not hostile bidders.  
[122] IPL also cited NP 62-202 in support of its argument that in contested bids, the target board's  
task is to maximize shareholder value and protect the integrity of the process to ensure shareholders  
have an opportunity to make an informed decision. There is no single prescribed method for a  
target board to fulfill its fiduciary duty, and its decisions should not be second-guessed if it has  
acted reasonably.  
(c)  
Staff  
[123] Like Brookfield, Staff cited the objectives of the take-over bid regime as described in  
s. 1.1(2) of NP 62-202. They argued that this panel's review of defensive tactics should be based  
on those objectives, ensuring that target shareholders can make fully informed decisions, and  
preserving the shareholders' right to choose among competing transactions.  
[124] Staff noted that defensive tactics in the take-over bid context are reviewable by a  
commission panel pursuant to both our public interest jurisdiction and NP 62-202. They  
acknowledged that while defensive measures may be genuinely employed in an attempt to secure  
a better bid, if they impair the take-over bid regime's objectives and deny or severely limit the  
ability of target shareholders to respond to a bid, we should intervene.  
3.  
Brief Conclusion  
[125] In our Oral Ruling, we indicated that we were not satisfied that IPL engaged in any  
improper defensive tactics, and found that Brookfield did not establish sufficient grounds for us to  
exercise our public interest jurisdiction and make the orders sought. We therefore dismissed the  
Brookfield Application.  
     
31  
[126] Our reasons for these conclusions are set out in the next sections of this decision.  
B.  
The IPL SRPs  
1. Additional Background and Evidence  
(a) General  
[127] According to McKenzie, after Brookfield made the February 22 Offer and the Strategic  
Review commenced, the Special Committee grew increasingly concerned about the effect  
Brookfield's IPL Swaps would have on the Strategic Review, the take-over bid process, and the  
IPL Board's efforts to maximize value for shareholders.  
[128] In March 2021, IPL's advisors indicated that when they contacted other potential bidders,  
some voiced reluctance to participate because of the size of Brookfield's economic interest in IPL.  
Based on investor calls and several inaccurate media reports, it also appeared that the market was  
confused about the difference between Brookfield's ownership of IPL Shares and its economic  
interest in additional IPL Shares through the IPL Swaps.  
[129] IPL thought that Brookfield's 19.65% position created a perception that it would be difficult  
for any other bidder to succeed in acquiring IPL without Brookfield's support, which discouraged  
competing bidders from coming forward. Brookfield's position also raised the concern that IPL  
shareholders would not come out to vote on any alternative transaction that arose if they were  
under the impression that the February 22 Offer was a "done deal" and they had no real choice  
other than to tender their IPL Shares to Brookfield.  
[130] IPL feared that if Brookfield further increased its position by entering into additional IPL  
Swaps and acquiring additional IPL Shares under the 5% Exemption, the situation would be  
exacerbated. As McKenzie stated in her affidavit:  
. . . with its 19.65% interest, the Special Committee was concerned that even the acquisition of an  
additional 5% of IPL Shares in the market within the take[-]over bid rules could effectively end the  
Strategic Review, such that even if a superior competing transaction came forward, it would not  
have a fair opportunity to be considered by IPL shareholders.  
[131] During cross-examination, McKenzie further explained that given its historically low voter  
turnout, IPL was concerned that if more IPL Shares were held by swap counterparties who had no  
economic incentive to vote on a competing transaction and Brookfield held as many as 15% of the  
IPL Shares and voted them against such a transaction, other IPL shareholders' votes would  
effectively not count. In her words, "the more shares that are held in [IPL Swaps], the more likely  
it becomes that the Brookfield ownership of [IPL Shares] has a greater and greater weight on the  
overall outcome".  
[132] Castaldo provided a similar explanation:  
Even if the [Swap] Shares underpinning the [IPL Swaps] could not be voted or tendered in  
connection with any change of control transaction, by entering into further [IPL Swaps], Brookfield  
could effectively take additional blocks of IPL voting shares out of play. This would give  
Brookfield's remaining beneficial holding disproportionately greater weight in any vote[.]  
     
32  
[133] These issues are discussed in more detail later in this decision in the context of the IPL  
Application and the Pembina Application.  
[134] In response to these concerns, IPL's financial and legal advisors recommended that IPL  
adopt the Supplemental SRP.  
[135] If triggered by a single shareholder acquiring 20% or more of the IPL Shares, the First SRP  
would have given IPL shareholders the right to buy additional IPL Shares at a steep discount. The  
Supplemental SRP maintained the 20% threshold, but expanded the definition of "Beneficial  
Ownership" from the First SRP to include "Derivative Transactions". This had the effect of treating  
Brookfield's IPL Swaps as equivalent to beneficial ownership of additional IPL Shares for the  
purpose of the trigger. According to McKenzie, this was intended to ensure all IPL shareholders  
were treated equally in the face of a take-over bid and prevent the aforementioned "creeping"  
acquisitions of control.  
[136] IPL's news release advising that it had adopted the Supplemental SRP specifically indicated  
that it was a response to Brookfield's February 22 Offer, but explained:  
The Supplemental [SRP] is not intended to prevent Brookfield . . . or its affiliates from acquiring  
[IPL] pursuant to its hostile take[-]over bid dated February 22, 2021 . . . . The Supplemental [SRP]  
includes a technical revision to [IPL]'s [First SRP] to treat certain financial derivatives, which have  
already been utilized by Brookfield, as equivalent to beneficial share ownership. [original emphasis]  
[137] The Supplemental SRP was initially set to expire on September 30, 2021 unless approved  
by IPL shareholders prior to that date. As noted in the Chronology, it was amended on  
June 25, 2021 so that it would expire at the close of business on the first business day following  
the IPL Shareholders Meeting held to vote on the Pembina Arrangement.  
(b)  
Expert Evidence  
(i) Brookfield  
[138] Brookfield retained Osler to provide expert opinion evidence concerning the IPL SRPs, the  
Break Fee, and, generally, the matters an investment banker would advise a target board to consider  
when choosing between competing acquisition proposals.  
[139] Osler observed that shareholder rights plans are typically adopted for the purposes of giving  
a target board sufficient time to undertake a strategic review process and find other potential  
transactions, giving shareholders the time and information they need to make a fully informed  
decision, and ensuring that all shareholders are treated fairly in the event of a take-over bid. In his  
view, shareholder rights plans are intended to be temporary, and cease to be of use once a superior  
transaction is identified and presented to a target company's shareholders.  
[140] According to Osler, with the advent of the New Bid Regime in 2016 and its extended  
timelines and Minimum Tender Condition, the need to implement a shareholder rights plan in  
Canada has diminished. In the circumstances here, Osler opined that there was no longer a  
compelling commercial rationale for maintaining the IPL SRPs once the IPL Board decided to  
recommend the Pembina Arrangement.  
   
33  
(ii)  
IPL  
[141] As mentioned, Puri was retained by IPL in part to provide expert opinion evidence  
concerning its adoption of the Supplemental SRP.  
[142] Puri acknowledged that since the mandatory bid period was extended under the New Bid  
Regime, fewer shareholder rights plans are implemented for the purpose of giving a target board  
more time to consider strategic alternatives to an unsolicited bid. However, she noted that such  
plans are still useful for protecting against "creeping" bids. In her view, shareholder rights plans  
can help to "level the playing field" in change of control transactions, as they may be used to  
prevent a bidder from assembling a negative control block that would unreasonably limit  
shareholder choice in the ways described by McKenzie and Castaldo.  
[143] Puri also explained that while the provisions in the Supplemental SRP that included  
derivatives in the definition of beneficial ownership are novel in Canada, they are common in the  
United States (the US). She considered IPL's implementation of these provisions reasonable and  
appropriate to allow the Special Committee to conduct an effective Strategic Review and give  
shareholders the opportunity to make a choice.  
[144] Puri suggested that maintaining the IPL SRPs until IPL shareholders voted on the Pembina  
Arrangement was also reasonable and appropriate, as it prevented Brookfield from gaining a  
negative blocking position. Without it, Brookfield could have purchased another 5% of IPL's  
shares on the market and increased its IPL Swap position, which would have given it enough of  
an interest to have negative control and defeat the required 66 2/3% vote on the Pembina  
Arrangement.  
[145] Puri emphasized that the Brookfield Offer was a permitted bid under the Supplemental  
SRP. Therefore, it did not prevent Brookfield from pursuing its bid, or deprive IPL shareholders  
of the opportunity to tender their shares to the Brookfield Offer. Instead, it legitimately preserved  
IPL shareholders' ability to choose between the Brookfield Offer, the Pembina Arrangement, and  
any other alternative that may have emerged as a result of the Strategic Review.  
2.  
Applicable Law  
[146] Past securities commission decisions are clear that adoption of a shareholder rights plan is  
not in and of itself unusual or improper, whether or not it is adopted in response to a hostile bid  
(see, e.g., Re High Arctic Energy Services Limited Partnership, 2006 ABASC 1510 at para. 74;  
ARC Equity at para. 85; and Falconbridge at para. 36). Shareholder rights plans are permitted  
under NP 62-202 (Falconbridge, ibid.).  
[147] However, as mentioned, unrestricted auctions are preferred in change of control scenarios  
to maximize shareholder value. Canadian securities commissions have therefore traditionally  
taken the view that shareholder rights plans should be "tolerated" rather than "promoted" and  
then only for the limited purpose of giving a target board of directors time to fulfill its fiduciary  
duty to maximize shareholder choice and value, including by conducting a strategic review (see,  
e.g., Re Inco Ltd., 2006 LNONOSC 747 at para. 22; Re BGC Acquisition Inc., [1999]  
25 B.C.S.C.W.S. 44 at p. 4; Re MDC Corporation and Regal Greetings and Gifts Inc. (1994),  
17 O.S.C.B. 4971 at p. 4979; and Icahn at para. 56; in the courts, see also Pente at para. 16). The  
   
34  
question addressed in many of the cases is therefore not if a shareholder rights plan should "go" or  
cease to operate, but rather, when (High Arctic at para. 74; Re Pulse Data Inc., 2007 ABASC 895  
at para. 96; and Icahn at paras. 32-33).  
[148] In High Arctic, an ASC hearing panel cease traded a shareholder rights plan when it found  
that there was no prospect (despite the target board's efforts) of an alternative bid being made  
before the hostile bid expired. If the plan had not been terminated, it could have left the target  
shareholders with no bid to consider (see paras. 79 and 84). BCSC panels reached similar  
conclusions in BGC Acquisition (at p. 7) and Re Inmet Mining Corporation,  
2012 BCSECCOM 442 (at para. 30), as did the panel in Re CW Shareholdings Inc. (1998),  
21 O.S.C.B. 2899 (CW Shareholdings (Comm. #1)) (at paras. 75-76).  
[149] In Suncor, an ASC panel weighed the possibility of other offers if the plan were left in  
place against the risk that Suncor would not extend its hostile bid if the plan stayed in place for its  
full term. To balance the two considerations, the panel issued an order cease trading the plan, but  
not until after it continued to operate for an additional short period (see paras. 73-74, 89, 97, 100,  
and 103-106).  
[150] In Re Afexa Life Sciences Inc., 2011 ABASC 532, the shareholder rights plans gave the  
target board time to generate another bid, but the hearing panel found that in the circumstances of  
the case, eventually the plans' operation would prevent shareholders from getting a better offer  
from the hostile bidder (see para. 43). The panel concluded that at that point, the competing offers  
should be left to unfold without the hindrance of the shareholder rights plans. It therefore directed  
that the plans remain in place until the end of the target company's go-shop period, but not  
thereafter (at para. 47).  
[151] In Re Baffinland Iron Mines Corp. (2010), 33 O.S.C.B. 11385, the panel was similarly  
concerned that the shareholder rights plan at issue would deprive the target shareholders of the  
ability to tender to the unsolicited offer or prevent the unsolicited bidder from increasing its offer  
(see paras. 14 and 25). It concluded that the possibility of the unsolicited bidder making a better  
offer was a potential benefit to Baffinland shareholders that justified cease trading the plan (see  
para. 38).  
[152] Some securities commission decisions have recognized that giving a target board more  
time to find a better offer in the face of a hostile bid is not the only legitimate reason for  
implementing a shareholder rights plan. In Neo, an OSC panel said that "shareholder rights plans  
may be adopted for the broader purpose of protecting the long-term interests of the shareholders,  
where, in the directors' reasonable business judgment, the implementation of a rights plan would  
be in the best interests of the corporation" (at para. 112 (original emphasis); see also para. 107). In  
Falconbridge, the panel observed that the target board had identified a number of concerns that  
could be addressed by a shareholder rights plan, including the prospect of a creeping take-over bid  
(see para. 20).  
[153] As mentioned previously, under the New Bid Regime, time for a board to consider a bid  
and find a superior alternative transaction is built into NI 62-104, making that justification for  
maintaining a shareholder rights plan less significant. However, as Institutional Shareholder  
35  
Services observed in a document appended to the Baker Affidavit and entitled, Proxy Voting  
Guidelines for TSX-Listed Companies, Benchmark Policy Recommendations (Effective for  
Meetings on or after February 1, 2021), "'new generation' shareholder rights plans will continue to  
serve an important purpose because they ensure that shareholders are treated equally in a control  
transaction by precluding creeping acquisitions or the acquisition of a control block through private  
agreements between a few large shareholders" (at p. 28).  
[154] Whatever the motivation for adopting a shareholder rights plan, it appears to be common  
ground among the case authorities that the plan should cease to operate once that goal has been  
achieved and there is no longer a basis for allowing the plan to continue (see, e.g., Icahn at  
para. 56). At some point, a target company's shareholders must be given an opportunity to decide  
for themselves whether to tender to a take-over bid or support an alternative transaction, and it is  
in the public interest to ensure that they have that chance (see Icahn at paras. 32-33 and 89, and  
Pulse Data at para. 95).  
[155] In Re Cara Operations Ltd. (2002), 25 O.S.C.B. 7997, an OSC panel explained (at  
para. 53):  
While it may be important for shareholders to receive advice and recommendations from the  
directors of the target company as to the wisdom of accepting or rejecting a bid, and for directors to  
be satisfied that a particular bid is the best likely bid under the circumstances, in the last analysis  
the decision to accept or reject a bid should be made by the shareholders, and not by the directors  
or others.  
[156] Accordingly, shareholder rights plans should cease to have effect once they no longer  
benefit shareholders and enhance their choice, but instead interfere with that choice or otherwise  
"impair [shareholders'] ability to exercise their fundamental right to decide whether to accept or  
reject a take-over bid for their shares" (Afexa at para. 28).  
[157] Similar conclusions were drawn in Canadian Jorex (at p. 4), Icahn (at para. 47), Re Aurora  
Cannabis Inc., 2018 ONSEC 10 (at para. 148), Baffinland (at para. 26), and Neo (at para. 144). As  
the Afexa panel described it, the applicable test is "whether there is, and remains, a real and  
substantial possibility that, given a reasonable period of further time under the protection of the  
plan, the directors of the target company can increase shareholder choice and maximize  
shareholder value" (at para. 28).  
[158] If the answer to that inquiry is "no" and a shareholder rights plan impedes shareholders'  
ability to choose, a securities commission may intervene (BGC Acquisition at pp. 4-5). Hearing  
panels have the discretion to make that determination, which will depend upon the facts and  
circumstances of the case (Afexa at para. 28; see also High Arctic at para. 76 and Falconbridge at  
para. 36).  
[159] To guide the determination, many past decisions cite the non-exhaustive list of factors set  
out in Royal Host (at para. 74, cited, e.g., in Falconbridge at para. 35, Pulse Data at para. 96, High  
Arctic at para. 76, Suncor at para. 14 et seq., and Neo at paras. 40-42):  
whether shareholder approval of the rights plan was obtained;  
when the plan was adopted;  
36  
whether there is broad shareholder support for the continued operation of the plan;  
the size and complexity of the target company;  
the other defensive tactics, if any, implemented by the target company;  
the number of potential, viable offerors;  
the steps taken by the target company to find an alternative bid or transaction that would  
be better for the shareholders;  
the likelihood that, if given further time, the target company will be able to find a better  
bid or transaction;  
the nature of the bid, including whether it is coercive or unfair to the shareholders of the  
target company;  
the length of time since the bid was announced and made;  
the likelihood that the bid will not be extended if the rights plan is not terminated.  
[160] Not all of these factors will apply in every case, and despite listing them, the Royal Host  
panel recognized that no specific test would provide the answer in every situation: "Take[-]over  
bids are fact specific; the relevant factors, and the relative importance to be attached to each, will  
vary from case to case" (at para. 76; see also Icahn at paras. 32-33 and Neo at para. 43).  
[161] Likewise, in Baffinland (at para. 29), an OSC panel adopted some of the language from the  
Royal Host decision and held that, "at the end of the day, there is no one test or consideration that  
constitutes the 'holy grail' when deciding whether a rights plan should remain in place or be cease  
traded"; the hearing panel must decide what course of action is in the public interest in the  
circumstances. The primary consideration is always the best interests and fair treatment of the  
target shareholders (ibid.; see also Cara Operations at para. 55, Pulse Data at para. 94, and High  
Arctic at paras. 48 and 76).  
3.  
Arguments of the Parties  
(a) Brookfield  
[162] Brookfield argued that the Supplemental SRP was an improper defensive tactic that was  
unfairly adopted in direct response to the Brookfield Offer. In its submission, the plan unduly and  
unfairly interfered with the rights of IPL shareholders including Brookfield qua shareholder –  
and frustrated the take-over bid process.  
[163] Brookfield emphasized that the IPL Board neither sought nor obtained shareholder  
approval of the Supplemental SRP, which had the effect of improperly substituting the board's  
views concerning the Brookfield Offer and the Pembina Arrangement for that of IPL's  
shareholders, who should have been permitted to decide for themselves.  
[164] Brookfield further argued that in this case, the Supplemental SRP did not benefit IPL  
shareholders because it prevented IPL's largest shareholder, Brookfield, from exercising its  
statutory right to purchase additional IPL Shares on the secondary market under the 5%  
Exemption. This not only prejudiced Brookfield, but also denied other IPL shareholders liquidity  
and the chance at a premium if they wanted to sell their shares on the market.  
[165] Although IPL maintained and Baker acknowledged during his cross-examination that  
the 5% Exemption was still available to Brookfield as long as it terminated a corresponding portion  
of its IPL Swaps so that its total interest in IPL did not exceed 20%, Brookfield contended that it  
should not have to terminate an agreement with a third party entered into for bona fide commercial  
   
37  
reasons before it could exercise its legal rights. It pointed out that this suggestion ignored the  
difficulty it would have terminating its IPL Swaps and the time it would take to do so and then  
acquire another 5% of the IPL Shares on the market.  
[166] Brookfield also argued that because it beneficially owned only 9.75% of the IPL Shares,  
another 5% would not have given it a veto over the Pembina Arrangement or positioned it to end  
the auction prematurely. Brookfield argued that the Swap Shares were irrelevant to that assessment  
because the uncontradicted evidence was that Brookfield had no right to control whether the Swap  
Shares were voted or how. Having 14.75% would not raise the potential for abusive conduct,  
either, as Brookfield could not waive the Minimum Tender Condition under the New Bid Regime.  
[167] In Brookfield's view, if the Supplemental SRP ever served a bona fide purpose for IPL's  
shareholders which was denied it had served that purpose once the IPL Board decided to  
support the Pembina Arrangement and the Special Committee acknowledged it was no longer  
looking for another bidder, because Brookfield considered the Strategic Review concluded at that  
point. Although IPL indicated that it considered the Strategic Review unfinished until IPL  
shareholders had a chance to vote on the Pembina Arrangement, Brookfield suggested that showed  
the IPL Board was improperly protecting the Pembina transaction.  
[168] Given the Supplemental SRP's negative effects and the fact that it had ceased to serve any  
legitimate purpose that it may once have had, Brookfield submitted that it should be cease traded.  
(b)  
IPL and Pembina  
[169] IPL and Pembina took the position that IPL properly adopted the Supplemental SRP to  
support, facilitate, and protect the integrity of the Strategic Review process, support the fair  
treatment of all IPL shareholders, preserve shareholder choice, protect against a creeping bid, and  
stem what McKenzie described as "the harm and potential abuse" caused by Brookfield's use and  
incomplete disclosure of the IPL Swaps. Pembina argued that it was appropriate for the IPL Board  
to protect shareholders' interests in this manner, and that doing so was consistent with the  
objectives of the take-over bid regime.  
[170] IPL pointed out that because the Brookfield Offer was a "Permitted Bid" under both the  
First SRP and the Supplemental SRP, neither plan prevented IPL shareholders from tendering to  
the Brookfield Offer if they wished to. Likewise, the IPL SRPs applied to all market participants,  
and therefore did not unfairly target Brookfield.  
[171] IPL and Pembina disagreed that the IPL SRPs no longer served a purpose once the Strategic  
Review resulted in the Pembina Arrangement. As McKenzie indicated during her cross-  
examination, IPL was no longer looking for another bidder, but it did not consider the Strategic  
Review process concluded until the shareholder vote.  
[172] Until then, IPL and Pembina argued, the Supplemental SRP continued to be in the best  
interests of IPL shareholders because it was the only thing protecting the integrity of the vote by  
preventing Brookfield from increasing its economic interest in IPL above 20%. Additional IPL  
Swaps may have sidelined additional Swap Shares, giving Brookfield sufficient negative control  
to block the Pembina Arrangement or any other alternative transaction, and depriving other IPL  
 
38  
shareholders of their right to choose. As Pembina pointed out, with even a 25% interest, historically  
low voter turnout at IPL shareholders meetings could have meant that Brookfield's blocking  
position was insurmountable.  
[173] Pembina cited the Falconbridge decision as factually analogous. The hostile bidder there  
had acquired almost 20% of the target's shares, and if it acquired another 5%, it would have been  
in a position to block the white knight transaction and end the auction prematurely. To minimize  
that risk, the OSC panel determined that it was in the public interest for it to allow the shareholder  
rights plan to continue for a further brief period. Since the same risk was present in this case,  
Pembina submitted, the Supplemental SRP should be allowed to continue for a further brief period.  
[174] In its submissions, Brookfield had argued that Falconbridge was distinguishable.  
Brookfield was not in a position to block a competing bid because documents governing the IPL  
Swaps provided that Brookfield "shall not acquire any right to vote, or direct or influence the  
voting, acquisition or disposition of any [Swap] Shares" (emphasis added).  
[175] Both IPL and Pembina disagreed with this distinction. They argued that Brookfield  
nonetheless retained the ability to influence voting of the Swap Shares, especially given the  
significant business relationships between Brookfield and BMO discussed later in these reasons.  
Moreover, if the Swap Shares were not voted, the proportionate weight of Brookfield's IPL Shares  
would increase.  
[176] As for Brookfield's argument that the Supplemental SRP was suspect because it was not  
approved by IPL's shareholders, Pembina pointed out that there was no practical benefit to seeking  
a shareholder vote for that purpose because the Supplemental SRP would expire the day after the  
vote on the Pembina Arrangement. In Pembina's submission, the vote on the Pembina Arrangement  
was therefore tantamount to a vote on the Supplemental SRP.  
[177] Pembina also disagreed that the Supplemental SRP deprived IPL shareholders of liquidity.  
It emphasized that IPL's share price had risen above the headline value of both the Brookfield  
Offer and the Pembina Arrangement, which suggested strong demand for IPL Shares should any  
IPL shareholders seek to sell.  
(c)  
Staff  
[178] Consistent with the case law, Staff observed that while shareholder rights plans are no  
longer required to achieve some of the objectives they served before the New Bid Regime, they  
may still be adopted for other legitimate purposes. Although much of the commission  
jurisprudence concerning shareholder rights plans prior to the advent of the New Bid Regime in  
2016 tended to focus on whether a plan should survive beyond the minimum deposit period (which  
is no longer an issue), Staff argued that the decisions still provide useful guidance on the principles  
Canadian securities regulators will apply when reviewing a shareholder rights plan.  
[179] Staff emphasized that our assessment of the IPL SRPs should take into account the over-  
arching public interest principles underlying the New Bid Regime and NP 62-202. They  
recommended that we consider the following questions:  
 
39  
(a)  
Do the IPL [SRPs] have the effect of denying IPL shareholders the ability to make a fully  
informed decision about the Brookfield Offer and frustrating an open take-over bid  
process?  
(b)  
(c)  
(d)  
Will the IPL [SRPs] likely result in shareholders being deprived of the ability to respond  
to a take-over bid or competing bid?  
Has prior shareholder approval of the IPL [SRPs] been obtained and/or is there information  
available that indicates the views of shareholders?  
Are the IPL [SRPs] designed to facilitate an auction or a genuine attempt to obtain a better  
bid?  
[180] Staff argued that the answer to the first question was likely "no". To the contrary, the  
Supplemental SRP may have been necessary to give IPL shareholders the opportunity to make a  
decision about the Pembina Arrangement. The limitation on Brookfield's ability to acquire an  
interest in IPL above the 20% threshold may also have been a necessary response to Brookfield's  
lack of early warning disclosure and the uncertainty around whether and how the Swap Shares  
would be voted.  
[181] Staff were of the view that the answer to the second question was also likely "no". The IPL  
SRPs did not preclude IPL shareholders from tendering to the Brookfield Offer or prevent  
Brookfield from taking up and paying for any IPL Shares tendered. However, they did increase  
the likelihood that IPL shareholders would have the opportunity to choose the Pembina  
Arrangement, because they made it more difficult for Brookfield to acquire a de facto blocking  
position prior to the vote.  
[182] Staff noted that the answer to the third question was "no". Only the First SRP was approved  
and confirmed by IPL shareholders, while the Supplemental SRP was not. Further, IPL confirmed  
that it did not intend to submit the Supplemental SRP for shareholder ratification because it was  
set to expire immediately following the vote on the Pembina Arrangement.  
[183] As to the fourth question, Staff submitted that the answer was "yes". They were of the view  
that without the Supplemental SRP and its limitation on Brookfield's ability to increase its interest  
in IPL, Pembina may not have made a competing bid and created an auction. They agreed with  
IPL and Pembina that the circumstances in Falconbridge were analogous to this case, as the OSC  
panel had been concerned about the possibility of a blocking position. Staff therefore suggested  
that we could follow Falconbridge and let the Supplemental SRP stand for a short time until after  
the vote on the Pembina Arrangement.  
[184] Staff concluded that, "in the specific circumstances before the Panel, the [Supplemental  
SRP] is a reasonable defensive tactic of the IPL [B]oard that will preserve the IPL shareholders'  
ability to choose between the Brookfield Offer and the Pembina Arrangement."  
4.  
Analysis and Conclusion  
[185] As discussed, even before the New Bid Regime, providing time for a board of directors  
facing a hostile take-over bid to conduct a strategic review process was not considered the only  
valid reason for a company to adopt a shareholder rights plan. In our view, whether related to the  
 
40  
provision of additional time or not, a plan that furthers the objectives of the take-over bid  
provisions set out in NP 62-202 protecting the bona fide interests of the shareholders of the target  
company and providing a framework within which bids may proceed in an open and even-handed  
manner may be entirely appropriate, depending on the circumstances of the case.  
[186] Here, the IPL Board identified several legitimate concerns raised by the size and nature of  
Brookfield's interest in IPL, including its effect on the willingness of other prospective bidders to  
participate in an auction, the willingness of other shareholders to make the effort to vote on a  
competing transaction, and the outcome of any vote that would take place.  
[187] We discuss the possible implications of Brookfield's IPL Swaps on such a vote in detail  
later in these reasons in the context of the IPL Application and the Pembina Application. For the  
purposes of this discussion, it suffices to say that we agreed with the IPL Board's assessment that  
the Swap Shares had the potential to unfairly distort the outcome whether they were voted against  
an alternative transaction or not voted at all. If Brookfield were at liberty to continue to increase  
its interest including through a potentially unlimited number of IPL Swaps the effect would  
have been compounded.  
[188] We were therefore satisfied that the IPL Board acted reasonably when it adopted the  
Supplemental SRP in response to these concerns.  
[189] The evidence was that the directors followed the advice of their legal and financial advisors  
and exercised their business judgment in doing so, with the goals of facilitating an auction,  
generating a better bid that would have a fair chance of success, and preserving IPL shareholders'  
ability to make a meaningful choice. Because the Supplemental SRP applied to all bidders and was  
implemented before the Pembina Arrangement was on the table, we were not persuaded that it  
unfairly targeted Brookfield or improperly protected the board-supported transaction. The  
Brookfield Offer was a "Permitted Bid" under both the First SRP and the Supplemental SRP, and  
neither plan precluded Brookfield from increasing its offer.  
[190] More importantly, we were satisfied that the Supplemental SRP did not prejudice IPL  
shareholders.  
[191] To the contrary and with reference to the questions Staff suggested should guide our  
analysis the IPL SRPs operated to the shareholders' benefit and supported their interest in  
maximizing value for their IPL Shares. While the IPL SRPs did not preclude shareholders from  
tendering to the Brookfield Offer, they did prevent Brookfield from accumulating a negative  
control position that could have blocked a genuine preference for the Pembina Arrangement or  
any other alternate transaction. IPL amended the Supplemental SRP to terminate after the vote on  
the Pembina Arrangement the time at which we concluded the plan would have served its  
legitimate purpose. If IPL had not done so, we would have issued an order with the same effect.  
[192] Brookfield pointed out that it, too, was an IPL shareholder whose bona fide interests should  
have been supported in accordance with the objectives of the take-over bid regime. However,  
Brookfield's interest in having the IPL SRPs cease traded so it could increase its shareholding  
position and therefore its chance of acquiring the company as cheaply as possible was clearly not  
41  
the same as the interests of other IPL shareholders, who wanted to obtain the highest value possible  
for their shares. It is the latter group's interest that was intended to take precedence, and not  
Brookfield's interest qua bidder who also happened to be a shareholder.  
[193] We were not persuaded by Brookfield's argument that the IPL SRPs denied other  
shareholders liquidity because Brookfield could not purchase additional IPL Shares on the market  
without terminating an equivalent interest in the Swap Shares. The evidence was that the IPL Share  
price was increasing at the relevant time and the shares were already liquid. We considered it  
unlikely that an IPL shareholder who wanted to sell on the market would have had difficulty doing  
so.  
[194] Similarly, we were not persuaded that it would have been too difficult for Brookfield to  
terminate some of its IPL Swaps and then make additional market purchases to acquire a beneficial  
interest in a corresponding number of IPL Shares. There was no evidence this was the case beyond  
Baker's speculation in that regard, and no evidence Brookfield even attempted this course of action  
to avail itself of the 5% Exemption. In fact, the terms of the IPL Swap Letter Agreements provided  
for Brookfield's optional termination of all or a portion of the IPL Swaps.  
[195] It was suggested in argument that a decision not to cease trade the IPL SRPs would be  
tantamount to a decision to endorse treating derivative interests as equivalent to beneficial  
ownership, contrary to the CSA's decision not to do so in 2016 after running a full stakeholder  
consultation process prior to implementing the New Bid Regime (as discussed later in this  
decision).  
[196] We disagreed. Although that possibility is contemplated in s. 3.1 of NP 62-203 ("[a]n  
investor that is a party to an equity swap or similar derivative arrangement may under certain  
circumstances have deemed beneficial ownership, or control or direction, over the referenced  
voting or equity securities"), a decision whether to cease trade a shareholder rights plan is based  
on the facts and circumstances of the particular case. Our conclusions concerning the Supplemental  
SRP or the IPL Swaps more generally are not intended to be a general pronouncement on the  
treatment of derivative interests in all situations.  
[197] In arriving at our decision, we considered the factors set out in Royal Host. As in other  
cases, not all of the factors were relevant here particularly since a number of them are oriented  
toward shareholder rights plans adopted for the purpose of giving a target company's board of  
directors time to conduct a strategic review.  
[198] Brookfield emphasized the factors relating to shareholder approval, given that the IPL  
Board adopted the Supplemental SRP without submitting it to a shareholder vote. It is true that  
lack of express shareholder support for a plan has had significance in some past securities  
commission decisions, but the decisions also note that shareholder approval is not necessarily  
determinative (see, e.g., Cara Operations at para. 65, Falconbridge at para. 46, Suncor at para. 27,  
and Neo at paras. 44-45).  
[199] Here, as in Suncor (at para. 29), we considered it a neutral factor. Broad IPL shareholder  
support for a shareholder rights plan with most of the same provisions as the Supplemental SRP  
42  
was established with shareholder approval of the First SRP, reconfirmed as recently as  
May 7, 2020. In addition, we agreed with Pembina that there was no point seeking a vote on the  
Supplemental SRP given that it was to terminate immediately following the shareholder vote on  
the Pembina Arrangement. In the circumstances, that vote would have served as a proxy for a vote  
on the Supplemental SRP.  
[200] As Brookfield pointed out, in CW Shareholdings (Comm. #1), the panel suggested that  
because the shareholder rights plan at issue was adopted in the face of a hostile bid and without  
the approval of target shareholders, the target company should have demonstrated that "it was  
necessary to do so because of the coercive nature of the [hostile bid] or some other very substantial  
unfairness or impropriety" (at para. 74). While this harkens back to one of the Royal Host factors,  
we did not consider it to be a general principle applicable in all cases. Even if it were, we were  
satisfied that whether the Brookfield Offer could be considered coercive or not, it was reasonable  
for the IPL Board to have concluded it was necessary to implement the Supplemental SRP to  
address the potential unfairness posed by Brookfield's use and disclosure of the IPL Swaps.  
[201] In support of its argument that the Supplemental SRP had outlived its usefulness once IPL  
entered into the Pembina Arrangement, Brookfield relied on the fact that compared to the plans in  
other cases, the Supplemental SRP was to be in place for a relatively long time from  
March 31, 2021 until the end of July 2021, a period of approximately four months. Some past  
decisions have held that the longer a plan has been in place, the higher the onus on the proponents  
of the plan to show it still serves the interests of the shareholders (see, e.g., Cara Operations at  
para. 60).  
[202] In our view, although the length of time a plan has operated may be a significant  
consideration in some circumstances, there is no hard and fast rule in that regard. The real focus  
of the inquiry is whether a plan continues to operate in the best interests of target shareholders.  
Brookfield argued that the Supplemental SRP no longer served a purpose once IPL and Pembina  
agreed on a transaction. We were satisfied that its purpose to address concerns relating to the  
effects of the IPL Swaps continued until the shareholder vote. Moreover, as we have already  
observed, the plan did not interfere with shareholder choice or otherwise frustrate the take-over  
bid process.  
[203] In the result, we dismissed this part of the Brookfield Application. We found that the IPL  
Board's decision to adopt the Supplemental SRP and maintain it until the IPL Shareholders  
Meeting was reasonable in the circumstances.  
C.  
The Break Fee  
1. Additional Background and Evidence  
(a) General  
[204] As set out in the Chronology, Burrows indicated that Pembina first raised the issue of a  
break fee with IPL on March 7, 2021. The evidence was unclear as to how IPL responded to that  
inquiry at the time, but the subject arose again between the two parties on May 25, 2021 as they  
discussed a possible all-share transaction.  
     
43  
[205] Burrows explained that based on advice from its financial advisors, Pembina initially  
proposed a break fee of $400 million, which it considered was an amount commensurate with its  
risk and consistent with comparable past transactions. Further negotiations followed, and break  
fee numbers ranging from $250 million to $400 million were discussed, as was a reciprocal or  
reverse break fee payable to IPL.  
[206] Ultimately, the parties agreed on the reciprocal $350 million break fee set out in the  
Pembina Arrangement. According to Burrows, IPL accepted this number in exchange for  
Pembina's agreement to other contractual terms, including an increase in the consideration it  
offered per IPL Share and its agreement to pay a post-closing dividend. Both McKenzie and  
Burrows described the Break Fee as having been heavily negotiated between the parties as just one  
element of a complex deal with many parts, and McKenzie said she did not believe the deal would  
have proceeded without it.  
[207] Quinn said the Break Fee represented approximately 2.3% of IPL's enterprise value and  
approximately 4.2% of equity value. He explained that equity value "theoretically quantifies the  
break fee relative to the consideration to be received by shareholders" and enterprise value  
"theoretically quantifies the break fee relative to the overall size of the target company, reflecting  
the value of both the equity consideration and the debt or other securities outstanding".  
[208] IPL's witnesses further explained that the Special Committee wanted to secure the  
transaction because it had concluded that the Pembina Arrangement was in the best interests of  
IPL and its shareholders and clearly superior to the Brookfield Offer including the two offers  
each described as Brookfield's "BEST AND FINAL OFFER". McKenzie, Quinn, and Castaldo  
gave some of the reasons for that conclusion:  
(a)  
Based on Pembina's May 28, 2021 share closing price, the Pembina  
Arrangement had a headline value of $19.525 per IPL Share. Based on  
Pembina's May 31, 2021 share closing price, it had a headline value of  
approximately $19.45 per IPL Share. Both exceeded the headline value of  
Brookfield's May 31 Offer of approximately $19.42 per IPL Share, based  
on the closing price of the BIPC Shares on May 31, 2021.  
(b)  
(c)  
J.P. Morgan thought that Pembina Shares were undervalued on the market,  
so the Pembina Arrangement gave IPL shareholders an opportunity to  
acquire Pembina Shares at a relatively low value. Pembina Shares are far  
more liquid than BIPC Shares, and J.P. Morgan had concerns about the  
BIPC Shares' valuation.  
The combination of IPL's and Pembina's complementary assets would result  
in greater "vertical integration, expanded customer service offerings and  
enhanced global market reach" i.e., a stronger combined company that  
would allow IPL shareholders to participate in both the upside of Pembina's  
business and the upside of IPL's standalone business.  
44  
(d)  
(e)  
(f)  
The Pembina Arrangement would create "significant value through the  
realization of near term synergies and high return growth opportunities" by  
merging two of Canada's largest midstream companies. Pembina estimated  
that the combined company would achieve $150 million to $200 million in  
"synergies".  
IPL shareholders would retain an implicit 28% interest in the HPC, which,  
once in full service, was expected to help the combined company to generate  
$1.1 billion to $1.4 billion in adjusted cash flow from operating activities  
after dividends annually. Under the Brookfield Offer, IPL shareholders  
would retain an indirect interest of 3% or less.  
IPL shareholders would receive a 175% increase in their monthly dividend  
upon closing.  
[209] As McKenzie explained, the Special Committee considered a break fee a customary term  
in a transaction like the Pembina Arrangement, and understood that break fees tend to be higher  
than average in white knight transactions such as the Pembina Arrangement. Quinn was of the  
view that break fees are a standard term included in almost all public company M&A transactions  
in Canada. TD Securities' research revealed that of 298 transactions involving Canadian public  
companies with an equity value of over $500 million over the last 20 years, there were break fees  
in 293 or 98.3%.  
[210] Concerning the quantum of the Break Fee, Quinn cautioned against over-reliance on  
precedent given the variability of the circumstances surrounding different transactions. However,  
he confirmed that in TD Securities' view, the fee here was consistent with the precedent range,  
which has averaged 3.1% of enterprise value and 3.5% of equity value over the past 20 years and  
3.3% of enterprise value and 3.9% of equity value and over the past 10 years.  
[211] Quinn also indicated that before agreeing to the Break Fee, IPL satisfied itself that it had  
thoroughly canvassed the market and conducted a fair auction process that led to the highest value  
transaction possible. He pointed out that the risk of a failed transaction was enhanced in this case  
because of the size of Brookfield's interest in IPL, its opposition to a deal with Pembina, and the  
fact that it was not constrained by a standstill agreement and could have responded to the Pembina  
Arrangement by making an improved competing offer directly to IPL shareholders. Quinn  
considered that the reluctance of other parties to enter the auction because of Brookfield's position  
negatively affected IPL's bargaining power and the size of the break fee Pembina sought.  
[212] Quinn concluded:  
Based on the above analysis and TD Securities' experience, the [B]reak [F]ee associated with the  
Pembina Arrangement . . . was, in the view of TD Securities, reasonable, standard, within the  
precedent range, and was consistent with the average on a percentage of equity value basis, and  
below the average on a percentage of enterprise value basis, of sell-side break fees offered in  
Canadian target transactions with greater than $500 million implied equity value over the past  
10 years arising from strategic review processes similar to the IPL Strategic Review.  
45  
[213] From Pembina's perspective, Burrows explained that Pembina sought the Break Fee as  
compensation for its investment of resources and the expenses it incurred to pursue IPL on an  
accelerated timeline, as well as its lost opportunity costs i.e., the loss of its ability to pursue other  
transactions during the IPL negotiations and the value of any impact on its business operations  
from its focus on the negotiations. Pembina also sought compensation for the risk it undertook in  
agreeing to a deal with IPL, including the potential risk to its reputation and share price if the  
transaction failed.  
[214] Pembina confirmed that in its view, the risk of a failed transaction was higher than normal  
in these circumstances, given the size of Brookfield's economic interest in IPL and the possibility  
that Brookfield may have had the ability to influence the voting of the Swap Shares. Like  
McKenzie, Burrows suggested that break fees are typically higher following an auction and where  
a white knight is involved because of the risk of bidding into a hostile take-over. He also pointed  
out that Pembina faced additional risk by sharing its confidential information with IPL, a  
competitor in the same industry.  
[215] Although Brookfield maintained that it never sought a break fee during its dealings with  
IPL, McKenzie contended that was not true. Brookfield's November and December Proposals both  
contemplated transaction documentation with "standard break-fee" provisions and "other  
customary deal protections". Brookfield's May 30 and May 31 proposals likewise indicated that  
Brookfield expected any agreement to include "[c]ustomary Brookfield . . . deal protections",  
which the Special Committee and its advisors understood would include a break fee.  
[216] McKenzie acknowledged during cross-examination that Brookfield never proposed a break  
fee number and IPL never asked it for one. However, in her affidavit, she pointed out that was  
because Brookfield did not provide a form of arrangement agreement or a mark-up of IPL's form  
of agreement. According to Quinn, it would generally not be until after a party's bid was  
determined to be superior and negotiations of a final agreement were underway that he would seek  
specific information about a break fee or other deal protections. He and Castaldo both assumed  
Brookfield would ask for a break fee similar to what Pembina sought, since that figure was in line  
with market precedent.  
(b)  
Expert Evidence  
(i) Brookfield  
[217] Osler acknowledged that there have been break fees in the vast majority of Canadian public  
M&A transactions over the last 20 years with an equity value of $500 million or more. In his  
opinion, a break fee is generally appropriate in contested M&A transactions when it is necessary  
to induce an offeror to make a materially superior proposal. He confirmed that offerors seek break  
fees as compensation for their time and out-of-pocket expenses incurred in completing due  
diligence, negotiating an agreement, and satisfying closing conditions, and for both their  
opportunity costs and the risks posed to their reputation and share price by the prospect of an  
unsuccessful transaction.  
[218] Osler observed that while an offeror will always want the greatest deal protections it can  
get, a target board has a responsibility to minimize those protections so they do not preclude other  
proposals or result in a disproportionate amount of the value of a proposal going to the break fee  
   
46  
recipient. Deal protections should not have the effect of depriving target shareholders of their right  
to make a decision among competing proposals.  
[219] To assess the appropriateness of agreeing to a break fee, Osler suggested that a target board  
should consider whether:  
(i)  
the solicited proposal will create more value for shareholders than the business's  
standalone prospects;  
(ii)  
the solicited proposal is superior to the unsolicited proposal (in terms of value and  
likelihood of timely completion); and  
(iii) the board is satisfied that it has explored all other reasonable alternatives and  
determined that none will deliver the same or better value to shareholders or has a  
higher likelihood of completion.  
[220] Applying these considerations to this case, Osler concluded that based on the information  
he reviewed, the IPL Board appeared to have determined that at least as of May 30, 2021, the  
Brookfield and Pembina proposals were superior to IPL's standalone prospects and preferable to  
continuing the status quo. It was then the board's responsibility to secure the best deal possible. If  
the IPL Board concluded that Pembina's offer was superior, Osler acknowledged that it was  
appropriate for IPL to have attempted to secure the transaction by offering deal protections,  
including a break fee.  
[221] However, Osler disagreed with the IPL Board that Pembina's offer was clearly superior to  
Brookfield's. In addition to pointing out the small difference in the respective headline values of  
the two offers as of May 31, 2021 and concerns he had about the value of Pembina Shares  
compared to BIPC Shares, he questioned the ostensible value added by the estimated "synergies"  
IPL and Pembina touted. He also pointed out that Brookfield's offer was predominantly in cash. In  
his opinion, cash is typically better than non-cash consideration because it is not volatile and,  
unlike share consideration, it is not subject to discounting. Similarly, he contended that any  
deferred, contingent, or restricted consideration may need to be discounted because it can be  
uncertain and beyond the control of the target board.  
[222] Osler further opined that the Brookfield Offer was superior in terms of its timing,  
conditionality, and transaction certainty, because an acquisition that can close quickly with little  
risk of non-completion is preferable to one that will be slower to complete or has a higher level of  
conditionality or uncertainty of completion. While Brookfield had already obtained all necessary  
regulatory approvals and anticipated paying IPL shareholders their total consideration within  
21 days, Pembina did not yet have those approvals and did not expect to close the Pembina  
Arrangement until later in 2021.  
[223] In addition, Osler noted that it was uncertain whether the Pembina Arrangement would  
garner the necessary 66 2/3% approval by IPL shareholders when IPL's largest shareholder,  
Brookfield, intended to vote against it. He thought that the IPL Board should have taken that  
uncertainty into account before agreeing to the Break Fee.  
47  
[224] Given his conclusion that the Pembina Arrangement presented only a "marginal, if any"  
premium over the Brookfield Offer, Osler was of the view that the Break Fee was excessive  
relative to the value offered, even if the IPL Board had determined in good faith that the Pembina  
Arrangement was superior. At 4.2% of equity value, he considered the Break Fee to be at the very  
high end of the precedent range.  
[225] Osler also commented on the possible chilling effect of a break fee where there is another  
bidder in play that might otherwise increase its offer. He stated in his report that he did not think  
it was clear in this case that the auction had ended before the IPL Board agreed to the Break Fee,  
as Brookfield's use of the word "FINAL" in its last few written offers should not have been taken  
literally. In his view, IPL lost value for its shareholders as a result. Instead of paying additional  
consideration to IPL shareholders, Brookfield would end up paying it to Pembina in the form of  
the Break Fee.  
(ii)  
IPL  
[226] Plewes was retained by IPL to provide expert opinion evidence about its Strategic Review  
and the Break Fee. Like Osler, he opined that break fees are a standard component of almost all  
Canadian M&A transactions, and that a target board should generally avoid agreeing to a break  
fee that would prevent a better offer from being made to shareholders. He suggested that the  
following factors are relevant when negotiating a break fee:  
(i)  
the absolute size of the fee;  
(ii)  
the absolute size of the transaction;  
(iii) the percentage of enterprise value that the fee represents;  
(iv)  
(v)  
the percentage of equity value that the fee represents;  
the relative size of the parties to the transaction;  
(vi)  
the value and benefits to shareholders that directors are seeking to protect;  
(vii) the competitive dynamics of the transaction;  
(viii) other terms and conditions of the transaction agreement; and  
(ix)  
the degree to which the protection provided by the fee is important to  
entering into a transaction agreement.  
[227] Plewes considered that it would be inappropriate for him to critique any single factor in  
this case in isolation, given that he was not directly involved in the negotiations between IPL and  
Pembina and did not have access to each party's relevant confidential information. He pointed out  
that in negotiating the Break Fee, Pembina was aware of the outstanding Brookfield Offer and no  
doubt weighed the likelihood that Brookfield or another third party would make further  
competing proposals.  
[228] In cross-examination, Plewes agreed with Brookfield's counsel that in the context of an  
auction with two competing offers, a target company's board should understand and, if necessary,  
seek out all the terms and conditions of both proposals and how they compare, including whether  
deal protections such as a break fee are being sought. However, in his report he made note of the  
fact that in IPL's data room, both Brookfield and Pembina had access to the process letter and IPL's  
proposed form of arrangement agreement, which included termination provisions. He therefore  
concluded that both Brookfield and Pembina were given multiple opportunities to improve their  
 
48  
respective offers, and that both were made aware a termination fee would form part of any  
arrangement agreement.  
[229] Since Plewes did not give an opinion about the appropriateness of the Break Fee in this  
case, Brookfield argued that we should have drawn an adverse inference that his view would not  
have supported IPL's position. In response, IPL pointed out that Plewes was not asked for that  
opinion either in preparing his report or by Brookfield when it had the opportunity to do so  
during cross-examination on the Plewes Affidavit.  
2.  
Applicable Law  
[230] There appear to be a limited number of reported decisions that discuss break fees also  
described as bust-up, break-up, termination, or kill fees. However, the decisions cited by the parties  
generally agreed that such fees are common in M&A transactions, and that they can be legitimate  
deal protection mechanisms (see, e.g., Re Pacifica Papers Inc., 2001 BCSC 1069 at para. 49 and  
CW Shareholdings (Ont. Gen. Div.) at para. 50).  
[231] Break fees are intended to entice bidders to participate in an auction. As alluded to in the  
previous section of this decision, they compensate a party for its wasted time, resources, and lost  
opportunity costs should a proposed transaction fail (CW Shareholdings (Ont. Gen. Div.) at  
para. 50). They can offset various potential risks, including disclosure risk and reputational risk.  
From the target's perspective, agreeing to a break fee may assist it in its goal of generating the best  
bid to maximize shareholder value. From the bidder's perspective, a break fee protects against "the  
price being shopped and the transaction being abandoned in favour of a marginally better deal"  
(Pacifica at para. 49).  
[232] CW Shareholdings (Ont. Gen. Div.) is a leading case on the subject of break fees in Canada.  
In its reasons, the Ontario Court accepted that a break fee is appropriate where (at para. 51):  
(i)  
it is needed to induce a competing bid;  
(ii)  
the bid represents better value for shareholders; and  
(iii) the fee reflects "a reasonable commercial balance between its potential negative  
effect as an auction inhibitor and its potential positive effect as an auction  
stimulator" (the CW Shareholdings Test).  
[233] However, if the quantum of a break fee is unreasonable in the circumstances, it could be  
considered an improper defensive tactic (Re CW Shareholdings Inc. (1998), 21 O.S.C.B. 2910  
(CW Shareholdings (Comm. #2)) at para. 52).  
[234] In Abitibi, Québec's Bureau de décision et de révision (the Québec BDR) found that a  
break fee in the amount of 5% of equity value and subject to further escalation was "unjustified"