April 27 (Bloomberg) -- Canada plans to change its foreign takeover legislation to make reviews more transparent as it seeks to assure business the country remains open to investment.
The changes, introduced yesterday as part of a budget bill, will allow the industry minister to publicly explain why an acquisition has been blocked as long as the information doesn’t cause harm to the businesses involved, Industry Canada said in a news release today.
Prime Minister Stephen Harper is seeking to strengthen investor confidence in the review process amid criticism the system is unpredictable, after his government rejected a hostile takeover bid for Potash Corp. of Saskatchewan Inc. by BHP Billiton Ltd in 2010. Harper has said that decision stemmed from unique circumstances.
“We want our foreign investment review process to continue to promote economic growth, job creation and prosperity in Canada,” Industry Minister Christian Paradis said in the statement.
Under Canada’s foreign-takeover law, known as the Investment Canada Act, the government reviews foreign takeovers valued at more than C$330 million ($336 million) in assets to ensure the transaction represents a “net benefit’ to the nation.
Canada’s system for weighing takeovers is ‘‘highly subjective and unpredictable,” the Toronto-based C.D. Howe Institute said in a study released in December. The rules may have contributed to the decline in Canada’s share of global foreign-direct investment, it said.
The changes will allow the government to disclose when the industry minister has sent a preliminary notice to an investor that that an acquisition isn’t a “net benefit” to the country. The department also said the changes will allow the minister to “accept security” for payment of any court-ordered penalties for contravention of the Investment Canada Act by investors.
The amendments are included in a bill introduced yesterday by Finance Minister Jim Flaherty to implement measures in the March 29 budget. The government said in the budget that it would introduce changes to the takeover law that will be in “the interests of greater transparency while preserving investor confidentiality.”
Canada’s rejection of the proposed $40-billion hostile takeover by BHP Billiton Ltd. of Potash Corp. was only the second time a foreign takeover had been scuttled under the act, which has been in force since 1985.
Harper’s Conservative government also blocked a bid by Minneapolis-based Alliant Techsystems Inc. in 2008 to acquire the aerospace division of Vancouver-based MacDonald, Dettwiler and Associates Ltd.
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