Re Red Eagle: Private Placements In The M&A Context

In its recent decision, Re Red Eagle, 2015 BCSECCOM 401 (Re Red Eagle), the British Columbia Securities Commission (BCSC) addresses the tension that arises between corporate law and securities regulatory goals when private placements are undertaken in the M&A context.

Red Eagle Mining Corporation (Red Eagle) sought to complete a hostile take-over of CB Gold Inc. (CB Gold). The bid was initially subject to a 50% minimum tender condition that was later waived. Red Eagle and CB Gold had initially engaged in friendly transaction discussions during the course of which CB Gold disclosed that it required financing of approximately US$550,000 in order to meet its ongoing obligations and remain a going concern. After the break-down of negotiations and the implementation of other defensive tactics, CB Gold entered into a support agreement with Batero Gold Corp. (Batero) pursuant to which Batero would make an offer to acquire all of the outstanding shares of CB