Canada is starting to lock up businesses, kind of like toothbrush heads at the drugstore.
Driving the news: The federal government is expanding its reach to block foreign ownership bids. New language in the country’s foreign investment rules now flags deals that could “undermine Canada’s economic security” and deepen ties with a foreign state.
Catch-up: Canada has bolstered foreign investment rules in recent years, enhancing scrutiny of foreign state-owned investments in 2020 and ordering Chinese companies to divest from critical minerals companies in 2022. This change tightens things up even further.
Why it matters: The timing is not coincidental. With Canadian companies potentially facing lower values due to the trade war and Donald Trump openly courting them to move to avoid tariffs, the feds want to prevent a rush of U.S. companies swooping in with buy-out offers.
- Industry Minister François-Philippe Champagne didn’t explicitly mention the U.S. while introducing the changes, but he mentioned “the rapidly shifting trade environment.”
- One sale that could be an early test of the new rules is that of gas station chain owner Parkland Fuel, which just went on the market and previously received U.S. buyer interest.
Bottom line: Foreign investments that previously may have gone forward without a second glance may suddenly face roadblocks. While this is good for extra security, it could gum up valuable and important foreign direct investments, which totalled $1,360.3 billion in 2023.—QH