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Mergers and Acquisitions in Canada


A merger can be challenged by the Commissioner in proceedings before the Tribunal on the grounds that the merger, or proposed merger, prevents or lessens, or is likely to prevent or lessen, competition substantially in any market. Section 91 of the Act contains a definition of “merger” which is very broad and includes:

the acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or significant interest in the whole or a part of a business of a competitor, supplier, customer or other person.

Most mergers which are reviewed under the Act fall within the typical types of merger and acquisition (MA) transactions, but the definition is broad enough to capture various types of strategic alliances, joint ventures and other cooperative agreements.

The Tribunal may prohibit a proposed merger, or order full or partial divestiture or dissolution of a completed merger. The Act lists factors that the Tribunal may consider in determining competitive impact, which include:

  1. 1.     the extent of foreign competition;
  1. 2.     whether the business of one of the parties has failed or is likely to fail;
  1. 3.     the extent to which acceptable substitutes to the products of the merging parties are or are likely to become available;
  1. 4.     any barriers to entry into a market (including tariff and non-tariff barriers to international trade, interprovincial barriers to trade and regulatory controls over entry) and the effect of the merger on such barriers; and
  1. 5.     the extent to which there will be effective competition remaining after the merger and the likelihood that the merger may result in the removal of a vigorous and effective competitor.

The Act also prohibits the Tribunal from finding that a merger prevents or lessens, or is likely to prevent or lessen, competition substantially based solely on evidence of concentration or market share.

A unique feature of the Act is that it provides for an efficiencies defence which prohibits the Tribunal from issuing a remedial order, if the merging parties can demonstrate that there would be efficiency gains from the merger that would be greater than, and would offset the effects of, any prevention or lessening of competition likely to result from the merger. The efficiency defence has been the subject of extensive litigation and is discussed in more detail below.

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New Bill Heightens Potential for More Investment Canada Reviews of SOE Acquisitions

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Last week the Canadian Government introduced amendments to the Investment Canada Act (ICA) to implement its revised policy towards state-owned enterprises (SOEs) which it announced in December last year. At that time, while it approved the acquisition by Chinese SOE, CNOOC, of Canadian oil and gas company, Nexen, the Government announced its intention to prohibit acquisitions of control of Canadian oil sands businesses by SOEs except on an exceptional basis. It also stated that joint ventures and minority investments were welcome. In addition, the government indicated it would closely monitor SOE acquisitions in other sectors of the economy and would distinguish between SOE and non-SOE investments when setting the ICA review threshold. (See Focus on Foreign Investment Review, December 2012)

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The Autorité des marchés financiers Proposes An Alternative Approach to Securities Regulators Intervention in Defensive Tactics

by Guy Paul Allard

On March 14, 2013, the Autorité des marchés financiers (“AMF”) published for comments a consultation paper (the “AMF Proposal”) pertaining to defensive tactics in response to take-over bids. This consultation is taking place concurrently with the one launched the same day by the Canadian Securities Administrator (“CSA”) with the release of proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). Unlike the CSA’s 62-105, the AMF Proposal addresses all defensive tacticsii, not only security holders rights plans.

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Proposed New Framework for Rights Plans a Potential Game Changer for Hostile Bids

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The Canadian Securities Administrators published for comment a proposed new regulatory framework for rights plans under proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). If adopted, 62-105 would provide issuers with a game changing tool to respond to hostile take-over bids, where a target board will be able to use a rights plan as leverage to negotiate with a potential bidder.



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