With the COVID-19 pandemic causing widespread business closures and reductions in the economy, many corporations around the world have seen their stock values in steep decline. Many are facing bankrupticies.
This means they are ripe for takeover by investors who have money, likely from abroad.
At the weekend, Prime Minister Trudeau says there will now be increased scrutiny of foreign takeovers or invest heavily in Canadian businesses.
A statement released on Saturday, the Division of Innovation, Science and Economic Development Canada noted that the sudden devaluation of Canadian business could lead to “opportunistic” investment behaviour,
In his weekend briefing, Trudeau said Canada, “will be strengthening our oversight and paying close attention to foreign investment in this country to ensure that there aren’t people taking advantage of this crisis.”
Saturday’s government statement also noted, “Some investments into Canada by state-owned enterprises may be motivated by non-commercial imperatives that could harm Canada’s economic or national security interests, a risk that is amplified in the current context”. This would include private investors assessed to have ties to foreign governments, or who may be subject to “direction from foreign governments”.
While particular attention will be focussed on investment in businesses dealing with public health or those involved in critical goods or services, investments of any kind with links to foreign governments, whether that involves a controlling or even non-controlling
The enhanced scrutiny will also encompass new young businesses that may benefit the economy in the long run, but which are currently struggling.
The increased attention to business investment will last until the economy recovers, a move which critics have said comes too late, but that should also not be continued beyond a COVID-19 timeframe. They also say the pandemic has shown that Canada is too reliant on international suppliers for critical goods.
The move marks a change, at least temporarily, in Liberal policy which had been to encourage foreign investment.
With the move, Canada joins other countries in increasing controls around foreign investment during this time of a weakened economy. These include Australia, Germany, Spain, and France. As with those countries announcements, no particular nation was singled out as being a concern for hostile action.
- additional information-sources
- Govt Statement: Apr 18/20: Policy statement on Foreign Investment Review and COVID-19
- Bloomberg (via Financial Post): S.Hagen: Apr 19/20: Canada steps up surveillance of foreign investment in pandemic
- Globe and Mail: Walsh/Silcoff: Apr 19/20: Canada tightens foreign investment scrutiny-Covid-19
- Canadian Press (via Global): Apr 19/20: Coronavirus-Ottawa to keep closer eye on foreign takeovers
- Hindustan Times: A Bhattacharyya: Apr 20/20: COVID-19- Canada moves to protect companies from ‘predatory foreign investors’
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