National Bank of Canada guards against unsolicited take-over bids

Montreal, 14 December 2000 - 

The Board of Directors of National Bank of Canada has adopted a shareholder rights plan. Pursuant to the plan, the Bank could issue subscription rights to its shareholders in the event of a cash or share exchange bid on its common shares. The purpose of the plan is to ensure, to the extent possible, that the Board will have sufficient time to properly consider any proposed bid for the Bank and allow enough time for competing offers to emerge. The plan will be submitted to the shareholders of the Bank on March 7, 2001.
The plan is being put in place in anticipation of a revision of the Canadian rules on ownership of financial institutions, in the event that draft legislation similar to Bill C-38 is tabled in the House of Commons in the near future.

André Bérard, Chairman of the Board of the Bank, commented on the plan as follows: "We are proposing to give the Bank such a plan so that our shareholders can avail themselves of it should the occasion arise. That being said, I want to make two things clear: this rights plan is not being proposed in response to a purchase bid that we are aware of or that we expect to be made, nor is it being introduced to safeguard any discussions whatsoever with any party whatsoever."

In the context of Bill C-38, the federal government had announced its intention to allow a person, with the prior approval of the Minister of Finance, to acquire an interest in excess of 10% up to and including 20% of any class of voting shares, or 30% of any class of non-voting shares. With respect to a bank such as the National Bank with equity between $1 billion and $5 billion, it could be owned up to 65% by a single person but would still be required to have shares carrying at least 35% of the voting rights listed on a Canadian stock exchange. Following the call for a federal election last November, the parliamentary session ended and Bill C-38 was not passed.
Should a new bill substantially in the same form as Bill C-38 be passed, the plan will complement the provisions of applicable securities legislation. The Board of Directors believes that since a take-over bid need only remain open for 21 days under existing Canadian securities legislation, it is a period of time which the Board of Directors believes is insufficient to evaluate a bid, pursue alternatives which could maximize shareholder value and make informed recommendations to the Bank's shareholders.

In the context of the plan, a flip-in event occurs when a person, acting alone or jointly in concert with another, acquires or offers to acquire more than 20% of the outstanding common shares, other than by way of a permitted bid, a competing permitted bid or in certain other limited circumstances.
A permitted bid is a take-over bid made by means of a take-over bid circular sent to all holders of common shares with identical terms and conditions.
It must remain open for at least 60 days and be accepted by more than 50% of the then outstanding common shares held by shareholders independent from the offeror and its affiliates.

If the potential offerors do not comply with these conditions, the shareholders would be entitled to purchase from the Bank one common share upon payment of a price equal to 50% of the closing price of the common shares on the date of the flip-in event, which is deemed to be effective at the close of business on the 10th day following the announcement of the offer.
The plan must be approved by securities regulatory authorities and by the shareholders of the Bank. It will be placed on the agenda of the shareholders' meeting to be held on March 7, 2001. If the plan is adopted by the shareholders, one right shall be issued with respect to each outstanding common share at the close of business on March 6, 2001. Until the occurrence of a flip-in event, the rights will trade together with the common shares and will be represented by the common share certificates or an entry in the Bank's securities register. Upon the occurrence of a flip-in event, the rights will be evidenced by rights certificates and will trade separately from the common shares. The rights do not carry any other rights attaching to the common shares such as voting or dividend rights.

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