The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.
Roger Martin is dean of the University of Toronto’s Rotman School of Management.
The CNOOC takeover bid for Nexen demonstrates once again that while a given government policy tool may have a bright, sunny face, it often simultaneously casts a dark, problematic shadow.
The Canadian policy tool that will be used to determine whether this takeover will be permitted is “net benefit.” This means that after all the capital-market formalities are taken care of – which should be pretty straightforward due to the 61-per-cent premium being offered – the government will declare whether the takeover produces net benefit for Canada.
Thus far, the net benefit tool has been all happiness and light for Ottawa. The handy thing is that the government can make up any conclusion it wants under the as-you-like-it construct of net benefit. The prima facie evidence for making stuff up is the BHP Billiton bid for PotashCorp, where the government determined that the bid didn’t provide net benefit to Canada and disallowed the takeover. I suspect the government felt pretty chuffed about the power of the net benefit tool.
In the face of a legitimate bid, it was able to declare on the basis of nothing particularly useful or intelligent that there wasn’t net benefit to Canada and, in doing so, ensured the goodwill of the Saskatchewan electorate for the Conservative Party.
But the dark side of this tool is that it is totally obvious to the rest of the world that Canada’s government can make up absolutely any story it feels necessary to disallow a takeover. Other countries understand the picture really clearly. Net benefit as a standard is intellectually and procedurally bankrupt, and any result of its use is simply a reflection of the government doing whatever it wants vis-à-vis the acquirer.
It is similar to when France declared yogurt to be an industry essential to France’s national security. The world got the picture: France would stoop to whatever intellectual depth required to prevent anyone from taking a run at Danone.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/commentary/nexen-deal-the-only-standard-is-reciprocity/article4440617/