It’s a rare week in Canada when two terms – contingent value rights, or CVR, and warrants C end up part of the public lexicon as two high-profile takeovers are being discussed.
It was this type of week: In a bid to win the hearts and minds from the board of Norfolk Southern Corp., Canadian Pacific Railway Ltd. announced it would give a CVR to the cash and stock offer that it had already presented.
Meanwhile, so that they can convince Suncor to pay for a little bit more, a group of Canadian Oil Sands Ltd. shareholders led by Seymour Schulich, argued for together with a warrant alongside the 0.25 cent of the Suncor share that they are currently being offered. That warrant would give the COS shareholder the right to buy additional Suncor shares if oil prices rose over a certain level.
On CP Rail’s offer, a US$25 cap, was placed on the value of each right. “This particular CVR protects the holder’s value in the event that the need for the stock inside a combined CP-NS is below US$175 a share in the date of payment,” CP Rail said.
The contingent value right C which, if fully exercised would cost CP Rail an extra US$3.4 billion C covers the period April 20, 2017 to October 20, 2017.
It’s believed this really is mostly of the occasions within the last 20 years that a contingent value right has been used inside a Canadian takeover.
In 1995, Algoma Steel Inc. included a CVR when it completed a two-part financing: US$82 million in equity and US$300 million high-yielding debt securities.
But there is a snag: not enough cash grew up to completely shell out the holders of previously issued preferred shares. And spending that group was among the objectives from the financing that was done included in a restructuring made to rid the company of preferred shares.