Both the Competition Act and the
Investment Canada Act thresholds
for review of acquisitions involving Canadian businesses are
expected to increase in 2016. The "size of target"
threshold for Competition Act notification, if adjusted
pursuant to the formula prescribed in the Act, will increase very
slightly to C$87 million, although this increase has yet to be
confirmed by the Minister and is subject to his discretion. The
Canadian government has also announced that the threshold for
review under the Investment Canada
Act applicable to direct acquisitions by state-owned WTO
investors will increase to C$375 million for transactions
closing in the remainder of 2016, based on the book value of assets
(other ICA thresholds remain unchanged).
The Competition Bureau must generally be given advance notice of
proposed transactions under the merger notification provisions of
the Competition Act, when the "size of the
target" exceeds the specified threshold, and when the combined
Canadian assets or revenues "in, from or into" Canada of
the parties together with their respective affiliates (the
"size of parties" test) exceeds C$400 million.
Transactions involving Canadian subsidiaries, as well as the direct
acquisition of Canadian businesses or assets, and acquisitions of
interests of as little as 20% (for public companies) or 35% (for
private companies and interests in non-corporate business
combinations) can trigger Competition Act merger
notifications in Canada.
The "size of target" threshold for merger notification
is based on either the book value of assets in
Canada of the target (or in the case of asset acquisitions, of the
assets in Canada being acquired), or the gross
revenues from sales "in or from" Canada generated by
those assets, calculated in accordance with the Notifiable Transactions
Regulations under the Competition
Act. The Act provides an amending formula to keep the
target size indexed for inflation, but the Minister has the
discretion not to index the threshold in any given year, and has
exercised that right in the past. If implemented, however, the
application of that formula would see the threshold increased to
C$87 million for transactions closing in 2016 (or until a further
Investment Canada Act:
The threshold for advance review and Ministerial approval of
certain direct foreign acquisitions of control of Canadian
businesses under the Investment Canada Act is subject to
annual indexing for inflation. The Investment Review Division of
the newly-renamed Department of Innovation, Science and Economic
Development ("ISED", formerly Industry Canada) has
announced that the amount will increase from C$369 million to C$375
million for 2016 for direct acquisitions of control of non-cultural
Canadian businesses by WTO investors (or from non-Canadian WTO
investors), where the investor is a state-owned enterprise (SOE) as
defined in the Act, based on the book value of the Canadian
As announced in The Competitor last
March, the threshold for review of direct acquisitions of control
of non-cultural Canadian businesses by WTO investors who are
not SOEs (defined as enterprises that are
controlled or influenced by a foreign state) is C$600 million based
on the "enterprise value" of the Canadian business. This
threshold will increase to C$800 million on April 24, 2017, and
eventually to C$1 billion. The old "book value"
threshold continues to apply to SOE investors from WTO members
only, in respect of non-cultural businesses, as outlined above.
Indirect acquisitions of control of non-cultural Canadian
businesses (pursuant to the acquisition of control of their
non-Canadian parents) are not subject to review for WTO investors
(or non-Canadian WTO-sellers), regardless of the size of the assets
of the Canadian business. This exemption applies to SOE investors
as well. All direct and indirect acquisitions of control of a
Canadian business remain subject to notification under the Act,
even if they are not subject to review.
Direct acquisitions of control of Canadian businesses with
cultural activities, and direct acquisitions of
control of non-cultural Canadian businesses where neither the
sellers nor purchasers are from WTO-member states, are still
subject to a review threshold of C$5 million based on the book
value of the Canadian business. Indirect acquisitions of control of
cultural businesses are still subject to review if the book value
of the Canadian business exceeds C$50 million, as are indirect
acquisitions of control by/from non-WTO
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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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