Wilson panel report: As with BCE, Canadians perform the destruction, foreigners renew. Repeat until bankrupt.

Cut takeover control, Wilson panel says

"We do not believe that it is desirable - or possible- to stop the natural rhythm of creative destruction and renewal, which is a key tenet of a market-based economy," the report states.

Red Wilson would know, as he did more than his share of the destruction part, while CEO of BCE.


Cut takeover control, panel says

June 26, 2008
Les Whittington
Ottawa Bureau

OTTAWA-Despite concerns about the recent wave of foreign takeovers of Canadian corporate mainstays, a blue-ribbon panel is recommending the federal government water down its foreign investment controls, with the exception of cultural industries.

The panel, which was commissioned by the Harper government, also says the existing prohibition against bank mergers should be lifted, which could open the way to consolidation among banks and other financial institutions if federal watchdogs judged them to be in the public interest.

The thrust of the recommendations in the report titled "Compete to Win" is Canada needs to reduce barriers to economic competition and embrace globalization in a bid to strengthen the economy, work smarter and enhance the country's long-term standard of living.

"The panel believes that Canada needs to be more open to competition, as competition spurs the productivity enhancements that underpin our economic performance and ultimately our quality of life," said L.R. Wilson, the well-known businessman who headed the year-long study of Canada's competition policies.

It is not clear whether the report will lead to new legislation or regulations governing investment from the Harper government or when that might happen. Industry Minister Jim Prentice, who formally accepted the report this morning, would only say he will go over it and provide comment at a later date.

The reports recommends:

– Amending the Investment Canada Act to reduce barriers to foreign buyouts by significantly raising the threshold for reviewing a transaction to $1 billion in gross assets from the current level of $295 million.

– Requiring the government--not the acquiring company--to prove whether or not a corporate takeover of a Canadian firm would be contrary to the national interest.

– However, the panel says the cultural sector should be exempted from the application of less-stringent takeover rules. The panel also recommends "a broad review" of the country's cultural policies.

– Watering down foreign investments restrictions on key sectors such as air transport, uranium mining and the telecommunications and broadcasting sector.

– The federal government should reverse a 1998 decision that effectively bans mergers between large financial institutions. That stance is no longer suitable at a time when banks are merging around the world and the Internet is opening up fresh choices for consumers, the panel said. Such consolidations in Canada should be considered if they are judged by regulatory agencies to be in the public interest, the report indicates.

– The creation of a Canadian Competitiveness Council to press the public and governments to pay more attention to making the economy function more efficiently at a time when global competition is asserting new demands on business and employees.

"Competition is global, and the pace of economic activity will continue to accelerate," Wilson said. "We must ensure that our policies and our mindset reflect global realities and the national interest."

Wilson said the panel was concerned about the recent acquisitions of Canadian corporate icons such as Alcan, Falconbridge, Inco and Hudson's Bay.

– Despite that, the study concludes that, with more Canadian companies finding success internationally, it would be a mistake to try to limit the effects of global corporate consolidation at home.

– "We do not believe that it is desirable - or possible- to stop the natural rhythm of creative destruction and renewal, which is a key tenet of a market-based economy," the report states.