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Brookfield Business Partners L.P. & Brookfield Business Corporation

2021-10-08 | Decision | 61-101 | Mergers and acquisitions | https://www.osc.ca/en/securities-law/orders-rulings-decisions/brookfield-business-partners-lp-brookfield-business-corporation

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, Part 5, ss. 5.5(a), 5.7(1)(a) and 9.1.


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 and the calculation of market capitalization for transaction size exemptions.

BBU, a Bermuda exempted limited partnership, and BBUC, a corporation, are both reporting issuers. BBU’s primary asset is its interest in Brookfield Business L.P. (Holding LP), and it is controlled by Brookfield Asset Management Inc. BBUC was created to offer investors an alternative way to invest in BBU’s operations through exchangeable shares that are economically equivalent to BBU units.

The exemption allows BBU and BBUC to engage in related party transactions without complying with the related party transaction requirements of MI 61-101, subject to conditions such as BBU consolidating BBUC in its financial statements and owning all equity securities of BBUC. Additionally, BBU can 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 functional and economic equivalence of the exchangeable shares to BBU units, the control BBU exercises over BBUC, and the consolidation of BBUC’s financials into BBU’s. The exemption is conditional upon no material changes to the exchangeable share provisions and disclosure requirements in BBU’s annual information form or equivalent filings.

The outcome is that BBU and BBUC can conduct related party transactions more efficiently, and BBU can potentially avoid the valuation and minority approval requirements for transactions that would otherwise fall below the adjusted 25% market capitalization threshold when including BBUC’s exchangeable shares.