And now for something completely different...
siliconinvestor.com
To: who wrote () 4/12/2006 5:44:20 AM
From: jpthoma1 of 13088
La bataille pour Falconbridge n'est pas terminée!
Battle over big nickel could put Harper's Tories on the spot
BARRIE MCKENNA (Globe&Mail)
WASHINGTON -- Foreign investment is one of the great strengths of the Canadian economy.
And nowhere is this truer than in the resource sector. Foreign cash is the engine that drives the forestry, mining and oil and gas sectors. It sustains hundreds of thousands of high-paying Canadian jobs.
Just look at the Toronto Stock Exchange. It has become the predominant mining stock exchange for the world and a major conduit for billions of dollars of offshore dollars now pouring into Alberta's oil sands. When business leaders and government officials tout the Canadian economic miracle in pitches abroad, it's that openness that they celebrate.
But a rumoured run for Falconbridge Ltd. by Xstrata PLC, a Swiss-based mining giant with an unsavoury labour relations history, could put Canada's open borders policy on resource investment to the test.
Inco Ltd. is anxiously waiting for U.S. and European regulators to okay its $12.8-billion acquisition of Falconbridge -- a deal that would create the world's largest nickel maker. Approval by the U.S. Justice department is expected shortly.
The only thing standing in Inco's path to global nickel supremacy may be Xstrata and its deep-pocketed shareholder Glencore, a secretive Swiss company founded by fugitive U.S. commodities trader Marc Rich.
Xstrata already owns a 20-per-cent stake in Falconbridge, which it acquired last year from Brookfield Asset Management (formerly Brascan) for $2-billion and it may want the whole thing. The company has done little to quell rampant speculation that it's girding to outbid Inco for all of Falconbridge. Xstrata chief executive officer Mick Davis, a tough-minded South African, said recently that Falconbridge "remains a source of value potential" for the company.
There has even been speculation that Xstrata may wait for the Inco-Falconbridge union to be consummated, and then mount a takeover of the merged company.
Either scenario would put the new Harper government to a major public policy test. Would Ottawa uphold Canada's open door policy on investment in the natural resources sector and stay neutral? Or would it put roadblocks in the way of an Xstrata takeover in the name of fostering a Canadian-based global giant?
Inco is hoping Ottawa won't stay on the sidelines. Company officials have been quietly making the rounds in Ottawa to drum up support for tougher foreign investment scrutiny.
Meanwhile, the United Steelworkers of America, which represents thousands of Inco and Falconbridge workers in North America, has made it clear that they see Xstrata as an unfit buyer.
"For us, the thought that Xstrata could get to own this large a strategic resource is as bad as the Dubai Ports deal," Leo Gerard, who heads the Pittsburgh-based USWA, said in an interview. "Xstrata is the wrong company for this and we're going to oppose them every step of the way."
Mr. Gerard said Xstrata, a mining and metals company, has a history of anti-union practices, including a lengthy lockout of workers at a West Virginia aluminum smelter. He's also quick to tie Xstrata to Glencore, its largest shareholder. Glencore, which owns 40 per cent of Xstrata, allegedly paid "illegal" surcharges into Iraqi-controlled bank accounts in breach of the United Nations oil-for-food program, according to an independent inquiry headed by Paul Volcker. Glencore, which has not been charged, has denied knowingly making payments to the Iraqi government.
At the least, the allegations should make government officials in Canada and the U.S. stand up and take notice, the anti-Xstrata forces argue.
"We need people to know who they are and what they do," Mr. Gerard said.
The question of what makes an unfit buyer of a strategic company is a burning issue in other countries. In France, Prime Minister Dominique de Villepin has identified 11 sectors and a clutch of signature companies, including yogurt maker Danone, that foreigners should be barred from owning.
U.S. foreign ownership rules are a work in progress. Congress has made it clear it won't tolerate state-owned Chinese companies owning U.S. oil companies (Unocal) or Arab nations running its ports (Dubai Ports World).
Canada maintains explicit curbs on foreign ownership of chartered banks and media companies, including newspapers. But it hasn't blocked a major foreign takeover in other sectors in years.
There is nervousness. Last year, when several Chinese companies were sniffing around the oil patch, Liberal industry minister David Emerson suggested Ottawa was looking new stricter standards.
"We have to ensure -- particularly in the case of non-renewable resources -- we're not just willy nilly unloading our natural resources without ensuring full benefits to Canada as a result," said Mr. Emerson, who became Trade Minister after jumping to the Tories.
Canadians may be about to find out if the Harper government would apply that same standard to Sudbury's big nickel. |
