Canadian Merger Notification and Investment Review Thresholds Increase
John Clifford of McMillan sends us this news: Increases to a merger notification threshold under Canada's Competition Act and the investment review threshold under the Investment Canada Act recently were announced. The Competition Act generally requires advance notification of certain merger transactions involving operating businesses in Canada where "size-of-parties" and "size-of-target" financial tests are both exceeded:
- The "size-of-parties" test requires that the parties to a transaction, together with their affiliates, have assets in Canada, or annual gross revenues from sales in, from or into Canada exceeding C$400 million.
- Currently, the "size-of-target" test generally requires that the assets to be acquired or the value of assets in Canada owned by the corporation the shares of which are being acquired exceeds C$73 million, or the annual gross revenue from sales in or from Canada generated by those Canadian assets exceeds C$73 million.
2009 amendments to the Competition Act provided for an indexing of the size-of-target test to reflect annual changes to Canada's gross domestic product. The Competition Bureau announced earlier today (February 7, 2012) that the size-of-target threshold will be increased to C$77 million. The 2012 threshold will come into effect following publication in the Canada Gazette, which the Bureau anticipates will occur on February 11, 2012. The "size-of-parties" test remains unchanged.
The Investment Canada Act requires that any non-Canadian that acquires control of a Canadian business (whether or not that business is controlled by Canadians prior to the acquisition) must file either a notification or an application for review. For the purposes of the Act, a non-Canadian includes any entity that is not controlled or beneficially owned by Canadians. Generally, direct investments (i.e., the acquisition of the shares or assets of a Canadian corporation) by WTO Investors are subject to pre-closing review and approval if the Canadian business:
- Has assets valued in excess of an annual threshold, which for 2011 was set at C$312 million; or is
- Cultural in nature and has assets in excess of C$5 million.
The Investment Review Division announced that the review threshold for the direct acquisition of non-cultural businesses by WTO Investors likely would increase to C$330 million in 2012, retroactively effective back to January 1, 2012. It is expected that the Minister of Industry will confirm that adjustment in the very near future.
As noted in this Weil alert, Bill Baer has been nominated as the new head of the DOJ's Antitrust Division.