Changes to the Investment Canada Act (the “ICA”) review thresholds for WTO investors are on the horizon. Currently, acquisitions by WTO investors are subject to review where the asset value of the business acquired exceeds the monetary threshold of $369 million. However, on April 24, 2015, the review thresholds will change to consider enterprise value with the potential for more investments by WTO investors being scrutinized under the ICA.
The new thresholds for non-state-owned enterprises from WTO countries will be based on enterprise value, rather than asset value. For the first two year period, the review threshold hold will be $600 million, which will then increase to $800 million for the next two years, and then to $1 billion for another year until the end of the calendar year. Thereafter, the review threshold will be indexed to inflation for subsequent years. The enterprise value for various types of transactions will be calculated as follows:
- for the acquisition of publicly-traded shares, the enterprise value will be equal to the market capitalization (on a published exchange) of the entity plus liabilities, minus cash and cash equivalents;
- for the acquisition of privately held shares, the enterprise value will be equal to the acquisition value plus liabilities, minus cash and cash equivalents; and
- for the acquisition of assets, the enterprise value will be equal to the acquisition value plus liabilities, minus cash and cash equivalents.
The review thresholds for state-owned enterprises from WTO countries will continue to be based on the asset value threshold of $369 million. There will be no changes to the review thresholds for the acquisition of a Canadian cultural business and to investments made by non-WTO investors.