The Securities Commission has granted an exemption to Brookfield Business Partners L.P. (BBU) and Brookfield Business Corporation (BBUC) from certain requirements of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101). This exemption relates to related party transactions between BBU and BBUC or their subsidiary entities, and the calculation of market capitalization for certain transactions.
Key points include:
1. BBU and BBUC are both reporting issuers and have created a structure where BBUC issues exchangeable shares that are economically and functionally equivalent to BBU units, providing an alternative investment method for investors.
2. The exemption allows BBU and BBUC to engage in related party transactions without adhering to the usual related party transaction requirements of MI 61-101, subject to conditions such as BBUC being a controlled subsidiary of BBU, and BBU consolidating BBUC in its financial statements.
3. BBU is permitted to include BBUC’s exchangeable shares in its market capitalization calculation for the purpose of determining the applicability of the 25% market capitalization exemption for certain related party transactions.
The decision is based on the premise that the exchangeable shares issued by BBUC provide an equivalent economic return as BBU units, and that the market price of the exchangeable shares will track the market price of the BBU units. The exemption is conditional upon no material changes to the exchangeable share provisions and the continued consolidation of BBUC within BBU’s financial statements.
The relevant legislative provisions underpinning the outcome are sections 5.5(a), 5.7(1)(a), and 9.1 of MI 61-101, which deal with the protection of minority security holders in special transactions. The decision also references the Downstream Transaction Carve-Out under paragraph 5.1(g) of MI 61-101 and the definition of market capitalization in the legislation.
The decision aims to facilitate the operation of the exchangeable share structure and support the economic interests of BBU and BBUC, while also ensuring that the protections intended by MI 61-101 are maintained for minority shareholders.