Bloomberg News

Canada Plans to Raise Foreign Takeover Review Threshold

May 25, 2012

The Canadian government is moving ahead with plans to increase the threshold for foreign takeover reviews, Industry Minister Christian Paradis said.

The federal reviews will only be done when the target companies have an enterprise value of at least C$1 billion ($972 million), and the new system will be phased in in three steps over the next four years. That’s up from businesses with an asset value of C$330 million currently.

Prime Minister Stephen Harper is seeking to assure foreign companies the country is open to investment amid criticism the system is upredictable. Harper in 2010 rejected a hostile takeover bid for Potash Corp. (POT) of Saskatchewan Inc. by BHP Billiton Ltd (BHP) in 2010.

“Canada has a strong investment climate, and these targeted changes will ensure that our foreign investment review process continues to encourage investment and spur economic growth,” Paradis said in a statement. “Foreign investment is vital to the Canadian economy.”

Canada’s system for weighing takeovers is “highly subjective and unpredictable,” the Toronto-based C.D. Howe Institute said in a study released in December. The rules may have contributed to the decline in Canada’s share of global foreign-direct investment, it said.

While Harper pledged to raise the threshold during an election campaign in 2008, and formally announced his plans in a January 2009 budget, final regulations have yet to be introduced to implement the changes.

Enterprise Value

The threshold immediately will increase to an enterprise value of C$600 million following a 30-day public consultation and the final publication of the regulations, according to today’s statement. That threshold will increase to C$800 million in two years, and to C$1 billion in four years.

The government will also change the way it appraises companies, using enterprise value instead of asset value, it said. Enterprise value is measured by subtracting a company’s cash from market capitalization plus debt.

The government will also begin offering formal mediation procedures to resolve disputes over whether a company has undertaken commitments made during a purchase in the review process, Paradis said in the statement.

In April, Canada announced changes to make the reviews more transparent by allowing the industry minister to publicly explain why an acquisition has been blocked.

To contact the reporter on this story: Theophilos Argitis in Ottawa at

To contact the editor responsible for this story: David Scanlan at

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