Investment Canada Act
The Investment Canada Act (ICA) threshold for 2014 for direct acquisitions of Canadian businesses by non-Canadian WTO investors is $354 million (book value of the target). Non-Canadians include Canadian companies that are ultimately controlled by non-Canadians. A $5 million threshold continues to apply to direct acquisitions by non-Canadian non-WTO investors and to the acquisition of cultural businesses. It is important to note there is no de minimis exemption in respect of businesses that only partly carry on a cultural business.
It is anticipated that later this year new regulations under the ICA will come into force increasing the $354 million threshold for WTO investors (other than state owned enterprises) to $600 million. That threshold will increase further to $800 million and then $1 billion over the next six years. In addition, under the new regulations the threshold will be measured by “enterprise value”, a term that has yet to be defined.
The Competition Act pre-merger notification size of transaction threshold for 2014 is $82 million. Accordingly, pre-merger notification may be required under the Competition Act if:
- Transaction-Size – the Canadian assets or gross revenues of the target generated in or from Canada exceed $82 million; and
- Party-Size – the combined Canadian assets or revenues of the parties and their affiliates in, from or into Canada exceed $400 million.
As the Tervita Corporation et. al. v. Commissioner of Competition case has demonstrated, mergers well below the notification threshold level are subject to challenge if they are likely to prevent competition. The decision highlights the importance of assessing the anti-competitive effects of a merger, regardless of size, early on in the transaction process.