Sept. 21 (Bloomberg) -- Canadian Prime Minister Stephen Harper said Canada will “proceed with caution” as it considers opening its doors to more foreign takeovers, making sure they don’t lead to a loss of head office jobs and declining industry leadership.
The Canadian government is looking at ways to liberalize foreign investment in various industries, Harper said today in an interview at Bloomberg headquarters in New York. The challenge is to ensure that the loosening of foreign-ownership rules doesn’t trigger the “loss of all Canadian presence in the sector,” he said.
“The important issue for me is that Canada continue to have head offices and some economic leadership in the world,” Harper said. “I don’t think we would want a situation, especially one that might not be driven entirely by market forces, where the Canadian economy were entirely owned and operated essentially from headquarters and offices based in every place but Canada.”
Harper has tried to reassure potential investors that Canada remains open to foreign takeovers since the government in November rejected a proposed takeover of fertilizer maker Potash Corp. of Saskatchewan Inc. by Australia-based BHP Billiton Ltd. Under Canada’s foreign-takeover legislation, known as the Investment Canada Act, foreign acquisitions of companies with assets worth more than C$312 million ($312 million) are reviewed by the federal government to determine whether the transaction is a “net benefit” to the country.
Harper, who was re-elected in May and leads a majority government for the first time, said he needs to balance the need to attract more foreign investment with the goal of developing global industry leaders based in Canada. Industries that are protected from foreign takeovers in Canada include the telephone companies, such as BCE Inc., airlines such as Air Canada and lenders including Royal Bank of Canada.
“Our government is looking at ways of liberalizing investments in a number of sectors,” Harper said. “The challenge for a government is one would never want a situation where we liberalize the rules, and the immediate result was the loss of all Canadian presence in the sector, so we’re obviously proceeding with some caution.”
The prime minister said his government is reviewing whether it can make changes to the law, which contains strict confidentiality provisions designed to protect commercial secrets, that would allow the government to communicate more freely without hurting companies attempting to buy Canadian assets.
Communicate With Public
“The government, at the same time, has to communicate with the public, and I think we should be in a position where we can communicate more,” Harper said. “We do have to be able to have flexibility, and we do have to be able to be in a position where we can assure investors that we’re not operating from a prejudicial viewpoint.”
Harper, 52, defended the government’s decision to block the Potash acquisition, arguing that no other country would have approved the deal.
“If it had been in Australia, to put the shoe on the other foot, I don’t believe that takeover would have been approved,” he said. “I think the objectives of BHP, in fairness, probably were beyond merely what we would consider good business in a market sense, but probably more an issue of strategic positioning, and that strategic positioning was obviously not in the interest of the Canadian economy.”
The government welcomes investment by China and other countries, as long as such acquisitions are “economic in nature and don’t have other strategic or political objectives,” he added.
In 2007, the Canadian government issued guidelines for foreign takeovers by state-owned enterprises, requiring that such enterprises operate on a “commercial” basis.
The government also blocked a bid by Minneapolis-based Alliant Techsystems Inc. in 2008 to acquire the aerospace division of Vancouver-based MacDonald, Dettwiler and Associates Ltd.
The two decisions are the only times the Canadian government has blocked a foreign takeover bid since the Investment Canada Act came into force in 1985.
Canadian Industry Minister Christian Paradis met last month with executives from telecom and cable companies including BCE, Telus Corp., Rogers Communications Inc. and Shaw Communications Inc., his office said. Paradis sought input from the industry on its news auction of wireless spectrum, as well as the nation’s rules on foreign ownership.
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