Bloomberg News reported yesterday
that in an interview given on September 21, Canada's Prime
Minister Harper confirmed that capital from China and other
countries is welcome provided that acquisitions of Canadian
businesses are "economic in nature and don't have other
strategic or political objectives". Bloomberg quoted the Prime
Minister as saying "[a]s much of an advocate as I am of free
markets, I don't think that governments realistically can just
make the assumption that everybody else is operating on a market
With respect to the BHP-Potash transaction that was
rejected under the Investment Canada Act
the Prime Minister stated: "If it had been in Australia, to
put the shoe on the other foot, I don't believe that takeover
would have been approved. ... I think the objectives of BHP, in
fairness, probably were beyond merely what we would consider good
business in a market sense, but probably more an issue of strategic
positioning, and that strategic positioning was obviously not in
the interest of the Canadian economy."
While it is reasonable to expect that most transactions will not
involve strategic or political objectives that may raise issues
under the Investment Canada Act, the Prime Minister's
comments underline the importance of an early assessment of the
potential for planned transactions to attract the heightened
scrutiny of the Canadian government. This has been understood at
least since the China Minmetals - Noranda transaction discussions
in 2004 and was confirmed in the State Owned Enterprise Guidelines
issued by Industry Canada in 2007. The SOE Guidelines make specific
reference to the Canadian government's need to be satisfied
that Canadian businesses that are acquired by non-Canadians will
continue to operate on a commercial basis. The Prime Minister's
comments in relation to BHP suggests that strategic actions by
non-state owned enterprises may also attract government scrutiny,
underlining the need for assessment and planning to satisfactorily
resolve such issues and successfully complete acquisitions of
significant Canadian businesses.
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