Ottawa Conservatives lose no time in letting businesses go private
Air Canada is the latest company on the block in Ottawa's plan to sell off its assets. Discussions on ''privatizing'' the government-owned airline are still in the early stages, so no price has been set.
Air Canada is the 12th-largest airline in the world; it flies 113 jet aircraft, has 21,600 employees, and assets of $2.2 billion (Canadian). In the first nine months of this year it had a profit of $22.6 million.
Canada's Conservative government has moved quickly to sell off $10 billion of corporate assets, from a company making business jets to a satellite communications operation. Some spinoffs - the satellite company for instance - are attracting potential buyers more than others. And the government minister in charge says he is taking lessons in privatization from Margaret Thatcher's government in Britain.
The companies being sold are held by the Canada Investment Development Corporation (CDIC), which in turn owns 48 percent of the shares of Canada Development Corporation (CDC). The initials get confusing, but the CDC was set up in the 1970s to run certain government-owned companies. CDIC was set up two years ago to oversee the government's holdings in the CDC and other government assets in the business world.
The assets of CDC are in oil and gas, coal, base metals, and potash. It also owns a huge petrochemical complex, Polysar, which was originally set up during World War II to make synthetic rubber and other war materiel. CDC is also into enterprises ranging from word processors to bio-engineering.
Besides its 48 percent of CDC, CDIC owns Teleglobe Canada, Eldorado Nuclear, Canadair, de Havilland Canada, and $125 million worth of Massey-Ferguson preferred shares. Also owned by CDIC, but not up for sale right now, are holdings in three east-coast fish companies and in Canadair Financial Corporation, a company that took over $1.35 billion in Canadair debt earlier this year.
One of the first things the new government did was to fire CDIC president Joel Bell and hire Paul Marshall, who is with the Brascan group controlled by the Bronfman family. There are other Brascan executives on the board of the CDIC , and, according to Industry Minister Sinclair Stevens, Brascan is in charge of selling the assets: ''We've turned to Brascan to perform a merchant banker function for us, and they've been given a mandate to privatize this group.''
Mr. Stevens will also be looking to Britain for advice. He has been approached by merchant bankers in London who have advised the Thatcher government in selling its assets, and he says, ''We will be hiring a London house that will not only advise us on privatization but also give us some guidance in other fields.''
At first the government wanted to sell the assets in one lump. Investment bankers say that would be impractical, because the companies are too diversified. But there has already been some interest from the British Columbia Resource Investment Corporation, itself a government holding company that was privatized, and from the Caisse de Depot, the rich Quebec pension fund. Ottawa is now willing to break up the pie and sell off pieces.
Teleglobe Canada is the prize of the lot. Teleglobe handles all telecommunications to and from Canada, except with the United States. It owns receiving stations and parts of satellites. Bell Canada, the largest phone company in Canada, and other, smaller companies want to buy Teleglobe for its book value, $350 million. They also want to buy Telesat, the domestic satellite company. Teleglobe owns 50 percent of Telesat; the phone companies own the other half.
There has been interest from buyers in other assets that are not for sale, according to Mr. Stevens. The government, through Canadian National Railways (not for sale yet), owns a string of hotels in Canada and Europe. ''You wonder how owning a hotel chain is in the national interest,'' Stevens muses. ''We'll see what we can do with those.''
Teleglobe Canada has caused the most interest from buyers; Canadair, which makes an executive jet, the Challenger, has some suitors, more than the other aircraft manufacturer in the stable, de Havilland. The companies have had their debt covered by the Canadian taxpayer, but neither has bloated order books. Eldorado Nuclear, one of the largest uranium producers in the world, is losing money. Peddling Massey-Ferguson's preferred shares may take some doing; it was an act of charity to buy them in the first place. Many of the assets of CDC, the mines and the petrochemicals especially, would be attractive, but because there are outside shareholders the 48 percent interest in CDC will probably have to be sold as group.