Government set to block state-owned takeovers

[jdobbin]

http://www.cbc.ca/cp/business/071002/b1002113A.html

he federal government is preparing to issue a policy directive as early as next week that would place a "national security" test on takeovers of strategic Canadian firms by foreign state-owned enterprises.

Sources have told The Canadian Press that Industry Minister Jim Prentice is concerned about foreign state-owned entities snapping up Canadian firms in the key resource sector, particularly Canadian energy firms.

And although Canadian business groups have been generally opposed to any government intervention in the market, a group of business leaders has privately informed Prentice that they would not object if he clamped down on state-owned takeovers.

The government has named a blue-ribbon panel headed by Lynton (Red) Wilson - a former chairman of Nortel Networks (TSX:NT) and BCE Corp. (TSX:BCE) - to look into the issue of the "hollowing out of Canada."

But sources say Prentice, who was appointed Industry minister over the summer, is anxious to block the $5-billion purchase of Alberta's PrimeWest Energy Trust (TSX:PWI.UN) by Abu Dhabi's state energy firm TAQA.

The proposed PrimeWest acquisition, part of TAQA's stated goal of dramatically growing its presence in Canada's energy sector, was announced on Sept. 24 and may have been the straw that stirred the government to act now - rather than wait for the Wilson report, expected next summer.

I don't see how these companies would be operated any differently. Would they not be subject to the same laws as any other company?

[August1991]

I don't see how these companies would be operated any differently. Would they not be subject to the same laws as any other company?

It is hard not to see this as protectionism by another name, and pandering to a nationalistic reflex.

But sources say Prentice, who was appointed Industry minister over the summer, is anxious to block the $5-billion purchase of Alberta's PrimeWest Energy Trust (TSX:PWI.UN) by Abu Dhabi's state energy firm TAQA.

...

"It is important that we protect Canada and we protect Canada's assets in certain circumstances where foreign state-controlled interests might be involved," Flaherty told the House of Commons.

The position was widely seen to have been the Harper government's blunt message to China's state-owned companies to keep hands off Canada's resources, particularly after China MinMetals' failed pursuit of Noranda Inc. two years earlier.

...

A recent Harris-Decima poll for The Canadian Press found a large majority of Canadians supporting government intervention to stop the so-called hollowing out of Canada.

CBC

You gotta love how the CBC spins these kinds of stories.

Incidentally, Canadian state-organisations buy foreign enterprises:

A consortium that includes the Caisse de depot et placement du Quebec has succeeded with its third bid to take over BAA PLC, the largest airport operator in the world, landing a deal that values the U.K.-based owner of Heathrow and Gatwick airports at (ps)10.11-billion (US$18.9-billion).

Link

[Wilber]

I kind of agree with this. State owned companies have bottomless pockets if their government wishes them to. Their actions are not purely commercial but a result of another nations foreign policy. If you have to deal with one of them, who are you actually dealing with, the company CEO or the head of state. We already put limits on foreign ownership in companies which are considered vital to the national interest such as transportation, as does the US.

[geoffrey]

I disagree with you August. This isn't nationalistic. It's common sense.

I have no problem with any company from anywhere in the world owning Canadian assets. I do have a problem when governments own anything, Canadian government included. There motives are not economic and the market becomes distorted as a result.

Anyone with a profit motive should be free to invest.

[M.Dancer]

Makes perfect sense. Why would any nation stand by to see a North Korean or Iranian State owned company go about trying to control, lets say, Uranium One Inc Mines?

Or for that matter, a communist state trying to buy a bank......