Canada lifts threshold for foreign takeover reviews

Fri May 25, 2012 5:32pm EDT
 
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By David Ljunggren and Euan Rocha

OTTAWA/TORONTO (Reuters) - Canada will boost the threshold at which it will review proposed foreign takeovers of Canadian companies, the industry minister said on Friday, but he stopped short of fulfilling a government pledge to clarify the criteria for approving them.

Sharpening its focus on the biggest deals, the government will gradually raise the threshold for mandatory reviews to proposed acquisitions with at least C$1 billion in enterprise value. The current threshold is C$330 million ($320 million) in asset value.

"I think C$1 billion is a reasonable number," said Thomas Caldwell, an outspoken investor who is chairman of Caldwell Financial. "We want to have some kind of number that doesn't create an administrative nightmare."

Industry Minister Christian Paradis said enterprise value -the price offered for the equity adjusted for the assumption of liabilities and cash assets - is a better measure of a deal's worth than the book value alone.

"Enterprise value better reflects the value of a business as a going concern and the increasing importance of service and knowledge-based industries," Paradis said in the statement.

Paradis said the Conservative government was following recommendations of a policy review panel that concluded in 2008 that the current way of reviewing proposed foreign investments needed to be changed.

PRESSURE AFTER POTASH

Ottawa has come under pressure to explain the way it handles foreign takeover bids since it surprised markets in late 2010 by rejecting an attempt by Australian miner BHP Billiton Ltd (BHP.AX: Quote) to buy fertilizer maker Potash Corp (POT.TO: Quote).   Continued...