At first blush, it's hard to fathom why the business-friendly Conservative government feels the need to review U.S. retailer Target's plans to move into Canada by taking over many Zellers store locations.
Canadian Heritage Minister James Moore ordered the review under the Investment Canada late last month, the Canadian Press reported, but the decision only came to light this week.
Target, a mid-level department store chain that's acquired a sophisticated image through canny marketing and advertising, will take over between 125 and 135 Zellers locations acquired from Hudson's Bay Co., which owns the longtime Canadian discount chain. HBC, Canada's oldest company founded in 1670, itself has been foreign-owned since 2008 by U.S.-based NRDC Equity Partners, which also owns U.S. retail chain Lord & Taylor.
Industry Canada normally launches foreign investment reviews to determine whether acquisitions are a net benefit to Canada. But the deal to morph Zellers stores into Targets didn't come onto the department's radar.
"The transaction between Zellers and Target was a real estate transaction and not the acquisition of a business, assets, technology, or employees," Margaux Stastny, communications director for Industry Minister Christian Paradis, told the Canadian Press.
But Moore decided the plan merited a review under the legislation to determine whether Target will stock sufficient Canadian content in its lineup of book, magazine, DVD and music products.
"The Investment Act requires foreign investments in the ... book industry to be of net cultural benefit to Canada," Moore's spokesman James Maunder said.
Moore has intervened to review previous deals bringing big U.S. retailers into Canada, the Canadian Press story noted. It looked at online giant Amazon's plan to set up a Canadian "fulfillment centre" warehouse in 2010. The deal was approved after Amazon agreed to invest more than $20 million, including $1.5 million for cultural events and awards, and for promoting Canadian books internationally. His department also reviewed and approved a deal that saw Indigo Books and Music Inc. sell its e-reader company, Kobo Inc., to Japan e-commerce company Rakuten Inc.
Target spokeswoman Lisa Gibson said in a statement the retailer "looks forward to working with the Department of Cultural Heritage regarding the retailing of cultural products."
The opening of Canadian Target stores in about a year has been hotly anticipated by local shoppers, many of whom cross the border to check out the store's trendy clothing lines and housewares.