Every Saturday, one of our journalists answers, along with experts, one of your questions on the economy, finances, markets, etc.
Published at 1:30 a.m.
Updated at 8:00 a.m.
Why doesn’t Quebec adopt a framework (like it exists everywhere) aimed at preventing the acquisition by foreigners of companies that are strategic or important for the Quebec economy?
“We would stop losing RONA or Héroux-Devtek or at the very least we could put conditions on the location of the head office and the place of exercise of its functions. Such measures have already been taken to prevent foreign control of agricultural land!
François T. Tremblay
This is a question that comes up regularly, generally when a well-known Quebec company passes into the hands of foreign investors. However, it would be surprising if the rules governing mergers and acquisitions in Quebec – and in Canada – changed, because for the moment they favor local companies.
Over the years, various solutions have been suggested to company management to avoid a foreign takeover. Among these: involving employees in shareholding, giving more weight to the oldest shareholders, or adopting the famous “poison pill”. This practice involves authorizing a massive fire sale of shares to avoid an unsolicited takeover. Except that hostile acquisitions are a practice that has somewhat gone out of fashion, explains Louis Hébert, professor of economics and management at HEC Montréal.
“Hostile acquisitions, against the wishes of the owners, have become extremely rare, quite simply because it wasn’t worth it – it costs too much to inherit companies that often don’t want to collaborate,” he says. “Nowadays, transactions are done in a more friendly manner. Company management generally wants to sell. This was the case for RONA at the time. Is it reasonable, even relevant, to prevent such transactions? »
Of course yes, nuance the HEC Montreal professor, but only for sectors or companies that would be considered strategic for the national economy. Or if the geopolitical situation makes the transaction risky. For example, if a Chinese company proposed to acquire a major Canadian mining company…
This is also why, at the federal level, any offer of acquisition of a local company by foreign interests must comply with the Investment Canada Actwhich will ensure that it meets certain conditions.
Certain resources or certain companies are considered strategic for the national economy and can thus be protected from foreign acquisition.
Canada is not as tough on foreign interests as more insular countries, such as Japan. That poses its problems, but it also has some good things, according to Louis Hébert. “Japan is very afraid of foreign capital, and its economy is not very smooth when it comes to business ownership,” he says. “There are a lot of zombie companies there, not very efficient, in fact. It is not always effective to keep businesses at all costs, especially those in difficulty or going in circles. »
In short, concludes the economic expert, it is probably wiser to go on a case-by-case basis. “After all, every transaction has a unique logic. »
Bulimia
In any case, Quebec companies are traditionally more greedy than their foreign rivals. Over the past five years, they have acquired 527 foreign companies, while 368 of them were the target of a purchase offer by foreign interests, according to the Ministry of Economy, Innovation and of Energy. At the Canadian level, the trend is the same: year after year, local companies are more likely to buy out than to be bought out by their foreign rivals.
In 2023, 573 foreign companies were swallowed up by a Canadian company, while 531 foreign companies acquired a Canadian company, Statistics Canada figures reveal. Since 2003, nearly 12,000 foreign companies have moved under the Canadian flag, compared to around 8,500 Canadian companies who have experienced the opposite.
As KPMG recently noted in a report on the North American mergers and acquisitions market, often, a tiny portion of these transactions gets noticed, given their sometimes disproportionate value.
The current year bears witness to this eloquently: Alimentation Couche-Tard is still trying to acquire its Japanese rival Seven & i Holdings for US$47 billion. Meanwhile, we saw CPP Investments, which manages Canada Pension Plan assets, join forces with the American firm Blackstone to acquire the Australian telecommunications services operator AirTrunk, in exchange for a sum of 16, 1 billion US.
Next to these two, the acquisition of Héroux-Devtek by the American firm Platinum Equity, at 1.4 billion, suddenly seems rather modest…
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