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In Canada, Fretting Over Foreign Takeovers

By IAN AUSTEN
Published: May 29, 2007

OTTAWA, May 28 — A recent series of acquisitions of Canadian corporations has prompted a growing public debate over foreign control.

First came the recent takeovers of the mining giant Inco, the steel maker Dofasco and the Hudson’s Bay Company, the retailer established long before Canada itself. The prospect that Alcan of Montreal might go to Alcoa of the United States and that a group including American private equity firms might acquire Bell Canada’s parent company has intensified the controversy.

On Monday, in the latest sign that the takeovers had become a growing political issue, the opposition Liberal Party said that it wanted to freeze foreign takeovers of Canadian companies for three months to allow a review of investment laws.

“The Conservative government should immediately review the rules governing foreign takeovers to better promote both global champions and the fair treatment of Canadian companies,” the leader of the Liberal Party, Stéphane Dion, told a news conference.

The Liberals are not alone. Some prominent executives have expressed concern that Canada is losing its dominance in industries like mining.

Among the critics is Ian W. Delaney, executive chairman of the mining company Sherritt International, who told The Globe and Mail, a Toronto newspaper, last week that London had replaced Toronto and Vancouver, British Columbia, as his industry’s hub.

Peter Munk, founder and chairman of Barrick Gold in Toronto, has warned that an exodus of head offices to other countries will cause, among other things, lower levels of charitable donations and fewer opportunities for skilled workers. Gordon Nixon, chief executive of the Royal Bank of Canada, has also raised the issue.

“I sometimes worry that we may all wake up one day and find that as a nation, we have lost control of our affairs,” Dominic D’Alessandro, the president and chief executive of Manulife Financial, told shareholders on May 3.

Unlike some other executives, Mr. D’Alessandro, whose company’s holdings include John Hancock in the United States, has suggested broadening the sectors covered by foreign ownership limits. Canada’s current restrictions on foreign control are largely limited to financial services, transportation, broadcasting and telecommunications companies.

In 1973 the Liberals, under Prime Minister Pierre Elliott Trudeau, introduced a Foreign Investment Review Act that tried to minimize foreign control of the economy.

But that move was unpopular with much of the business community, and a Conservative government passed legislation in 1985 creating a review body, Investment Canada. It is believed not to have turned down a single takeover since then, although it does not publicly disclose information about decisions.

John McCallum, the Liberals’ finance critic and a former chief economist of the Royal Bank, said Canadian companies should have the same protection from takeovers that other governments provide their corporations.

He noted that if Alcan tries a reverse takeover of Alcoa, a step the Canadian company has said it might take, it will encounter laws in Alcoa’s home state of Pennsylvania intended to block takeovers.

Speaking at a news conference in Toronto, Jim Flaherty, the Conservative government’s finance minister, rejected Mr. Dion’s proposal.

“Well, I wonder what they’d say to Canadian companies that are acquiring businesses abroad,” Mr. Flaherty said. “Would we have a three-month moratorium on Canadian companies like Thomson Corporation acquiring companies like Reuters in a transaction worth more than $17 billion in the United Kingdom?”

Copyright 2007 The New York Times Company