Canadian Spinco Acquisition Transactions

Summary Overview

Strong and rising commodity prices in recent years have sparked a wave of activity in the Canadian stock markets, with larger resource companies acquiring a significant number of smaller, publicly-traded resource companies that require further capitalization to exploit their assets. A number of these transactions have contained a feature not often found in transactions outside the resource sector to date: in the course of being taken over, the target has spun out a new public corporation to its shareholders, owning assets not required by the purchaser.

Commonly, these takeovers occur once some of the target's assets have proven out, while others remain highly speculative. Where the purchaser is interested in acquiring and operating the proven assets, it often will place little or no value on the more speculative assets - and the stock market typically will give it little or no credit for them, either. Target's management, however, may be focused