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Mergers and Acquisitions in Canada

In May 2008, the Minister, for the first time, rejected a transaction that did not raise cultural or heritage concerns. The transaction involved the proposed CDN$1.3 billion acquisition of the information systems and geospatial service operations of MacDonald, Dettwiler and Associates Ltd. (“MDA”) by US-based Alliant Techsystems Inc.

Since no decision was published (note that the Act was amended in 2007 to require the minister to provide reasons for a rejection), it is not certain on what basis the Minister concluded that the transaction was not likely to be of net benefit to Canada. It is likely that national security considerations were an important factor, given MDA’s role as a pioneer of what are perceived to be leading-edge Canadian space technologies, including operation of Radarsat-2, a sophisticated surveillance satellite linked to Canada’s ability to monitor possible violations of Canada’s claims of Arctic sovereignty. Moreover, considerable public concern was expressed that the proposed sale would transfer to non-Canadians significant technologies developed at the expense of the public.

In November, 2010, a proposed $39 billion hostile take-over of Potash Corporation of Saskatchewan by the Anglo-Australian firm BHP Billiton was also rejected, following an intensive public relations campaign led by the Premier of Saskatchewan which placed significant political pressure on the minority Conservative federal government. Reasons for the decision were not provided, since BHP Billiton technically withdrew its application for review.

Undertakings are subject to “force majeure” type of exceptions but otherwise enforceable. In July 2009, the Minster brought legal proceedings against US Steel to compel it to comply with undertakings (given when it acquired Stelco in 2007) relating to employment and production at Stelco’s Canadian facility. The Minister is also seeking a penalty of $10,000/day for each day of non-compliance.

Additional posts from the blog



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

by Sandra Walker

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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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.



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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