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Quebec’s giant pension fund manager has a long history of controversial deals, given its dual mandate to both develop Quebec’s economy and maximize returns for depositors. Marrying the two objectives is not always as easy as Caisse de dépôt et placement du Québec makes it sound.

Few transactions have demonstrated the trade-off more than the Caisse’s backing of Quebecor’s $5.4-billion acquisition of cable giant Vidéotron in 2000. On June 22, Quebecor bought back the last of the Caisse’s shares in Quebecor Media acquired in the Vidéotron deal, closing the book on one of the most contentious transactions in the pension fund manager’s 53-year existence.

After almost 18 years, what, if anything, did the Caisse get out of the Vidéotron deal?

According to an analysis prepared for La Presse by former Caisse head Richard Guay, now a finance professor at the Université du Québec à Montréal, the pension fund earned an annual return of 2.05 per cent on the $3.2-billion it invested in Quebecor Media. That compares with the Caisse’s overall average annual return of 5.95 per cent return over the same period. The S&P/TSX Composite Index, meanwhile, returned 6.4 per cent between 2001 and 2017, the period covered by Mr. Guay’s analysis.

Considering that the Caisse needs to earn an annual return of around 7 per cent in order to cover the pension obligations of its depositors, including the Quebec Pension Plan, the Vidéotron deal ranks as a pretty poor investment. But for the Caisse, the Vidéotron takeover was never about its own bottom line. It was about keeping what it considered to be a strategic asset in Quebec hands.

In early 2000, the Chagnon family that controlled Vidéotron announced a deal to sell Quebec’s dominant cable company to Toronto-based Rogers Communications. Rogers’ all-share offer was initially valued at $5.6-billion and aimed to create a telecommunications behemoth to take on Bell Canada in the local telephone market in Ontario and Quebec.

The Caisse had been a Vidéotron shareholder since 1980, when it backed André Chagnon’s takeover of a larger Quebec rival. As part of the deal, the Caisse acquired a right of first refusal in the event of a Vidéotron sale. It used that option to force Vidéotron into Quebecor’s hands.

Marrying Quebecor’s media assets with Vidéotron’s telecom network was the idea of Michel Nadeau, who was then second-in-command at the Caisse. The world had just witnessed the merger of AOL and Time Warner south of the border, supposedly heralding a new era of “convergence” between content creators and content deliverers. Mr. Nadeau was persuaded that Quebec needed to ensure it had a home-grown player in the convergence sweepstakes.

Under its deal with the Chagnons, Rogers had planned to sell off TVA, Quebec’s dominant French-language television network. But for Mr. Nadeau, keeping TVA and Vidéotron together was an essential in building a powerful convergence player in the province.

It took some arm-twisting on Mr. Nadeau’s part to persuade Quebecor chief executive Pierre Karl Péladeau to go along with the plan. Mr. Péladeau was a well-known tech skeptic at the time and preferred focusing on expanding the then bread-and-butter business of printing giant Quebecor World.

Within weeks, however, Mr. Péladeau had come around to Mr. Nadeau’s thinking. After Quebecor launched its offer for Vidéotron in the spring of 2000, Mr. Péladeau wrote that the transaction “represents a unique opportunity to create a global player in the new economy that will have not only a solid platform in Quebec, but which will be very well positioned to carve out a leadership position across Canada and around the world.”

While Quebecor had some notable convergence successes in Quebec, it never managed to become a cross-Canada player, much less a global one. Quebecor World was put into bankruptcy in 2008 and Quebecor Media sold off its media assets outside Quebec.

Considering the Caisse’s meagre return on its Quebecor Media investment, and the opportunity cost the pension fund manager faced in having so much capital tied up in it, it would be hard to justify the Vidéotron takeover as a good deal for Quebec pensioners on strictly financial terms.

Still, under Quebecor’s ownership, Vidéotron has built a lucrative wireless franchise that has helped lower cellphone rates in Quebec. Mr. Péladeau has also boasted that Videotron has created 4,000 jobs under Quebecor and maintained a major head office in Quebec.

For his part, Mr. Nadeau – now executive manager of the Institute for Governance of Private and Public Organizations – has no regrets. “The Caisse could have made a lot more on an investment in other businesses, but this wasn’t just any investment,” he told La Presse in May. “It was about maintaining technology and a decision-making centre in Quebec.”

Mission accomplished? As they say in Quebec, c’est selon. It depends.

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