Circumstances are cultivating a welcome environment for foreign players planning to invest in Canada. The current Liberal government has signaled that Canada is open to global investment—and at the same time, nearly 18 months have passed since Canada's new regulatory regime for takeover bids took effect.
Although some predicted the new bid regime would have a chilling effect on hostile bids, targets in Canada continue to change hands at relatively the same pace as before. Together, these developments suggest foreign buyers are well-positioned to pursue growth opportunities in Canada.
Takeover bid rules changes
In May 2016, Canadian securities regulators overhauled the regulatory framework for takeover bids in Canada, intending to address concerns that target boards had limited ability to respond to hostile bids. Market perception was that Canada's regime was bidder-friendly, with unsolicited bids usually resulting in the target changing hands.
The rule changes intended to correct the perceived imbalances between target boards and bidders by giving target boards more time to react to an unsolicited approach, explore alternatives or convince shareholders to stay the course. The new rules introduced a minimum bid period of 105 days and require formal bids to include a mandatory 50 per cent minimum tender condition with a 10-day extension period if the minimum tender requirement is met.
Some market commentators predicted that as a result of these changes, fewer hostile bids and more proxy contests would be made. But the numbers tell a different story. Since the new bid rules were introduced, the number of unsolicited takeover offers to acquire a Canadian public company target has remained broadly consistent with activity levels recorded since 2013 (see below).
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