Canada: Mergers & Acquisitions: Trends To Watch In 2014

Canadian M&A activity was moderate in 2013. The weakened natural resources sector, which had helped Canada outperform other economies through the recession, contributed to an overall drop in M&A levels as the total number and aggregate value of Canadian deals, and Canada's share of global M&A, decreased. The total value of Canadian announced deals was C$168.5-billion, the lowest recorded value since 2009 (market statistics from Bloomberg, except as noted).

Despite a significant uptick in mega-deals in Q3, there were only 28 Canadian deals over US$1-billion announced in 2013, with an aggregate deal value of US$70.8-billion. This represents a 42 per cent and 43 per cent decrease in deal number and value, respectively, of US$1-billion-plus deals as compared to the prior year.

However, powered by a strong domestic economy, Canadian companies' outbound M&A strengthened relative to inbound acquisitions and the U.S. was again by far the most popular target country. Over 60 per cent of Canadian outbound M&A in 2013 involved U.S. targets, including the proposed US$4.3-billion Fortis acquisition of UNS Energy and the US$2.9-billion Hudson's Bay acquisition of Saks.

Looking forward to 2014, we see the following recent developments and trends impacting Canadian M&A.


Some of the factors that have contributed to a weaker global M&A environment, including low commodity prices, slower growth in China and economic and political challenges in Europe, will undoubtedly extend into 2014. There are, however, some positive signs that inbound deal activity will rise, including a strengthening U.S. recovery, a rebound in U.S. housing activity and a weakening Canadian dollar, which as of January 2014 fell to approximately C$0.93 against the U.S. dollar, a 7.5 per cent decline from a year earlier.

As confidence in the economy grows, risk-averse companies that hoarded cash through the downturn may feel new pressure to grow earnings through acquisitions. Continuing consolidation in many sectors of the Canadian economy also means that inbound investors need to move quickly and decisively to seize remaining opportunities of scale. Supported by liquid capital markets and willing lenders both in Canada and the U.S., financial buyers are also once again ramping up activity in Canada and providing meaningful competition to strategic buyers.


The retail sector was a bright light in 2013, with a number of high-profile transactions announced. In addition to the Hudson's Bay acquisition of Saks, last year saw Loblaw's proposed C$12.4 billion acquisition of Shoppers Drug Mart, the C$5.8-billion Canada Safeway acquisition by Sobey's parent Empire, and a consortium led by Canada Pension Plan Investment Board (CPPIB) acquire a majority interest in Neiman Marcus. While 2013 may have been a high water mark for retail, we expect sector activity will remain strong as confidence in consumer spending grows and retailers adjust to marketplace consolidation.

REITs were also active in 2013, with deals that included H&R REIT's C$4.6-billion acquisition of Primaris REIT and Dexus Property Group and CPPIB's A$3-billion cash-and-stock offer for Commonwealth Property Office Fund. REIT-sector M&A activity may slow in 2014, notwithstanding investor appetite for yield and the perceived safety of Canadian real estate, reflecting a recent slowdown in REIT financing activity.

While resource-sector activity softened in 2013, transactions in this sector continued to dominate public M&A in Canada. Our sixth annual Blakes Canadian Public M&A Deal Study found that 68 per cent of announced friendly transactions occurred in the oil & gas and mining industries over the 12-month period reviewed. 2013's headline transactions included the proposed C$1.5-billion acquisition of certain of Talisman Energy Inc.'s Montney natural-gas interests in British Columbia by Progress Energy (a Petronas subsidiary), Russian nuclear corporation Rosatom's acquisition of Uranium One and Pacific Rubiales' proposed C$1.6-billion acquisition of Petrominerales. In the mining sector, we expect more distressed acquisitions and roll-up strategies in 2014 in response to the struggles and capital constraints faced by many junior mining issuers.


The Canadian Securities Administrators (CSA) are reviewing comments on draft National Instrument 62-105 – Security Holder Rights Plans (NI 62-105) and the alternative competing proposal from Quebec's Autorité des marchés financiers (AMF). These proposals offer divergent approaches to the treatment of shareholder rights plans (poison pills) in unsolicited take-over bids.

The CSA proposal focuses exclusively on shareholder rights plans, rather than defensive tactics generally, and would eliminate the current practice whereby securities regulators decide on a case-by-case basis whether to cease trade a rights plan in a particular transaction. Instead, to remain effective, a rights plan would require shareholder approval within 90 days of its adoption or, if the rights plan is adopted after the date that a bid is announced, within 90 days from the earlier of the commencement of the bid and the date the plan is adopted. Absent such approval, or if the issuer fails to hold a meeting in time, the rights plan would terminate.

The AMF proposal goes further than that of the CSA, addressing not only shareholder rights plans but the use of defensive tactics generally. The AMF would replace the existing defensive tactics instrument with rules addressing the conflicts of interest faced by a target's board of directors in an unsolicited transaction. Absent unusual circumstances, the AMF has suggested that regulators should limit their intervention in unsolicited situations.

Both proposals would improve a target board's ability to defend against an unsolicited offer, and both should reduce the frequency with which securities regulators will be called upon to intervene. However, adoption of either proposal will likely result in more frequent proxy contests, either at a target meeting to approve a shareholder rights plan or in an attempt to replace the target board and dismantle a defensive measure.


In August 2013, the federal government released a consultation paper outlining possible measures to address perceived tax abuse through treaty shopping. According to the consultation paper, "treaty shopping" generally occurs where a person, such as a foreign company or private equity fund, that is not otherwise entitled to the benefits of a favourable tax treaty with Canada, forms an intermediate entity in another jurisdiction that is entitled to such benefits. In the M&A context, a foreign purchaser may incorporate a third-country holding company (a "Holdco") through which it will acquire the Canadian target. The Holdco may be able to access reduced withholding tax rates on interest, dividends or royalties from the target, or access to capital gains exemptions.

After unsuccessfully attacking these structures in court, including under the general anti-avoidance rule, the government is now considering a direct legislative response. If such changes are implemented, foreign buyers of Canadian companies may need to revisit traditional acquisition structures and assess the extent to which such changes will affect future cash flows and exit strategies for a proposed investment, and therefore the value of the target. The impact of any new rule on existing structures is not yet known and will need to be monitored when structuring future deals.


The CSA has proposed changes to the existing "early warning" disclosure regime designed to improve transparency of investor interests and voting rights in public companies. The changes, not yet scheduled for implementation, would, among other things, reduce the early warning disclosure threshold from 10 per cent to five per cent, aligning it with the U.S. and other jurisdictions.

The changes would require investors to make enhanced disclosure once they cross the five per cent ownership or control threshold. While the majority of public issuers who commented on the proposal expressed support, many investors commented that the increased reporting obligations could dampen investment in Canada.

In our most recent Blakes Canadian Public M&A Deal Study, we found that 18 per cent of transactions reviewed involved a buyer that owned securities of the target before execution of the transaction agreement, up from 12 per cent in our prior version of the study. Of these purchasers, 22 per cent held less than 10 per cent of the target:


New leadership at the Competition Bureau has ushered in more timely and focused reviews of non-complex M&A transactions, particularly upstream oil & gas acquisitions. Similarly, increased coordination between the Competition Bureau and its U.S. and European counterparts has meant a more streamlined and coordinated approach to multi-jurisdictional transactions. At the same time, however, transactions between competitors have received greater scrutiny as government resources are increasingly focused on strategic mergers and acquisitions.

The government also continues to utilize the Investment Canada Act to review direct acquisitions of Canadian businesses by non-Canadians and determine if such transactions are of "net benefit" to Canada. Most parties are able to obtain clearance of their transactions under this test by providing undertakings to the Canadian government, such as commitments to preserve jobs in Canada and maintain capital expenditure levels. Going forward, we expect that fewer transactions will be subject to a "net benefit" review in the wake of recent legislative amendments that are expected to take effect in 2014, and the forthcoming Comprehensive Economic and Trade Agreement with the European Union, which together will raise the review threshold for certain transactions to C$1.5-billion.

Significant scrutiny remains, however, for investments in Canadian companies by foreign state-owned enterprises (SOEs) and transactions that raise potential national security issues. A new "national security" review power implemented in 2009 was used by the Canadian government for the first time in 2013 to block a transaction in the telecommunications sector. The subject transaction involved Egyptian-based Accelero's attempted acquisition of Allstream, which, among other things, provides enterprise telecommunications services to the federal government.


A recent Alberta court decision provided new guidance on when shareholders may be considered to be acting "jointly or in concert," thus potentially triggering disclosure obligations under the early warning regime. In Genesis Land Development Corp. v. Smoothwater Capital Corporation, the court found that an activist shareholder had failed to comply with the early warning reporting system and disclose that it had been acting jointly or in concert with certain other shareholders as it sought to gain control of the target board of directors. If parties are found to be joint actors, they are required to make certain prescribed disclosures and aggregate their shareholdings for the purposes of the take-over bid rules.

The decision clarified that shareholders may be acting jointly or in concert if there is any "agreement, commitment or understanding" to "exercise voting rights" in respect of the public company. The subject matter of the agreement, commitment or understanding does not need to involve a take-over bid or other acquisition of shares. The decision also provided guidance on when parties will be considered to be acting jointly or in concert, noting that it is a question of fact and that the agreement, commitment or understanding need not be formal or written. Circumstantial evidence, such as family relationships, communications between the parties and attendance at meetings together can be taken into account in determining whether the parties were making a concerted effort to bring about a specified objective.

The question of whether a shareholder is required to aggregate its holdings with other shareholders when determining its obligations under the early warning requirements or take-over bid rules is likely to receive additional scrutiny from target boards seeking to defend against an unsolicited offer or activist proxy challenge.


Activist shareholders continue to agitate and wage proxy contests to effect changes in public companies, exerting substantial influence over board composition, corporate management, strategy and operations. In 2013, JANA Partners lost its bid to elect five directors to the Agrium board following a lengthy and well-publicized proxy contest, while Talisman Energy and shareholder Carl Icahn reached an agreement whereby two of Icahn's representatives were appointed to the Talisman board.

Dissidents have a number of tools at their disposal that can raise serious challenges for public companies, regardless of size. Investors continue to leverage Canada's relatively liberal corporate laws, which permit shareholders holding five per cent of the votes to call special meetings and seek to replace directors. Despite a mixed track record, we expect activist investors to continue to see Canadian issuers as potential targets for governance improvements and value maximization. The proposed reduction of the early warning disclosure threshold and associated enhanced disclosure requirements should provide issuers with better insight into when an activist has acquired an influential stake and its intentions for 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
23 Jan 2018, Seminar, Toronto, Canada

Blakes invites you to attend a seminar focused on the importance of intellectual property, with a particular emphasis on the oil and gas sector. Blakes lawyers and patent agents will highlight the key elements of each topic listed below and provide forecasts and constructive recommendations.

24 Jan 2018, Seminar, Toronto, Canada

We invite you to join members of our National Restructuring & Insolvency Group as they review key restructuring and insolvency developments and trends across Canada in 2017.

31 Jan 2018, Seminar, Toronto, Canada

The Supreme Court of Canada and the Alberta Court of Appeal issued a number of decisions over the past five years that have significantly impacted businesses and commercial disputes.

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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