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Two key financial thresholds relevant to the review of proposed
transactions under Canada's Competition
Act and Investment Canada Act for 2019
were recently increased for 2019 as a result of an indexing
mechanism mandating annual adjustments to relevant thresholds.
Competition Act
On January 31, 2019, the Competition Bureau announced an
increase in the size of the target threshold from CA$921
million to $96 million. The new threshold went into effect on
February 2, 2019.
Parties to transactions over certain financial thresholds must
notify the Competition Bureau in advance of closing and pay a
$72,000 filing fee.
While the thresholds vary by type of transaction, for 2019, a
transaction will generally require notification if it is above
both of the following thresholds:
The target's assets in Canada, or revenues from sales
generated from those assets, exceed $96 million; and
The assets in Canada or revenues in, from or into Canada, of
all of the parties to the transaction and their affiliates, on a
combined basis, exceed $400 million.
Investment Canada Act
The Government also recently announced increased 2019
Investment Canada Act thresholds for review (effective
January 1, 2019) of various categories of transactions in which
non-Canadian investors acquire control of Canadian businesses based
on whether the investment results in a net benefit to Canada.
Private sector trade agreement investments
For direct acquisitions of Canadian businesses by private sector
investors from certain countries with a free trade agreement with
Canada (currently, EU member countries, USA, Mexico, Australia,
Japan, New Zealand, Singapore, South Korea, Chile, Peru, Colombia,
Panama, and Honduras), the threshold has increased from $1.5
billion to $1.568 billion, measured by the enterprise
value2 of the target.
Private sector World Trade Organization (WTO) investments
For direct acquisitions by other private sector WTO investors,
the Government increased the threshold from $1 billion to
$1.045 billion in enterprise value.
State Owned Enterprise (SOE) WTO investments
The Government raised the review threshold for direct
acquisitions of a non-cultural Canadian business by an SOE of a WTO
member country from $398 million to $416 million in the book value
of the target's assets.
Non-WTO investments and investments in cultural businesses
For direct acquisitions of cultural businesses (such as those
involving the production, publication, distribution, sale or
exhibition of books, magazines, film and music recordings) and
direct acquisitions of non-cultural businesses by and from
investors from the few countries that are not WTO members, the
threshold remains unchanged at $5 million in book value of the
target's assets. Indirect acquisitions of cultural businesses
and of non-cultural businesses by non-WTO members are subject to a
$50 million threshold, based on the book value of the target's
assets.3
Footnotes
1 All funds are in Canadian Dollars.
2 Enterprise value is generally equal to the market
capitalization for a public company transaction, or the purchase
price for a private company transaction, plus liabilities
(excluding operating liabilities) less cash and cash
equivalents.
3 "Indirect" investments concern acquisitions
of Canadian businesses by virtue of the acquisition of a
non-Canadian corporate parent of a Canadian entity that carries on
the Canadian business.
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The Canadian Competition Bureau is currently examining its policies regarding merger reviews that involve minority shareholdings and interlocking directorships.
The threshold for certain pre-closing net benefit reviews under the Investment Canada Act (ICA) and the threshold for a pre-closing merger notification under the Competition Act have been increased for 2019.
