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The Globe and Mail

Charest sends shareholders to back of the bus

Alimentation Couche-Tard Inc.’s takeover of Norwegian company Statoil Fuel and Retail ASA shows that Quebec companies are having no difficulty buying foreign companies.


Will Rogers was fond of saying "If you find yourself in a hole, stop digging." Jean Charest is no Will Rogers.

After vowing to protect Rona from a proposed bid from Lowe's, Mr. Charest has decided to double down on economic nationalism with two baffling policy proposals.

These are not the policies Quebec needs to revive its economy.

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The least objectionable of the two is the creation of a $1-billion fund that would assist Quebec based firms with acquiring foreign firms. In the world of mergers and acquisitions this is a trivial amount of money. In the second quarter of 2012 alone, Canadian firms spent $21.8-billion on foreign acquisitions. Quebec-based companies are having no difficulty acquiring foreign firms, as shown by the $2.8-billion acquisition of Statoil Fuel and Retail by Alimentation Couche-Tard. The economic basis of this proposed fund is the flawed zero-sum logic that takeovers benefit the country of the acquirer at the expense of the country of the acquired.

The second proposal is a set of new restrictions on foreign takeovers of Quebec-based companies. The details of the proposal are unclear, as even Mr. Charest and Finance Minister Raymond Bachand cannot agree on the details. In rough, it would allow corporate boards to veto foreign takeover bids, preventing them from going to a shareholder vote. On what grounds boards could exercise this veto is not clear, nor is the eligibility of boards to exercise such a veto: Would an Alberta-based firm be considered "foreign" under the new law?

This new law, if enacted, does nothing but transfer power from shareholders to corporate boards. This serves to make investing in Quebec based firms far less attractive as it reduces the power of shareholders and their exit options. This transfer of power runs contrary to a number of studies which show that corporate governance is strengthened with more shareholder power, not less.

Charest's big new ideas can be summarized as follows: an inconsequential investment fund based on flawed economic logic and a law that takes away the ability of shareholders to vote on their own interests.

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