Attention nationalists, the great Canadian sale is on
David Olive, Senior writer
Financial Post
Where are the economic nationalists when we need them?
In the 1980s, acquisitive buccaneers such as Jack Gallagher of Dome Petroleum Ltd. and Wilbert Hopper of Petro-Canada were repatriating foreign assets at a furious pace, urged on by Canadians who worried about economic sovereignty and security of energy supplies.
Today, that process is being reversed as Canada's natural resource wealth slips back into foreign hands, with nary a peep of concern expressed over who owns our oil, gas, minerals and trees.
In the past year, half a dozen or so mid-sized firms in the Alberta oilpatch have been acquired by offshore interests.
Yesterday's deal by Roc Oil of Australia to snap up 40% of Calgary-based Gulfstream Resources Canada Ltd. follows the disappearance of Berkley Petroleum Corp., Encal Energy Ltd., Trigas Exploration Inc., Quintana Minerals Ltd., Beau Canada Exploration Ltd. and Newport Petroleum Ltd.
A similar raid on the forest-products sector continued with yesterday's deal by Bowater Inc. of Greenville, S.C., to purchase Montreal-based Alliance Forest Products Inc. In the past three years, offshore buyers have acquired Avenor Inc. (an amalgam of the old Great Lakes Forest Products and CIP Inc.), MacMillan Bloedel Ltd., Fletcher Challenge Canada Ltd. and Pacifica Papers.
And yesterday's announcement by Australia's BHP Ltd. that it will buy out its Canadian partner in the Ekati diamond mine in the Northwest Territories removes all but a tiny degree of Canadian participation in what is expected to become the world's fifth-largest diamond producing region, 160 kilometres from the Arctic Circle.
At a time when some economists fret that Canada's tax regime scares away foreign capital, buyers from every corner of the world are drawn to the resource-extraction industries on which our country was founded. The buyers hail from London, South Africa, Sydney and Tulsa, Okla.
They come from Fifth Avenue in Manhattan. Tiffany & Co. owns a 14.3% stake in Aber Diamond Corp. of Toronto. It's eager to share in Aber's 40% interest in the Diavik diamond project in the Far North -- the first time in Tiffany's 162-year history it has bought rough, uncut diamonds directly from the source.
Meanwhile, one of Canada's few formidable mining companies, Noranda Inc., was humbled last October when it was outbid for Toronto-based rival Rio Algom Ltd. The prize went to South Africa's Billiton PLC, which had deeper pockets.
Yet the torrid pace of takeovers hasn't triggered a nationalist outcry.
Maybe that's because Canadians have long since come to regard New Economy companies such as Nortel Networks Corp. and JDS Uniphase Corp. as champions of national sovereignty. Maybe they're philosophical about a tradeoff in which foreign acquisitions in the resource sector are matched by Galen Weston's emergence as the second-largest baker in the United States, and the fact that Canadian Pacific Ltd.'s Fairmont chain now has the management contract for a Manhattan dowager, the Plaza on Central Park South.
Canadians have been aggressive acquirers of offshore assets in recent times, with the same implications for foreign workers that once troubled economic nationalists in Canada. The difficulties at Nortel, for instance, have resulted in layoff notices that are rearranging the career plans of employees in Texas and North Carolina.
It's the cheap Canadian dollar, some say, that accounts for the apparent fire sale in domestic resource assets.
Yet the deep-discount loonie has not tamed the wanderlust of Canadian-owned firms in Calgary that have rapidly expanded abroad, companies such as Talisman Energy Inc. (Sudan), Alberta Energy Co. (the United States), Nexen (Yemen) and Suncor Energy (Australia).
One of Noranda's most exciting plays is in the Andes, where it is a 33% owner of Antamina, one of the world's biggest copper-zinc deposits. In pursuing Rio Algom, Noranda coveted its assets in Chile, Peru and Argentina, including its 33% stake in Antamina.
Are the locals showing a lack of faith in Canada, in contrast to foreign buyers? Could be.
Then again, Talisman and AEC, among others, placed their biggest bets when oil and gas prices were coming out of a deep trough. Lately, they have been keeping their powder dry as energy prices have soared.
In passing on opportunities to buy assets in their own backyard at the top of the market, it might just be that they are seeking to avoid the fate of Dome, which never recovered from its overpriced acquisitions, and Petro-Canada, which spent more than a decade digging itself out of debt after gorging on takeovers in the early 1980s.
dolive@nationapost.com |
