SEC Division of Corporation Finance no-action letter: PetroKazakhstan Inc.

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Securities Exchange Act of 1931 - Rule 13e-4(g)

Response of Office of Trading Practices and Policies, Division of Market Regulation and Office of Mergers and Acquisitions, Division of Corporation Finance

June 10, 2004

Mark S. Bergman, Esq. Paul, Weiss, Rifkind, Wharton & Garrison LLP Alder Castle 10 Noble Street London EC2V 7JU

Re: PetroKazakhstan Inc. Request for exemption under Rule 13e-4(g) and General Instruction III of Schedule 13E-4F

Dear Mr. Bergman:

In your letter dated June 10, 2004, as supplemented by conversations with the staff, you request that the Commission determine whether PetroKazakhstan Inc. (the "Company") can proceed with its proposed tender offer ("Offer") in the United States under the Multijurisdictional Disclosure System with Canada. Specifically, you request relief to permit the Offer to be conducted in reliance upon Rule 13e-4(g) of the Securities Exchange Act of 1934 where the Company has received exemptions from applicable Canadian statutory requirements. We have attached a copy of your correspondence to this response to avoid reciting or summarizing the facts set forth in your letter. Each defined term in our letter has the same meaning as defined in your letter, unless otherwise noted.

On the basis of your representations and the facts presented in your correspondence and in conversations with the staff, particularly that the Offer otherwise will be made in compliance with and subject to applicable Canadian statutory requirements, the Commission, by the Divisions of Market Regulation and Corporation Finance, acting pursuant to delegated authority, hereby determines that the application of the provisions of Section 13(e)(1) of the Exchange Act and Rule 13e-4 and Schedule TO thereunder to the Offer is not necessary or appropriate in the public interest. Accordingly, the Company can proceed with the Offer in the United States as described in your correspondence.

The foregoing determinations with respect to the application of Section 13(e)(1) of the Exchange Act and Rule 13e-4 and Schedule TO thereunder are based solely on your representations and the facts you have presented to the staff, and is strictly limited to the Offer. The Offer should be discontinued, pending presentation of the facts for our consideration, in the event that any material change occurs with respect to any of those facts or representations. In addition, we direct your attention to the anti-fraud and anti-manipulation provisions of the federal securities laws, including Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-5 thereunder. Responsibility for compliance with these and other applicable provisions of the federal or state securities laws must rest with the Company. The Division expresses no view with respect to other questions that the offer may raise, including, but not limited to, the applicability of other federal and state laws to the Offer.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority,

For the Commission, by the Division of Corporation Finance, pursuant to delegated authority,

James A. Brigagliano Assistant Director Office of Trading Practices and Processing Division of Market Regulation

Mauri L. Osheroff Associate Director Division of Corporation Finance

Incoming Letter:

June 10, 2004

Securities and Exchange Commission 450 Fifth Avenue, NW Washington, DC 20549

Attention: Brian V. Breheny, Esq. Chief, Office of Mergers & Acquisitions Division of Corporation Finance

Attention: James A. Brigagliano, Esq. Assistant Director, Office of Trading Practices and Processing Division of Market Regulation

Re: PetroKazakhstan Inc. "Dutch auction" issuer tender offer Request for exemption under Rule 13e-4(g) and General Instruction III of Schedule 13E-4F

Dear Messrs. Breheny and Brigagliano:

PetroKazakhstan Inc., a corporation organized under the laws of Alberta, Canada, formerly known as Hurricane Hydrocarbons Ltd. (the "Company"), announced on May 4, 2004 that it proposes to effect an issuer tender offer (the "Offer") to all holders of the outstanding common shares of the Company (the "Shares"). The Offer, to be conducted in the form of a modified "Dutch auction," will be to purchase, for cash, up to C$160 million (the "Specified Amount") of Shares at a price per Share not less than C$40 (the "Minimum Price"). The combination of the Specified Amount and the Minimum Price will have the effect of establishing a maximum number of Shares sought in the Offer, in this case, 4 million Shares (the "Maximum Number of Shares").

The Offer will be conducted pursuant to Canadian statutory requirements, except that the Company has obtained exemptive relief from various Canadian securities commissions to exempt the Offer from Canadian valuation requirements, proportionate take-up and associated disclosure requirements, as well as the requirement to state the specific number of Shares sought under the Offer, as more fully discussed herein.

We are writing to request relief from the U.S. Securities and Exchange Commission (the "Commission") in order that the Offer may proceed in the United States under the Multijurisdictional Disclosure System with Canada (the "MJDS") and pursuant to Rule 13e-4(g) under the U.S. Exchange Act of 1934, as amended (the "Act"), notwithstanding the fact that the Offer will have two features not found in issuer tender offers conducted under the Williams Act in the form of modified Dutch auctions, namely:

a minimum, but no maximum price, at which the Shares can be tendered, and

an obligation to purchase stated in terms of a maximum dollar amount rather than a maximum number of securities.

Background

The Company is a vertically integrated international energy company engaged in the acquisition, exploration, development and production of oil and gas, the refining and export of crude oil, and the marketing of crude oil and refined products in the Republic of Kazakhstan. The Company's business consists of upstream and downstream operations.

The Shares are listed and posted for trading on the Toronto Stock Exchange (the "TSX"), the New York Stock Exchange (the "NYSE"), the London Stock Exchange and the Frankfurt Stock Exchange. The Shares are registered under Section 12(b) of the Act.

In 2003, based on trading volume, the single largest market for the Shares was the NYSE. In 2003, 57.7% of all trading in Shares took place on the NYSE and 41.7% of all trading in Shares took place on the TSX. On May 31, 2004 the closing price of the Shares on the TSX was C$37.49. On May 28, 2004, the closing price of the Shares on the NYSE was US$26.67. On the basis of these closing prices, the Shares had an aggregate market value of approximately C$2,985,354,036 and US$2,129,999,790 respectively.

The authorized capital of the Company consists of an unlimited number of Shares and an unlimited number of Class B redeemable preferred shares. As of March 31, 2004, there were 79,865,009 Shares and no Class B redeemable preferred shares issued and outstanding.

The Company believes that no person or company beneficially owns more than 10% of the issued and outstanding Shares. 1 Members of the board of directors and officers of the Company, as a group, beneficially own or exercise control or direction over approximately 6,254,997 Shares, representing 7.8% of the issued and outstanding Shares. The balance, 73,610,012 Shares representing approximately 92.2% of the issued and outstanding Shares, is held by the public.

The Offer

Structure

The Company proposes to make the Offer on terms to be more fully described in the Company's Offer to Purchase, Letter of Transmittal and Notice of Guaranteed Delivery (together, the "Offering Circular"), to all holders of Shares (the "Shareholders") to purchase Shares at or higher than the Minimum Price, up to the Specified Amount.

Shareholders wishing to tender their Shares into the Offer would do so by selecting one of two alternatives. Shareholders will be able to deposit either all or a portion of their Shares pursuant to (i) auction tenders at prices specified by such Shareholders of not less than the Minimum Price ("Auction Tenders") or (ii) purchase price tenders ("Purchase Price Tenders"). An Auction Tender enables a Shareholder to specify the lowest price, such price not being less than the Minimum Price, at which the Shareholder is willing to sell its Shares in increments of $0.10 per Share. Under a Purchase Price Tender, a depositing Shareholder does not specify a price but rather agrees to have the Shareholder's Shares purchased at the Purchase Price determined as described below. All Shares purchased in the Offer, whether pursuant to Auction Tenders or Purchase Price Tenders, will be purchased at a single purchase price.

The Offering Circular will set forth the Specified Amount (C$160 million) that the Company intends to spend under the Offer, as well as the Minimum Price (C$40 per Share) and the Maximum Number of Shares (4 million Shares, being the quotient of the Specified Amount divided by the Minimum Price), representing approximately 5% of the issued and outstanding Shares. The purpose of the Offer is to distribute to Shareholders willing to participate in the Offer approximately C$160 million and the structure of the Offer is designed to maximize the likelihood that the full C$160 million can be distributed to Shareholders.

Purchase Price

The purchase price for the Shares will be the lowest price at or above the Minimum Price that will enable the Company to purchase the maximum number of deposited Shares having an aggregate purchase price not exceeding the Specified Amount (the "Purchase Price"). The Company will determine the Purchase Price based on the number of Shares deposited pursuant to Auction Tenders and Purchase Price Tenders, the prices specified by Shareholders making Auction Tenders and the price at which Shares deposited pursuant to Purchase Price Tenders are deemed to have been deposited. Shares deposited pursuant to Purchase Price Tenders will be considered to have been deposited at the Minimum Price for the purpose of calculating the Purchase Price. Shareholders who select a price pursuant to an Auction Tender that is higher than the Purchase Price will have their Shares returned to them. All Shares purchased by the Company will be at the Purchase Price, including Shares deposited at or below the Purchase Price pursuant to Auction Tenders and Shares deposited pursuant to Purchase Price Tenders.

Proration

If more Shares are deposited for purchase at the Purchase Price than can be purchased for the Specified Amount, the deposited Shares will be purchased on a pro rata basis according to the number of Shares deposited (or deemed to be deposited) by the depositing Shareholders (with adjustments to avoid the purchase of fractional Shares), except that deposits by Shareholders who own fewer than 100 Shares, or "Odd Lots", will not be subject to proration. The Company will accept for purchase without proration all Shares deposited by any Shareholder owning fewer than 100 Shares, provided such Shareholder deposits all such Shares at or below the Purchase Price. Holders of Odd Lots will have the opportunity to sell their Shares without incurring brokerage commissions that they would otherwise incur if they were to sell their Shares in a transaction on the stock exchanges on which the Shares are listed.

Hypothetical Scenarios

To illustrate the effect of the terms of the Offer, we have considered three hypothetical scenarios: (i) fewer Shares are tendered than can be purchased for the Specified Amount at the Purchase Price, (ii) exactly such number of Shares are tendered that can be purchased for the Specified Amount at the Purchase Price, and (iii) more Shares are tendered than can be purchased for the Specified Amount at the Purchase Price, in each case under two assumptions: (a) the Purchase Price equals the Minimum Price and (b) the Purchase Price exceeds the Minimum Price.

Scenario 1 - Under-subscribed. If the Offer is under-subscribed, all Shares tendered will be taken up and paid for by the Company without proration. In this case, as in all tender offers conducted in the form of a modified Dutch auction, the actual number of Shares taken up in the Offer will be lower than the Maximum Number of Shares specified in the Offering Circular, and the actual Purchase Price will be the single highest price specified by Shareholders tendering pursuant to Auction Tenders.

The Company's intention is to allow all Shareholders to participate in the Offer, at their election. The level of that participation, both as to the number of Shares tendered and the prices (if any) selected, will determine the final purchase price on a per Share basis. Because there is no maximum price set, it is possible that Shareholders could tender Shares at prices well in excess of the then current market price and it is also possible that Shares could in fact be purchased at a price in excess of market price. If that is the case, all tendering Shareholders will get the benefit of the highest of such prices. More importantly, the absence of a maximum price increases the likelihood of distributing the full C$160 million, which is the Company's objective.

Scenario 2 - Fully-subscribed. If the Offer is fully-subscribed, all Shares tendered will be taken up and paid for by the Company without proration. Consistent with the normal operation of a modified Dutch auction tender offer, the Purchase Price will be the lowest price at or above the Minimum Price that will allow the Company to purchase the maximum number of Shares having an aggregate purchase price not exceeding the Specified Amount. However, because the number of Shares sought is specified by reference to the Specified Amount, the actual number of Shares taken up in a fully-subscribed Offer will change depending on the actual Purchase Price. Accordingly, if the Purchase Price is the Minimum Amount, the actual number of Shares taken up in the Offer will equal the Maximum Number of Shares specified in the offering documents. If the Purchase Price exceeds the Minimum Price, the actual number of Shares taken up in the Offer will be lower than the Maximum Number of Shares. However, the Company's commitment stays the same to purchase the maximum number of Shares that the Specified Amount buys at any given Purchase Price.

Scenario 3 - Over-subscribed. If the Offer is over-subscribed, Odd Lots tendered at or below the Purchase Price will be taken up first. Shares tendered pursuant to Auction Tenders at or below the Purchase Price and Shares tendered pursuant to Purchase Price Tenders (the "Prorated Shares") will be taken up in proportion to the following fraction: such portion of the Prorated Shares that can be purchased for the Specified Amount (less the total purchase price paid for Odd Lots) divided by the total number of Prorated Shares. The Purchase Price will be the lowest price at or above the Minimum Price that will allow the Company to purchase the maximum number of Shares having an aggregate purchase price not exceeding the Specified Amount. However, because the number of Shares sought is specified by reference to the Specified Amount, the actual number of Shares taken up in an over-subscribed Offer will change depending on the actual Purchase Price. Accordingly, if the Purchase Price exceeds the Minimum Price, the Offer may be over-subscribed even at levels of total Shares tendered below the Maximum Number of Shares. However, the Company's commitment stays the same to purchase the maximum number of Shares that the Specified Amount buys at any given Purchase Price.

Shares Returned to Shareholders

All Shares deposited at prices below the Minimum Price will be considered to have been improperly deposited, will be excluded from the Purchase Price, will not be purchased by the Company and will be returned to the appropriate Shareholders. All Shares deposited pursuant to Auction Tenders at prices above the Purchase Price will also be returned to the appropriate Shareholders. In addition, all Prorated Shares not taken up by the Company will be returned to the appropriate Shareholders.

Offering Circular

The Company will file a Schedule 13E-4F with the Commission at the commencement of the Offer, including the Offering Circular, which will be disseminated to Shareholders, and all other required documents. The Offering Circular will include disclosure regarding the terms of the Offer required by applicable Canadian securities provisions, including the mechanics for the take-up and payment for, or the return of, Shares. In particular, the Offering Circular will specify the Maximum Number of Shares, the Specified Amount and the Minimum Price. The Offering Circular will also make it clear that, by tendering Shares at the Minimum Price, a Shareholder can reasonably expect that the Shares so tendered will be purchased at the Purchase Price, subject to proration as discussed above.

Issue Presented

Rule 13e-4(g)

In the MJDS adopting release, the Commission modified the tender offer rules to permit issuer tender offers, in connection with offers made in both the United States and Canada, for a class of securities of a Canadian issuer to proceed in the United States in accordance with all relevant Canadian federal, provincial and territorial rules and regulations. Release No. 34-29354 (June 21, 1991).

Rule 13e-4(g) under the Act provides that, for cash offers, if a Schedule 13E-4F is filed with the Commission, the requirements of Section 13(e)(1) of the Act and Rule 13e-4 and Schedule TO thereunder will be deemed satisfied with respect to any issuer tender offer where the issuer is incorporated or organized under the laws of Canada (or any Canadian province or territory), is a foreign private issuer and is not an investment company registered or required to be registered under the U.S. Investment Company Act of 1940, if less than 40 percent of the class of securities that is the subject of the tender offer is held by U.S. holders (collectively, the "status requirements") and the tender offer is subject to, and the issuer complies with, the laws, regulations and policies of Canada and/or any of its provinces or territories governing the conduct of the offer (unless the issuer has received an exemption(s) from, and the issuer tender offer does not comply with, requirements that otherwise would be prescribed by such section).

The note to Rule 13e-4(g) provides that notwithstanding a grant of an exemption form one or more of the applicable Canadian regulatory provisions imposing requirements that otherwise would be prescribed by such section, an issuer tender offer will be eligible to proceed in accordance with the requirements of Rule 13e-4(g) if the Commission by order determines that the applicable Canadian regulatory provisions are adequate to protect the interests of investors.

MJDS Eligibility

The Company is eligible to use Schedule 13E-4F in connection with the Offer because it meets all of the status requirements listed above.

The Company is organized under the laws of Alberta, Canada.

The Offer involves a cash tender offer by the Company for the Company's Shares.

The Company believes that, as of March 31, 2004, approximately 27% of the outstanding Shares were held by U.S. holders, calculated in accordance with the instructions to Schedule 13E-4F. In accordance with such instructions, the Company has identified all Shareholders whose address appears on its share register and the records of any voting trustee, any depositary, any share transfer agent and any person acting in a similar capacity on behalf of the Company to be located in the United States. Based on these records, 21,501,045 Shares were held by such Shareholders as of March 31, 2004, which represents approximately 27% of the outstanding Shares as of such date (79,865,009 Shares). 2

The Company is a foreign private issuer, as such term is defined in Rule 405 of Regulation C under the U.S. Securities Act of 1933, as amended (the "Securities Act"). None of the Company's executive officers or directors are U.S. citizens or residents; none of the Company's assets are located in the United States; and the Company's business is administered principally (in fact, completely) from outside the United States.

The Company is not an investment company registered or required to be registered under the Investment Company Act of 1940.

Implication of Exemptive Relief in Canada

As is customarily the case in Canada for an issuer tender offer conducted as a modified Dutch auction, the Company obtained exemptive relief from the securities regulatory authorities of the provinces of Canada from various provisions of provincial securities laws. The relief exempts the Company from the following Canadian regulatory requirements with respect to the Offer:

valuation requirements (of certain of the Canadian provinces);

requirements for proportionate take-up and associated disclosure requirements; and

requirements to state the number of Shares sought under the Offer.

A copy of the final executed MRRS Decision Document granting exemptive relief in Canada in connection with the Offer is attached hereto as Exhibit A.

Although the Company meets the status requirements of Rule 13e-4(g), the Rule appears to require an analysis, whenever an issuer seeks relief under Canadian rules, of whether it will receive an exemption that arguably does not comply with, and whether the terms of its tender offer will not comply fully with, the requirements prescribed by Section 13(e)(1) and Rule 13e-4 and Schedule TO thereunder. If either is the case, to proceed with the offer in reliance on Rule 13e-4(g), an issuer must seek an order from the Commission that the applicable provisions are adequate to protect the interests of investors.

Williams Act Requirements

Despite the requirements of the "best price" rule set forth in Rule 13e-4(f)(8)(ii) and the disclosure requirements under Schedule TO, issuer tender offers may be conducted in the United States under the Williams Act in the form of a modified Dutch auction. The terms under which an issuer tender offer may be conducted as a modified Dutch auction are specified in interpretations of the staff of the Commission's Division of Corporation Finance (the "Staff"). 3 These terms include:

disclosure in the tender offer materials of the minimum and maximum consideration to be paid;

pro rata acceptance during the offer with all securities purchased participating equally in prorationing;

withdrawal rights during the offer;

prompt announcement of the purchase price, if determined prior to the expiration of the offer; and

purchase of all accepted securities at the highest price paid to any shareholder under the offer.

The Tektronix, Inc. no-action letter (available June 18, 1987) ("Tektronix") addressed an additional requirement, namely that an issuer tender offer, including a modified Dutch auction tender offer, specify the exact number of securities being sought and that such an offer remain open at least 10 business days from the date of any increase in the number of securities sought unless such increase does not exceed 2 percent of the class of securities that is the subject of the tender offer. 4

Canadian Exemptive Relief

Of the provisions in respect of which relief was obtained by the Company in Canada, the valuation requirements and the proportionate take-up requirements are common to all modified Dutch auction tender offers and should not trigger a need under Rule 13e-4(g) for an order from the Commission.

Relief from the valuation requirements is specifically referred to in the MJDS adopting release as an example of "a limited grant of exemptive relief" which would "normally not result in the loss of MJDS eligibility, and therefore normally would not require relief from the Commission." Release No. 34-29354 (June 21, 1991).

The Canadian proportionate take-up requirements require an offeror to take up and pay for securities deposited pursuant to an issuer tender offer proportionately according to the number of securities deposited by each depositing shareholder. See, e.g., Section 166(i) of the Securities Act (Alberta) (the "Alberta Securities Act"). The Canadian disclosure requirements require disclosure in the Offering Circular that the Company would, if Shares deposited to the Offer exceeded the number of Shares that can be purchased under the Offer, take up such number of Shares proportionately according to the number of Shares deposited by each Shareholder. See, e.g., Item 9 of Form 34 of the Alberta Securities Act. Relief is based on the standard proration approach common to Williams Act tender offers conducted in the form of modified Dutch auctions and thus should not trigger the need for a Commission order. 5

The Canadian disclosure requirements require that the Offering Circular state the number of Shares sought under the Offer. See, e.g., Item 2 of Form 34 of the Alberta Securities Act. The Company obtained relief from this requirement and, accordingly, although the Maximum Number of Shares that the Company may purchase under the Offer is disclosed (being the Specified Amount divided by the Minimum Price), the exact number of Shares sought will not be specified in the Offering Circular.

The Canadian requirements do not address minimum and maximum price ranges and accordingly the Company is not required to state a price range. For example, Item 5 of Form 34 of the Alberta Securities Act requires that the Offering Circular state the consideration offered. In accordance with this requirement, the Offering Circular will disclose the Minimum Price and the method under which the actual Purchase Price will be established, but the Offering Circular will not disclose a price range.

As an issuer tender offer under the Williams Act that is conducted in the form of a modified Dutch auction would specify a price range for tenders and would specify the number of shares sought, it is arguable that the exemptive relief in Canada from specifying the number of securities sought represents an exemption that does not comply with the requirements of the Williams Act, and that an offer that fails to specify the number of shares sought and a maximum price would constitute a tender offer that does not fully comply with the Williams Act. These last two elements trigger the need for the requested relief from the Commission.

Relief Sought

Rationale for the Structure of the Offer

To meet market expectations, the Company has decided to distribute a portion of the excess cash generated by its operations to its Shareholders. The Company has determined that the appropriate amount that it would like to distribute should be (and in any event, may not exceed) C$160 million, the Specified Amount.

The Company wishes to undertake the Offer in order to meet its objective of equitably distributing cash to its Shareholders in a way that provides all Shareholders with the opportunity, at their election, to participate in the distribution. A significant majority of the Company's Shareholders are based in Canada and the United States. Considering the Canadian and United States federal tax treatment of distributing cash by way of a cash dividend versus through the mechanism of an issuer tender offer, the Company believes that distributing cash by way of an issuer tender offer is likely to be tax advantageous to a significant portion of its Canadian Shareholders and may be tax advantageous to some U.S. shareholders.

If the Company were to conduct a regular issuer tender offer, the Purchase Price and the number of Shares being sought would need to be fixed at the commencement of the Offer. If the Purchase Price is not set appropriately, Shareholders will not tender and the Company will not meet its objective of distributing to Shareholders, willing to participate, the Specified Amount. In contrast, conducting the tender offer as a modified Dutch auction will allow tendering Shareholders to determine the price at which they are willing to tender their Shares. The Company believes that providing Shareholders with the option to choose the price will increase significantly the likelihood that the tender will be fully subscribed and the Company can distribute the full Specified Amount.

In contrast to most modified Dutch auction tender offers, where the motivation is to buy back shares that an issuer believes to be undervalued, in a manner in which the issuer is likely to pay less for its shares than it would in a fixed price offer, the Offer is designed to maximize the likelihood that the Company can distribute the full C$160 million (the Specified Amount) to its Shareholders through a combination of fixing the maximum amount to be spent but providing no maximum price payable per Share.

Absence of Regulatory Concerns

Although the exact number of Shares sought in the Offer would not be specified in the Offering Circular, the Maximum Number of Shares that the Company may purchase under the Offer (being the Specified Amount divided by the Minimum Price) would be specified. As the Specified Amount that the Company intends to spend on purchases under the Offer is fixed and will be disclosed, Shareholders will be able to calculate dilution at a variety of possible purchase prices by dividing the Specified Amount by the relevant Purchase Price. Similarly, although the maximum consideration to be paid by the Company per Share will not be specified, the Specified Amount that the Company intends to spend on purchases under the Offer will be fixed and will be disclosed. The Offering Circular will also disclose the fact that Shares tendered at a price above the actual Purchase Price will not be accepted and will be returned to Shareholders. The Company believes that such disclosure provides adequate information to Shareholders about the terms of the Offer that is necessary to make an informed investment decision.

Neither of the concerns expressed by the Staff in Tektronix and Thiele no-action letters is presented by the terms of the Offer.

In Tektronix, the issuer did not specify either the number of shares being sought in the offer or the purchase price. Although the issuer disclosed the price range and a range within which the actual number of shares being bought may fall, it had the discretion to determine both the number of shares to be purchased and the final purchase price. 6 Thus, effectively the issuer was not committed to purchase a specified number of shares. In Thiele, although the issuer specified the number of shares being sought and a price range, the issuer was only committed to purchase the specified number of shares at the low end of the price range. However, the issuer had discretion to determine the final purchase price within the price range regardless of how many shares were tendered into the offer. 7 As a result, the issuer was effectively not committed to purchase a specified number of shares.

In contrast to the situations presented in both Tektronix and Thiele, the Company will be committed to purchase a specified number of Shares, albeit by reference to the Specified Amount (C$160 million), and the Offering Circular will disclose the Specified Amount, the Minimum Price (C$40 per Share) and the Maximum Number of Shares (4 million Shares). Although the actual number of Shares purchased may be less than the Maximum Number of Shares depending on the actual Purchase Price, the Company will set the actual Purchase Price at the lowest price that will enable it to purchase the maximum number of Shares for the Specified Amount. Any change to the terms of the Offer will be subject to the requirements of Canadian tender offer rules generally applicable to variations of offer terms. 8 The terms of the Offer fully comply with, and no exemptive relief was granted from, these requirements of the Canadian tender offer rules. By virtue of these terms, the number of Shares actually purchased by the Company in the Offer will in no event exceed 4 million Shares (being C$160 million divided by C$40 per Share). It will be less than such number to the extent the actual Purchase Price exceeds the Minimum Price. However, the Company's commitment remains the same to purchase the maximum number of Shares that C$160 million buys at any given Purchase Price.

In addition, the way in which the Company will determine the actual Purchase Price and the order in which it will accept Shares that are tendered at different price levels comply with the requirements of the Williams Act applicable to issuer tender offers conducted in the form of a modified Dutch auction. Although a price range will not (and is not required under Canadian tender offer rules to) be specified in the Offering Circular and thus Shareholders can tender at whatever price they choose (subject to it being in increments of 10 cents), Shares tendered at a price above the actual Purchase Price that is ultimately determined based on all of the tenders made will not be accepted and will be returned to Shareholders by the Company. This procedure, in combination with the method for setting the Purchase Price, is consistent with the normal operation of a modified Dutch auction tender offer.

We respectfully submit that the applicable Canadian regulatory provisions, as modified by the exemptive relief granted, will be adequate to protect the interests of investors and that grant of the relief requested in this letter would be consistent with the purposes underlying the MJDS. In particular, we respectfully submit that the Company has a legitimate business interest to undertake the Offer based on the proposed terms. Such terms (although requiring relief from the Canadian requirement to state the number of Shares sought under the Offer) will not result in abusive tender offer practices against which the Williams Act and the Staff's position on modified Dutch auctions are designed to protect investors.

Specifically, in a typical tender offer, an offeror is required to state the total number and class of securities sought in the offer. 9 In addition, an offeror is required to specify the minimum and maximum consideration in a tender offer conducted as a modified Dutch auction. 10 These provisions are designed to protect shareholders from abusive tender offer practices by requiring an offeror to commit to purchase the stated number of Shares at the final Purchase Price. By virtue of these rules, shareholders are given appropriate information and certainty necessary to make an investment decision to tender or not to tender.

As discussed above, under the proposed terms of the Offer, the Company will be committed to purchase the maximum number of Shares that can be purchased for C$160 million at the given Purchase Price, and the Offering Circular will include appropriate disclosure about the terms of the Offer. We believe that the combination of the Company's commitment to purchase Shares and related disclosure will provide shareholders with the appropriate information and certainty necessary to make an investment decision to tender or not to tender.

Based on the facts set forth herein, the Company respectfully requests that the Commission grant an exemptive relief to permit the Offer to proceed under the MJDS and pursuant to Rule 13e-4(g), and without complying with the provisions of Section 13(e)(1) of the Act and Rule 13e-4 thereunder.

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In compliance with Securities Act Release No. 6269, seven additional copies of this letter are enclosed.

If you have any questions or comments with respect to this matter, please call me, collect, at 011-44-20-7367-1601 or, in my absence, G�bor Moln�r at 011-44-20-7367-1605.

Very truly yours,

/s/ Mark S. Bergman Mark S. Bergman

Enclosures

Endnotes

1 On May 12, 2004, FMR Corp., a Delaware corporation ("FMR"), publicly announced that as a result of sales of Shares over the TSX it beneficially owned 7,915,890 Shares, representing approximately 9.9% of the issued and outstanding Shares. Prior to that, FMR beneficially owned or exercised control or direction over approximately 8,232,110 Shares, representing approximately 10.3% of issued and outstanding Shares, as reported by FMR on Schedule 13G on February 16, 2004.

2 The Company believes that approximately 43% of the outstanding Shares are held beneficially by U.S. residents. This estimate is based on the Company's ongoing survey of its major shareholders.

3 See Release No. 34-23421 at footnote 64.

4 See, also, Janet S. Thiele no-action letter (available August 10, 1987) ("Thiele").

5 See, e.g., Schedule 13E-4F filings of Descartes Systems Group Inc. (June 4, 2003), Quebecor World Inc. (April 28, 2003) and Russel Metals Inc. (March 6, 2000). Each of these offers, like the Offer, included a modified Dutch auction process and, accordingly, relief was granted in Canada from the proportionate take-up requirement. See, also, Shell Canada Limited no-action letter (available April 30, 1997).

6 "Tektronix will select a Purchase Price that will enable it to purchase in the Tender Offer at least 6 million Common Shares or such lesser number of shares as is validly tendered at prices not in excess of $40 nor less than $35 per share. Tekronix may, but will not be obligated to, select a Purchase Price that will enable it to purchase up to 10 million Common Shares, although Tektronix does not intend to pay more than $380 million to purchase Common Shares in the Tender Offer. Tektronix also reserves the right to purchase more than 10 million Common Shares, although it has no current intention to do so. The Tender Offer is not conditioned on any minimum number of Common Shares being tendered." See, Tektronix.

7 "[T]he Issuer is committed to buying 10 million Common Shares only if that amount of Common Shares is tendered at the minimum $35 per share price. Should 10 million Common Shares be validly tendered at prices ascending from $35 per Common Share to $40 per Common Share, the Issuer would not be obligated to purchase all 10 million Common Shares at $40 per share, but instead may set a Purchase Price of, for example, $37 per share and accept only the number of Common Shares tendered at or below that Purchase Price. If fewer than 10 million Common Shares are validly tendered, the Issuer again would not be obligated to purchase all such shares, but may accept only that number of Common Shares tendered at or below the Purchase Price it selects. If more than 10 million Common Shares are validly tendered, the Issuer would not be obligated to prorate those shares, and could accept only that number of Common Shares tendered at or below the Purchase Price it selects. Thus, the Proposed Procedure effectively allows the Issuer to purchase less than all the Common Shares validly tendered, whether more or less than the stated number of shares sought have been tendered." See, Thiele.

8 If the terms of the Offer are amended, Canadian tender offer rules require that notice be given to Shareholders and the Offer period be extended by ten days after notice has been given to Shareholders. The rules also require that Shares tendered be subject to Shareholders' right of withdrawal during the extended Offer period. In addition, if the amendment results in an increase in the Purchase Price, Shares previously deposited and not withdrawn must be taken up at the increased price.

9 Item 4 of Schedule TO and Item 1004(a)(1)(i) of Regulation M-A.

10 See Release No. 34-23421 at footnote 64.

http://www.sec.gov/divisions/corpfin/cf-noaction/petro061004.htm

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Modified: 06/29/2004