Earlier today, the Federal Government announced that the Minister of Industry has approved the acquisition of Viterra Inc. by Glencore International plc., a transaction announced last March.  The Competition Bureau had already issued a no action letter in the transaction on May 4, 2012 (see: Competition Bureau Issues No Action Letter in Glencore/Viterra Merger).

In making the announcement, the Industry Minister made very brief comments saying only that he was “satisfied that the investment [was] likely to be of net benefit to Canada”, that he carefully considered Glencore’s proposed undertakings and referred to Glencore’s press release for details regarding commitments provided by Glencore.  According to media reports, Glencore has agreed to increase capital expenditures in Canada by more than $100 million, contribute to Manitoba “grain industry initiatives” and maintain Viterra’s Regina head office.

Presumably some of the earlier concerns expressed by the Saskatchewan Government relating to Agrium’s acquisition of farm input assets (see: Saskatchewan Government Releases Review Report on Proposed Glencore/Viterra Transaction), which appeared to relate to concentration concerns in local retail crop input markets, were resolved in Glencore’s commitments.

The Minister also appeared to want to counteract recent public criticism relating to the opaqueness of the current Investment Canada Act approval process saying: “the approval of this transaction demonstrates that our investment policies are working, helping to create jobs, growth and long-term prosperity.”

Despite recent efforts by the Federal Government to make changes to the Investment Canada Act approval process, however, criticism remains from some, mostly in the wake of the failed BHP/Potash transaction, including calls for increased clarity relating to the key test for foreign investment in Canada – i.e., the “net benefit to Canada test”.  Despite such criticism (see e.g.: CBA National Competition Law Section Posts Letter Criticizing Bill C-38 Investment Canada Act Amendments and a recent Conference Board of Canada report that suggests that Canada’s current foreign direct investment regime is discouraging Chinese foreign direct investment: Fear the Dragon?  Chinese Foreign Direct Investment in Canada), no proposed changes have been brought forward by the Government to the core test for ICA approval.

While in fact it remains rare for the Government to block foreign investment in Canada on Investment Canada Act grounds, the reality and perception are that the governing test – i.e., net benefit to Canada – is a wholly political test with no clear guidance for potential investors or their counsel to determine, except through negotiation of commitments and monitoring and managing any political opposition and criticism as a transaction progresses, whether an investment is likely to be approved (or serious opposition that may impede a transaction develop).

Moreover, the recent technical modifications to the current Investment Canada process seem very unlikely to dispel criticism by some that the current regime continues to have a chilling effect on at least some foreign investment in Canada.

For more information about Canada’s merger control and Investment Canada Act rules see:

Merger Control

Investment Canada Act


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