Canada: 2013 Trends In Canadian Mergers & Acquisitions

Canada was again an example of economic stability and strength amid global volatility in 2012. With its wealth of natural resources, well-capitalized financial institutions and relatively predictable political landscape, Canada remains a top destination for foreign investment. At the same time, Canadian companies and institutional investors, seeking greater diversification and a higher growth environment, have been increasingly looking abroad for investment opportunities. As mounting evidence points towards a gradual recovery in the global economy, there is no better time to discuss the M&A trends we see unfolding in 2013.


The total number and aggregate value of Canadian deals, and Canada's relative share of global M&A, increased in 2012. The number of deals over C$1-billion also increased, with 48 such deals valued at C$123.1-billion in aggregate announced in 2012, as compared to 34 deals valued at C$90.4-billion in 2011 (market statistics are from Bloomberg, except where otherwise noted). The year's highest-profile announced transactions included the C$19-billion acquisition of Nexen by China's CNOOC, the C$6.1-billion acquisition of Viterra by Glencore International and its partners, the C$5.5-billion acquisition of Progress Energy Resources by Malaysia's Petronas, and the C$3.8-billion acquisition of Provident Energy by Pembina Pipeline.

Many of the factors that contributed to the weaker global M&A environment are expected to extend into 2013. There are, however, reasons to believe that Canadian M&A will continue to strengthen. Mid-market transactions dominated the Canadian marketplace in 2012, representing approximately 93% of all M&A activity by deal volume, and we expect that the high level of mid-market activity will continue to bolster Canadian M&A in the coming year. Canada's financial sector is secure and the Canadian economy is expected to continue to grow steadily. The Governor of the Bank of Canada has indicated that no interest rate increases are imminent. Canada's Conservative majority government has worked to expand international trade agreements and, with the exception of control acquisitions in the energy sector by state-owned enterprises (SOEs), generally demonstrated an openness to foreign direct investment.

Canada's economic growth will continue to be closely tied to that of the United States. U.S. equity markets, a historical leading indicator of global M&A activity, rose with the announcement of QE3 and the Federal Reserve's pledge to keep interest rates at historic lows until the U.S. unemployment rate drops to 6.5%. With the conclusion of the U.S. presidential race, there was some hope that the country's long-term fiscal issues may be addressed in a credible way.

With the Canadian dollar continuing to hover near par with the U.S. dollar, the value of Canadian outbound M&A transactions as of December 31, 2012, was approximately 1.33 times that of foreign inbound activity. While Canadian businesses are looking at opportunities in emerging markets, over 56% of Canadian outbound M&A in 2012 still involved U.S. targets, such as the C$6.6-billion acquisition of Suddenlink by its management, BP Partners and the Canada Pension Plan Investment Board (CPPIB), the US$1.5-billion acquisition of CH Energy Group by Fortis, and the US$1.4-billion acquisition of Atlantic Broadband by Cogeco Cable.


On September 26, 2012, the federal government appointed John Pecman as the Interim Commissioner of Competition and head of the Competition Bureau. Mr. Pecman is highly regarded both within the Bureau and among the competition law bar for his expertise and his transparent and balanced approach to enforcement. We expect active enforcement of the Competition Act to continue under Commissioner Pecman.

2012 saw a number of significant challenges by the Commissioner. When challenging a long-standing joint venture relationship between Air Canada and United Air Lines under the new collaborative horizontal agreements provision, the Commissioner also challenged a proposed deeper joint venture among Air Canada, United Air Lines and Continental Airlines (which had recently merged with United) under the Competition Act's merger provisions. The parties reached a settlement in late 2012 restricting joint venture co-ordination on 14 trans-border routes. The Commissioner also challenged the CCS Corporation/Complete Environmental merger, which was a non-notifiable transaction, after it had closed, alleging that the merger would likely prevent competition for hazardous waste disposal. The acquirer's internal documents, which referenced "price wars" and "direct competition" with the target, were a key element the Bureau used to demonstrate a likely substantial prevention of competition.

Commissioner Pecman confirmed in a recent speech given at Blakes (available at that promoting transparency will remain a Bureau priority in 2013. A number of draft pre-merger notification interpretation guidelines have been published for public consultation and a third hostile transaction interpretation guideline is expected to be published. As 2012 came to a close, the Bureau had an unprecedented number of contested cases in progress that will likely yield new M&A-related jurisprudence in the coming year.

Concern over regulatory issues is increasingly reflected in transaction documentation, as the degree to which each party bears competition approval deal risk is being more specifically delineated, including memorializing the buyer's obligation to offer a remedy to secure Competition Act clearance. In our upcoming fifth annual Blakes Canadian Public M&A Deal Study, we review the terms of the 50 largest friendly public deals in the 12-month period ended May 31, 2012. We found that 64% of the transactions included a Competition Act-related condition to closing and 12.5% of those transactions required the buyer to agree to offer to some kind of remedy if necessary to obtain Competition Act clearance, while 34.4% explicitly provided that the buyer was not required to agree to any remedy in order to secure approval.


2012 ushered in a heightened interest in mergers and large-scale investment in Canada by foreign entities. In particular, there has been a perceived spike in proposed acquisitions in the natural resources sector by SOEs. Headline transactions in 2012 included CNOOC/Nexen, Petronas/Progress Energy, a joint venture between TransCanada and PetroChina to develop a C$3-billion oil sands pipeline, and a multibillion-dollar joint venture among Kuwait Petroleum, Spain's Repsol and Canada's Athabasca Oil in respect of certain Athabasca oil sands properties.

These high-profile proposed investments have sparked considerable political interest and debate, most notably around clarification of the "net benefit" criteria used by the Canadian government in its investment review process and their application in the context of SOE investments. Coincident with the approval of both the CNOOC/Nexen and Petronas/Progress transactions, on December 7, 2012, the government issued a long-awaited Policy Statement and Revised Guidelines for Investments by State-Owned Enterprises. Notable changes include clarification to the rules pertaining to reviewable investments by SOEs, lower review thresholds for SOE investments relative to non-SOE investments, and an expanded definition of "SOE." The clarifications did not, however, address non-SOE investments. In coming months, the government is expected to finalize announced changes to the Investment Canada Act that will significantly increase the financial threshold that non-SOE investors must cross before being subject to review and give the government new tools to enforce undertakings made by non-Canadians to secure investment approval.


The Canadian deal landscape over the past several years has been dominated by M&A activity in the oil and gas and mining sectors. In addition to those deals discussed above, major transactions in the resource sector announced in 2012 included the C$1.9-billion acquisition of NAL Energy by Pengrowth Energy, the C$1.5-billion acquisition of Minefinders by Pan American Silver, and the C$608-million acquisition of Trelawney Mining and Exploration by IAMGOLD.

In our upcoming fifth annual Blakes Canadian Public M&A Deal Study, 68% of the 50 transactions reviewed occurred in the resource sector:

Asian demand for commodities continued in 2012. While evident in the high-profile Nexen and Progress Energy deals, Asia's focus on Canadian resources was also demonstrated by Mitsubishi's announced C$2.9-billion acquisition of a 40% interest in Encana's Cutback Ridge natural gas development, Sinopec's C$1.5-billion acquisition of a 49% equity stake in Talisman Energy's U.K. North Sea assets, and Toyota Tsusho's C$602-million acquisition of a royalty interest in Encana's U.K. coalbed methane resource asset. Despite the Canadian government's stand against further control acquisitions in the energy sector by SOEs, we expect Asian investment in Canadian resource companies through minority investments and joint ventures to be brisk in 2013.

In the agribusiness sector, Glencore's acquisition of Viterra made headlines in 2012. With the Canadian Wheat Board's monopoly over the marketing of wheat and barley set to expire in August, we should see further industry consolidation in 2013. Canada is a significant grain exporter, and we expect increased M&A activity along the entire length of the export supply chain, particularly among grain handlers and elevators.


Canada is home to some of the largest and most acquisitive pension funds in the world, employing highly sophisticated internal deal teams executing direct investments. Canadian pension funds regularly co-invest alongside the most recognized U.S. private equity firms and have increasingly focused on deploying capital internationally. We expect that European and U.S. assets, particularly real estate and infrastructure, will remain attractive opportunities for Canadian pension funds in 2013. Notable 2012 transactions involving Canadian pension funds included the C$1.3-billion sale of Ontario Teacher's Pension Plan's interest in Maple Leaf Sports and Entertainment, CPPIB's C$1.1-billion acquisition of Tomkins' Air Distribution division from Onex Corporation, the sale of CPPIB's 15% interest in Progress Energy to Petronas, and the acquisition by CPPIB of significant minority stakes in five major Chilean toll roads from the Atlantia Group for C$1.1-billion.


In its March 2012 federal budget, the Canadian government proposed new rules intended to curtail a practice known as "foreign affiliate dumping." Broadly speaking, these rules were introduced to prevent foreign multinational corporations from achieving certain Canadian tax advantages by using their Canadian subsidiaries to hold investments in non-Canadian subsidiaries (foreign affiliates). The rules were enacted on December 14, 2012, and generally have effect from March 29, 2012.

These rules will potentially impact the traditional structure employed by a foreign corporate purchaser acquiring a Canadian company if the target has foreign affiliates. Typically, a foreign purchaser would incorporate a Canadian acquisition company to acquire the Canadian target. In order to fund the acquisition price, the Canadian acquisition vehicle is usually capitalized by the foreign purchaser with equity, or a combination of equity and debt. Under the proposed rules, if the fair market value of any shares of foreign affiliates owned by the target exceeds 75% of the fair market value of all of the target's assets, certain adverse tax consequences may arise. In other words, there may be unwelcome tax consequences if more than 75% of the value of the Canadian target is, generally speaking, derived from the target's foreign operations (a common scenario for many Canadian companies in the resource sector).

With careful advance planning, the risk of such consequences can, in many cases, be mitigated but will need to be considered early in the process when evaluating a Canadian acquisition.


In 2012, Canadian commercial real estate volume and activity levels returned to pre-recession levels. This was in stark contrast to the U.S., where deal volumes remained at approximately 50% of the market's peak. Despite a softening in the residential sector, Canadian commercial real estate continues to be seen as a safe haven, and 2012 prices exceeded pre-recession levels in a number of core markets. Canadian pension funds and real estate investment trusts (REITs), which already own many of the country's premier office and retail properties, have shown an eagerness to acquire and trade more premium commercial assets to capture steady cash flows and appreciation.

With REIT valuations approaching all time highs, Canadian grocer Loblaws recently announced that it was preparing to launch one of Canada's largest REITs with an expected real estate portfolio worth in excess of C$7-billion. Other representative transactions in the space include the C$4.4-billion hostile bid for Primaris REIT by a group led by KingSett Capital (the first ever hostile bid for a Canadian REIT), the C$1.3-billion acquisition of Scotia Plaza by H&R and Dundee REITs, and the C$318-million acquisition of Georgian Mall by RioCan REIT from Cadillac Fairview.

We expect that Canadian companies, institutional investors and REITs will continue to look south of the border for investment opportunities as U.S. real estate prices remain attractive and the market appears positioned for a rebound. In 2012, CPPIB entered into a joint venture agreement with the Westfield Group to acquire a US$1.8-billion equity interest in a U.S. regional mall portfolio, and Brookfield's real estate acquisitions have made it the largest commercial landlord in lower Manhattan.


Hedge funds have become active in influencing Canadian corporate policy, engaging in proxy battles and even initiating take-over bids in an effort to put issuers in play. Investors are increasingly leveraging Canada's relatively liberal corporate laws, which permit shareholders holding 5% of the votes to call special meetings and seek to replace directors in an effort to force change and maximize value.

In the fall of 2011, Pershing Square, an activist U.S. hedge fund, acquired 14% of CP Railway and sought board representation and management changes. Pershing Square ultimately initiated a proxy contest in 2012 that was settled by agreement just prior to CP's scheduled annual general meeting. Pershing secured the election of seven directors on the 16-member CP board and the replacement of CP's acting CEO.

Separately, a highly publicized dispute at Telus was prompted by activist U.S. hedge fund Mason Capital. Mason objected to Telus' plan to collapse its dual-class share structure and attempted to requisition a shareholders' meeting to block the transaction. According to news coverage, Mason had a substantial short position in the non voting shares of Telus raising so called "empty voting" concerns. On appeal, the British Columbia court declined to address the empty voting issue, and Mason was successful in its argument that a shareholders' meeting could be properly requisitioned by the registered shareholder CDS (Canada's national security depositary, the equivalent of DTC in the U.S.) without disclosing the identity of the beneficial shareholder to the company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
14 Nov 2018, Speaking Engagement, Ontario, Canada

Join members of the Blakes Environmental and Enterprise Risk & Crisis Response groups for a discussion of hot topics and trends in Canadian environmental law.

15 Nov 2018, Webinar, Toronto, Canada

Join us for a live webcast with partners from our Employment & Labour and Litigation & Dispute Resolution groups as they discuss employment-related challenges and considerations surrounding the recent legalization of recreational cannabis in Canada.

15 Nov 2018, Webinar, Toronto, Canada

Join us for a live webcast with partners from our Employment & Labour and Litigation & Dispute Resolution groups as they discuss employment-related challenges and considerations surrounding the recent legalization of recreational cannabis in Canada.

Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Blake, Cassels & Graydon LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Blake, Cassels & Graydon LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions