The thresholds for pre-merger review under the Investment Canada Act and pre-merger notification under the Competition Act will both be increased for 2015.
Investment Canada Act
The threshold for pre-merger review for investments by WTO members will increase from $354 million in 2014 to $369 million in 2015 upon official publication in the Canada Gazette later this month. For now, the threshold figure continues to be based on the “book value” of the assets of the Canadian business. Previous government announcements regarding higher review thresholds and changing from “book value” to “enterprise value” have not yet been implemented.
For non-WTO investors, the thresholds for transactions which are subject to review are $5 million for direct investments and $50 million for indirect acquisitions.
The exception for cultural businesses remains unchanged for all investors. The threshold for review for these transactions are $5 million and $50 million for direct and indirect acquisitions respectively.
The Canadian Competition Bureau has announced that the pre-merger notification threshold relating to transaction-size for 2015 will increase to $86 million from the 2014 threshold of $82 million.
Once the 2015 threshold is in effect, the Competition Bureau must generally be given advance notice of proposed transactions when the target’s assets in Canada or revenues from sales in or from Canada generated from those assets exceed $86 million, and when the combined Canadian assets or revenues of the parties and their respective affiliates in, from or into Canada exceed $400 million.
Keep in mind that while a transaction below these thresholds is not notifiable, the Competition Bureau may nonetheless review the transaction if there are legitimate competition concerns and the Bureau is made aware of the transaction. This was the case in Tervita v. Commissioner of Competition where a non-notifiable transaction was brought to the attention of the Bureau by a competitor. The $6 million acquisition wound its way through the courts to the Supreme Court of Canada likely resulting in legal fees well in excess of the purchase price.