Two political parties have now promised that if they win the Sept. 4 election they would allow a company's board of directors to repel a foreign acquisition if it's deemed to be against the interest of workers or the greater community.
The latest such pledge from the Charest Liberals, whose promise Monday resembles an earlier one from the Parti Quebecois, prompted one analyst to predict copycat moves elsewhere in Canada.
The PQ, which leads in the polls, last week promised to amend the Quebec Corporation Act to also give corporate boards broader powers.
At a news conference Monday, Premier Jean Charest and Finance Minister Raymond Bachand said such rules would simply follow the lead of dozens of U.S. states with similar takeover restrictions.
The governing party also said that if it's re-elected it would create a $1 billion fund to help Quebec companies buy properties outside the province, with a special focus on the mining sector and in emerging powerhouses like Brazil, Russia, India and China.
All three major parties in the province have proposed, to varying degrees, policies to thwart foreign takeovers in Quebec — a timely subject here given the attempted acquisition of the Rona hardware chain (TSX:RON) by the U.S. giant Lowe's.
The anti-takeover proposal would make it a little harder for such acquisitions to proceed in Quebec, said Michel Nadeau, executive director of the Institute for Governance of Private and Public Organizations. He said it would likely prompt other provinces to amend their own laws.
The Supreme Court of Canada ruled a few years ago in Bell Canada's fight with its bondholders that boards should consider the interests of all stakeholders, not just shareholders, he noted.
"Unfortunately, the provinces have not changed their legislation. Quebec will do it the first if the Liberals or the PQ are elected, but I'm sure that Ontario and other provinces will do the same as 27 U.S. states," he said in an interview.
In the interim, he said the law might prompt foreign buyers to look at non-Quebec targets that have less flexibility to reject proposals.
Nadeau said his group proposed the change to the Liberal government 18 months ago when it reviewed amendments to the corporation act.
"We are extremely happy that at least two out of the three parties are really eager to do this," he said.
"They are opening their eyes because the electoral campaign and the Rona bid is on the table — but it's a North American trend."
Nadeau pointed out that Iowa law helped Casey's General Stores successfully thwart Alimentation Couche-Tard's (TSX:ATD.B) hostile bid two years ago.
But Monday's promise worried other observers.
Investment guru Stephen Jarislowsky says some key businesses, such as Potash Corp., Inco and Alcan, might need government protection from hostile takeovers to preserve Canadian head offices. But he opposes the proposed change for all companies.
"To put that total power in a board of directors I don't think is correct," he said.
Ultimately, he said the board shouldn't be able to stymie the will of shareholders. He said the board should be given six to nine months to investigate the bid before any action can be taken.
"Unless there is a particular reason, which existed in the Potash case, to stay in Canada as far as head office is concerned, I don't think you should have a rule where a board of directors can just say no."
The Canadian government rejected the takeover of Potash by Australia's BHP Billiton in 2010 after the Saskatchewan government joined Potash's board in urging the Harper Conservatives to nix the US$38.6 billion deal.
The Quebec election has seen all three major parties propose measures inspired by economic nationalism.
Other Quebec parties propose creating multibillion-dollar funds within the Caisse de depot pension-fund manager to buy up shares in companies threatened with foreign takeovers.
The PQ, which is leading in the polls, would direct the Caisse to devote $10 billion, from its $160 billion in overall assets, to such a fund.
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