Quebec proposes rules to prevent hostile takeovers
Budget sets out economic agenda that includes government taking stakes in mining sector
Quebec’s Parti Québécois government proposed measures to shield businesses headquartered in Quebec from hostile takeovers in a budget tabled Thursday.
It was one in a series of proposals geared at keeping Quebec business in the province that also included plans for the government to buy direct stakes in oil and mining companies with new finds in Quebec.
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The proposal comes at a time when the minority government is expected to call a provincial election and may not last long enough to pass through the legislature.
Nonetheless, Quebec Finance Minister Nicolas Marceau called protecting Quebec head offices a priority and said it would adopt recommendations of a report on takeovers tabled Thursday.
Being masters and prosperous in our own house also means protecting the head offices of Quebec businesses.- Nicolas Marceau, Quebec finance minister
“Being masters and prosperous in our own house also means protecting the head offices of Quebec businesses,” he said in his budget speech.
“The presence of head offices in Quebec is both a major source of wealth and a strategic factor in economic development decisions.”
Claude Séguin, a senior vice-president at Quebec IT firm CGI, chaired a task force that looked into how to protect Quebec businesses after Lowe’s made an abortive takeover bid for Rona last year.
His report was tabled with the budget and comes at a time when Quebec-based mining corporation Osisko is fending off a hostile bid from Goldcorp.
Osisko’s most promising property, the Canadian Malartic gold mine, was developed with a large investment through government owned Investissement Québec.
Among the budget recommendations that Marceau says are high priority are:
- Allowing business corporations to adopt variable voting rights, which would allow shareholders who had owned shares for longer than two years to have more clout in voting.
- Companies would be able to incorporate measures against takeover in the articles of their constitutions.
- Prohibit a merger or other amalgamation of assets of a takeover target by the bidder for five years.
- Prohibit sale of assets representing 15 per cent of the takeover target for five years.
An amendment to Quebec's Corporations Act would be required to allow companies to take these steps. Quebec is home to high-profile companies such as Dollarama, CGI, Metro and Transcontinental.
A task force warned the province that allowing companies to adopt anti-takeover measures could hurt their stock prices. Laval University professor Jean-Marc Suret, who wrote the report, estimated Quebec's listed companies could see a 10 to 20 per cent hit on their stock prices.
In his budget speech, Marceau recalled the spirit of the Quiet Revolution of the early 1960s, a time when the provincial government created Hydro-Québec and the Caisse de dépôt et placement.
He also pledged tight provincial control over oil and gas development in the Anticosti region, as well as other mining developments.
“Being masters and prosperous in our own house is ensuring that Quebecers are the first to benefit from the eventual discovery of resources,” he said.
“Thus, by adopting an approach styled on Norway’s, the government is announcing the taking of major equity interests in the exploration programs that will enable the oil potential on Anticosti Island to be ascertained.”
The PQ said it plans to maintain generous tax assistance for exploration work, but it wants equity options in return from the oil and gas or mining sector. It proposed setting out a formula for such government stakes in the industry later in the year.