Quebec's growing asbestos issue
After months of legal wrangling with the Province of Quebec government, General Dynamics Corporation of St. Louis is on the offensive in its effort to head off a government takeover of its Quebec subsidiary, Asbestos Corporation.
The Parti Quebecois, which is committed to enhancing Quebeckers' control of economic activities within the province, has sought to take over part of the province's asbestos industry, which produces one-quarter of the world's supply.
In a landmark court decision in December, Asbestos Corporation won an injunction from the Quebec Court of Appeal, barring expropriation of the company by the provincial government for up to two years.
With that victory behind it, Asbestos Corporation now enters the decisive phase of the legal battle with Premier Rene Levesque's regime. Later this winter company lawyers will try to have the expropriation law declared unconstitutional in Quebec Superior Court.
The Quebec National Assembly passed a special expropriation law permitting Mr. Levesque's government to order a surpise takeover of the company last June when purchase talks with General Dynamics, which owns 54.6 percent of Asbestos Corporation's stock, ground to a halt.
Even if the Quebec Superior Court rules against the company, it will remain shielded from a takeover by the appeal-court injunction, which would stay in force throughout a lengthy appeal process.
Though the injunction was a major blow to Mr. Levesque's plans to take over the province's second-largest producer and main exporter of asbestos fiber, the government still has other possible moves, regardless of what happens in court later this winter.
If the expropriation law is held to be constitutional, then the province could ask that the injunction by the Court of Appeal be revoked.
Conversely, if the company succeeds in having the expropriation statute declared invalid, Mr. Levesque could simply push through another similar bill in language more acceptable to the courts.
However, time and political developments seem to favor General Dynamics' strategy. If Asbestos Corporation holds on until the next provincial election, expected as early as next fall, there is the change that the Patri Quebecois will be defeated. Secondly, many observers think the Parti Quebecois's energies will soon be absorbed by the debates leading up to the spring referendum on provincial independence.
Prior to the government's moves toward expropriation, the major disagreement on the takeover bid was the price to be paid for Asbestos Corporation. The government offered $42 (Canadian) a share, or about $60 million. General Dynamics held out for $99.75, or about $155 million, though financial analysts believe the company would have settled for considerably less had Mr. Levesque been willing to compromise.
The government wanted to proceed with expropriation this winter, but the injunction slowed its plans. A Jan. 14 court date had been set for argument on the constitutionality of the expropriaton statute but was canceled because of a change in government strategy. A new date has not been set.
General Dynamics has another urgent concern in Canada.It is bidding for a $2. 5 billion contract to build fighter planes for the Canadian government. A decision on the contract has been postponed until after the Feb. 18 national election.