The manner in which the take-over occurred was that Elders set up IXL Holdings Canada (IXL) to buy out Canada O’Keefe Ltd. (COL), which in turn owned Carling O’Keefe Breweries (COB), the operating company. IXL borrowed $400 million (Canadian) to finance the take-over, and successfully acquired all of the common shares of COL. Elders then sought to reorganize the three companies. This could have been done with minimal difficulty, except for the fact that IXL had not acquired the series A and series B preference shares of COL, which were still held by independent shareholders. The logical course of action would have been to redeem the preferred shares. The problem was that the redemption price of the preferred shares was significantly higher than the price of the shares on the stock exchange, with the total difference in value being over $40 million.

Elders’ response was to try to lower the redemption price of the preferred shares. Shareholder approval was required under the O.B.C.A. for this to occur, however, as variations of class rights must be approved by the class concerned. The series B shareholders rejected the offer, even though the proposed price was significantly higher than the market price. Then, Deacon Morgan, an investment dealer, purchased a substantial amount of series A shares on the market, speculating that Elders would have to pay out the full redemption price for the preferred shares. The series A shareholders subsequently rejected Elders’ offer, primarily through the efforts of Deacon Morgan.