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Osisko’s Canadian Malartic mine.daniel rompre

The heated battle over control of Osisko Mining Corp. illustrates the failings of a Canadian regulatory system that unfairly pressures companies into playing the takeover game against their will, says the head of Quebec's securities regulator.

"The Osisko situation is an example of what we have been trying to avoid in the Canadian environment," Louis Morisset, president and chief executive officer of the Autorité des marchés financiers, said in an interview Thursday.

Companies like Montreal-based Osisko are not positioned to properly defend themselves  when a hostile offer is made, Mr. Morisset said.

"It's not in the best interests of the corporation to be sold nor of long-term shareholders, but a company is forced to launch a process and find a better offer," he said.

Osisko on Wednesday struck a $3.9-billion friendly merger deal with Yamana Gold Inc. and Agnico Eagle Gold Inc., countering a lower hostile offer from Goldcorp Inc.

The battle between Osisko and Vancouver-based Goldcorp over Osisko's prized Canadian Malartic gold mine in northwestern Quebec has intensified recently and many players in Quebec's business community bemoan what they say will be an inevitable dilution of head office operations in Montreal no matter who wins.

The AMF and a provincial government committee have proposed revisions to the regulatory regime that would give company boards more time and stronger defences to counter hostile bids.

Mr. Morisset said the AMF is trying to find common ground with Canada's other provincial securities regulators on the controversial issue.

But there is resistance to change, he said.

"Many institutions and hedge funds are perfectly happy with the way the Canadian system works, which leads to situations like Osisko," he said.

"In the case of Osisko, you get an opportunistic offer at a time when it is not welcomed by the company and that leads to a sale of the company."

Quebec has seen several unwanted takeovers and takeover bids on homegrown companies with dire implications for their head-office operations, he said.

Notable examples include Alcoa Inc.'s hostile bid for Alcan Inc. in 2007, which resulted in the Montreal-based aluminum company being taken over by Rio Tinto, and the failed 2012 attempt by U.S. home improvement giant Lowe's Cos. Inc. to take over Rona Inc.

"This Quebec situation is just another example that, for me, warrants change in Canada," Mr. Morisset said.