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Parties may wish to add closing conditions to a share purchase where part of the value of the shares/securities that are being purchased results from an action yet to be taken by the company for example, the company’s purchase of specified assets.

Emera Inc. announced it has entered into a subscription agreement with Algonquin Power & Utilities Corp. (“Algonquin”) under which Emera has subscribed for 7,865,170 subscription receipts (“Odell Subscription Receipts”) at a price of $8.90 per subscription receipt, for an aggregate subscription price of $70 million. Each subscription receipt represents a right to one common share of Algonquin. Under the subscription agreement, the Odell Subscription Receipts will become convertible into common shares of Algonquin following the closing of Algonquin’s acquisition of Odell. The purchase of Odell is an example of a closing condition that would have to be satisfied before the conversion to common shares.

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Take away:

  • If you are participating in a share purchase, ensure that your closing conditions include all assets that you expect the company to purchase prior to the closing of the share purchase.

 

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