Winnipeg | Reuters –– Canada’s Liberal and New Democratic parties, vying to replace the governing Conservatives in a tight three-way election race, both say they would clarify rules around foreign corporate takeovers if they win.
Liberal leader Justin Trudeau, campaigning in Winnipeg on Tuesday, said foreign investors need clearer rules around takeovers.
“(Conservative Prime Minister Stephen) Harper continues to make these decisions on a political basis rather (than) on a level of clarity and that’s why quite frankly we’re seeing global investment hesitant to engage,” he said.
Canada requires foreign bids for Canadian firms worth $600 million or more in enterprise value to undergo a review of whether they provide to Canada a “net benefit,” a term never fully explained.
On that basis, Harper’s Conservatives blocked in 2010 a takeover bid by BHP Billiton for Saskatoon-based fertilizer firm PotashCorp.
In 2012, Harper approved a $15.1 billion bid by China’s state-controlled CNOOC Ltd. for energy company Nexen, but banned state-owned companies from further oilsands takeovers except in “exceptional circumstances.”
There is uncertainty whether the Canadian government would allow a foreign company to buy a major tech company like Blackberry Ltd., which is perennially rumoured to be a takeover target.
Conservative Party officials could not immediately be reached for comment on plans for takeover rules if they are returned to power in the Oct. 19 election.
The lack of clarity would end under the New Democratic Party (NDP), said its industry critic, Peggy Nash. In government, it plans a sweeping review of the Investment Canada Act legislation and would clarify what type of benefit Canada expects.
“You can’t just make up the rules as you go along,” Nash said in an interview.
Nash said takeover rules under an NDP government would also reflect reciprocity — that Canadians must be allowed to invest freely in the country of any foreign company that wants to buy a Canadian firm.
Canada has sometimes allowed foreign takeovers after receiving assurances about jobs. Such promises typically stay between Ottawa and the company.
This was the case when U.S. Steel Corp. bought Canada’s Stelco in 2007. But it failed to meet those commitments after the financial crisis hit, and later put the troubled unit into bankruptcy protection.
The NDP would make commitments more transparent, possibly involving local governments, Nash said.
— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.