By Tom Bradley
At the risk of alienating some of our clients and my Bay Street friends, I admit to being happy that the BHP takeover of Potash Corp was turned down. I keep wondering if it’s just my prairie roots (I want desperately for Saskatchewan and Manitoba to have corporate champions), but I don’t think so. There are other reasons for feeling this way:
Potash is a world leader in an important segment of the economy and we need more of these.
- The company has lots of growth ahead and I want to have the chance to participate directly in that.
- If the deal went through, we would get hollowed out … eventually (i.e. lose research and high-end, decision-making jobs). I know BHP made extensive promises and academic research says it isn’t happening, but I don’t buy it. When I was managing pension funds, it was playing out right in front of my eyes. Foreign-owned firms steadily reduced the head office component of their Canadian subsidiaries to the point where only the plant was still here. In the early 90’s, I was reporting to committees in Toronto, Montreal and other Canadian locations. A decade later I was going to New Jersey, Connecticut and New York where the Canadian pension plan was viewed as a minor irritant. In Vancouver, the loss of head offices due to foreign takeovers has been significant.
- Canada has been a patsy compared to other countries. Whether it’s overt or behind the scenes, countries in developed and emerging markets have their ways of turning down or discouraging foreign takeovers. We are transparent and bend over backwards to facilitate foreign transactions.
- BHP wasn’t paying enough. Potash’s resource base and leadership position is worth a lot. The modest decline in the stock price post-announcement is indicative of that point.
The rhetoric about Canada being closed for business is misguided. Yes, the government has stepped in the way of a free flow of capital, but I don’t buy for a minute that other businesses around the world will alter their plans for working and investing in Canada. In the last week we’ve seen Canadian CEO’s of a number of prominent, acquisitive companies saying that the deal should be turned down. I think the business community here and abroad is saying, “It’s about time. I’m surprised it took so long?” Even if they’re not saying it out loud.