The threshold for a pre-closing net benefit review under the Investment Canada Act and the threshold for a pre-closing merger notification under the Competition Act have been increased for 2015.
Investment Canada Act
The direct acquisition of control of a Canadian business by a non-Canadian from a WTO-member country is subject to pre-closing review and approval where the assets of the acquired business had a net book value of more than $369 million as at the end of the target’s last completed fiscal year prior to the acquisition. The 2014 threshold was $354 million. Amendments to the ICA to change the threshold to one based on the enterprise value of the Canadian business have been passed, but are not yet in force. In addition, the Minister can review any investment by a non-Canadian, regardless of its value, that he has reasonable grounds to believe may be injurious to Canada’s national security.
Canada uses a two part test for determining whether a pre-merger notification is necessary. The two-part test is based on the size of the parties and the size of the transaction. The transaction size component can be adjusted annually for inflation. Under the size of the parties test, the parties, together with their affiliates, must have aggregate assets in Canada or annual gross revenues from sales in, from or into Canada, in excess of $400 million. Under the size of transaction test, the value of the assets in Canada or the annual gross revenue from sales (generated from those assets) in or from Canada of the target operating business and, if applicable, its subsidiaries, must be greater than $86 million. The 2014 transaction size threshold was $82 million.
These changes will become effective upon publication in the Canada Gazette, Part I, expected in early February 2015. Please contact a member of our Antitrust, Competition and Regulatory team if you have any questions.
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