Quebec’s Charest proposes $1-billion foreign-takeover fund and new law to reject foreign advances

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Jean Charest is seeking to tap into Quebeckers' economic nationalism by promising a $1-billion fund to help companies finance foreign acquisitions.

But he's also promising a new law that would give Quebec companies more power to reject foreign takeovers without giving shareholders a say – a vague promise which the Quebec Liberal Leader and his finance minister described in very different terms.

The measures are a twist on the fears of foreign takeovers that have been highlighted by a U.S. company's bid for Quebec hardware retailer Rona Inc. Both the Parti Québécois and the Coalition Avenir Québec are offering to marshal public funds to keep domestic control of the province's corporate champions.

But Mr. Charest is pledging to put public money into helping Quebec companies finance their own takeovers. He proposed a $1-billion Quebec Ambition fund, arguing it will help Quebeckers export their "creativity and talents" onto the world stage. The fund will be formed using $500-million directly from the government's coffers and $500-million from Investissement Quebec, a public investment agency.

"This has never been done before in Quebec," Mr. Charest boasted, arguing it will protect jobs at home. "Because growth abroad is consolidation in Quebec. It's the consolidation of jobs in Quebec."

But Mr. Charest didn't resist the temptation to cater to those who want restrictions on foreign takeovers. He promised a new law to allow the boards of Quebec firms more latitude to reject foreign takeovers – without letting shareholders vote.

The details of that plan were exceedingly vague – and Mr. Charest and his finance minister, Raymond Bachand, offered very different descriptions of what it would mean.

Mr. Charest made it sound as though Quebec companies will have to consider local jobs and the effect on the community in deciding whether to accept a foreign buyout, rather than just the value for shareholders. That may have appeal for Quebeckers who want to stop the sale of local firms to foreign interests, but it could also make shares in Quebec companies less attractive to foreign investors.

"We will change the law so that boards of directors of Quebec companies take into account factors which go farther than the strict interests of shareholders," Mr. Charest said. "That they can, and they must take into account the interests of workers, and the interests of the whole community."

But Mr. Charest's finance minister, Raymond Bachand, appearing alongside the Quebec Liberal leader at a campaign stop at a farm in Saint-Francois-de-la-Rivière-du-Sud, east of Quebec City, offered a very different description.

The new law, he said, would only allow boards to reject a takeover bid for "commercial reasons" – and he balked when reporters asked whether companies would make financial decisions based on the impact on their community. He described the criteria in strictly business terms, unlike Mr. Charest.

Mr. Bachand said the law would apply similar criteria to corporate-takeover rules in 30 U.S. states, where boards of companies can refuse to put a bid to a shareholder vote if they believe that rejecting it will allow them to follow a business plan that will ultimately create more value for shareholders.

"Ultimately, they can't do that capriciously," Mr. Bachand told reporters after the announcement. "They have a fiduciary responsibility to ensure they are maximizing value for shareholders."

Mr. Charest, running behind in this campaign, also offered a pair of pledges to shore up support in rural communities, and with small-business owners. He said a Liberal government would allow small-business owners to get a capital-gains tax break when they sell a small business to a family member.

And he increased the size of that exemption for farm owners, so that they are exempt from capital-gains tax when they sell a farm worth up to $1-million. The previous exemption was $750,000.

The measure would provide a hefty tax break – tens of thousands of dollars – for a farmer selling their farm to a son or daughter.