You’d be dead wrong if you thought Bay Street lawyers, bankers, and yes, even regulators, have simply learned to accept the confusion around Canada’s foreign takeover rules.
After the Globe pointed out this week that the federal government has pretty much closed the file, dealmakers are talking, and the lack of clear guidelines is dominating discussion.
Just ask Marianne Harris, president of corporate and investment banking for the Canadian office of Bank of America Merrill Lynch. Whenever a foreign bidder approaches her firm, she knows “the first thing we’re going to have to do is explain how the net benefit test works,” she said on a breakfast panel hosted by Torys LLP on Wednesday, “and I have no idea.”
You can go through precedent transactions all you want and you can survey the political climate for months, she said, but you never quite know what you’re going to get.
Howard Wetston, chair of the Ontario Securities Commission, also chimed in. “There’s no question in my mind that it is the responsibility of governments... to provide as much clarity as possible,” he said. However, he added that his comments were general, rather than specifically targeted towards the ‘net benefit’ rules.
And then there was Michael Wilson, chairman of Barclays Capital Canada and former ambassador of Canada to the United States, who said he disagreed with the decision and noted it is vital to have clear guidelines.
As for whether big foreign takeovers should be allowed, on principle, the panel’s responses were mixed. Michael Nobrega, chief executive officer, clearly stated he was in favour of foreign money coming into Canada, especially because OMERS invests so much money abroad. His main point: giving a foreign firm ownership of our assets doesn’t mean we can’t slap major duties or fees on extraction to make sure Canada still benefits.
“We do have laws,” he said. “We can tax these things to death.”
Fellow panelist Gerry Schwartz of Onex had more mixed feelings. “I don’t disagree with anything Michael said intellectually, but I do emotionally,” he said.
Mr. Schwartz said head offices mean something in a small country like Canada. Economic factors, or taxes, are only part of the equation. National pride and decision making also weigh in.