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Politics, Protectionism and Pragmatism – Understanding the Canadian Foreign Investment Review Process

Published: 07/29/2011

Once a relatively routine process, the review of foreign takeovers of Canadian businesses under the Investment Canada Act (ICA) has played a significant role in several recent high-profile transactions. While the vast majority of transactions reviewed under the ICA have been allowed, the Minister of Industry has shown an increased willingness to reject transactions outright, impose more onerous conditions on foreign investors and take enforcement action where investors breach those conditions. The most recent examples of this include: (i) the rejection of BHP Billiton PLC’s proposed $38.6bn acquisition of Potash Corp in November 2010; (ii) the scrutiny faced by the LSE’s bid for the Toronto Stock Exchange; and (iii) the ongoing enforcement proceedings against US Steel for alleged violations of commitments given in connection with its acquisition of certain Canadian steel production facilities.
 
While most transactions will likely continue to receive approval in the ordinary course, the recent experience is that this can no longer be assumed. Foreign companies (in particular, state-owned enterprises) seeking to acquire control of Canadian businesses (including the Canadian operations of foreign companies) must consider whether a proposed acquisition is likely to raise issues under the ICA and implement an effective plan to address any potential stakeholder concerns at an early stage. This article outlines the ICA review process and provides some general guidance as to how companies can navigate this process successfully.

To read the full article by Chris Hersh and Jeremy Bornstein, published in the August issue of Financier Worldwide, please click here.