Canada moves with care on `privatization'
Ottawa — ``Crown Corporations for Sale.'' Canada's Conservative government hasn't put such an advertisement in the newspapers yet. But like Britain's Margaret Thatcher, Prime Minister Brian Mulroney wants to sell a large number of government corporations to private investors.
But ``privatization'' in Canada has not proceeded nearly as far as in the United Kingdom.
In July, Ottawa sold Northern Transportation Company to two native Inuit corporations for $27 million. That company operates barges on the Athabasca, Slave, and Mackenzie River system in the summer, when that northern waterway is not frozen.
In September it sold all but 11 percent of its 48 percent holding in Canada Development Corporation, a diversified holding company that owns Polysar (petrochemicals), Canterra Energy (oil, gas, sulfur), Kidd Creek Mines (zinc, copper, silver, lead), CDC Life Sciences (pharmaceuticals, biological products), and A.E.S. Systems (electronics).
A more controversial deal, the sale of two government-held aircraft companies, De Havilland of Canada Ltd. and Canadair Ltd., may be close to completion.
``There has been no decision by the government yet,'' says Basil Beneteau, head of the Privatization Secretariat, newly set up under the Treasury Board to handle the sale of crown properties. ``The various alternatives are being examined.''
One offer of $500 million (Canadian) for the two has been made by West German entrepreneur Justus Dornier. Of this, $300 million would go to the government, $200 million into the companies. Mr. Dornier is the son of Claudius Dornier, a German seaplane pioneer who founded Dornier GmbH. Embroiled in a family dispute, the German aircraft company was sold earlier this year to automaker Daimler-Benz AG.
Another bidder for De Havilland is Seattle's Boeing Company. The aircraft company would thereby add the manufacture of commuter aircraft to its broad line of larger airships.
De Havilland makes the Dash-8, a twin-engine, 36-seat commuter airliner developed over the past four years. The Toronto company has delivered, sold, or has options for nearly 120 of the planes so far, with production backlogged through next year.
Canadair's main products are the Challenger, an executive jet, a water bomber for fighting forest fires, and surveillance drones.
These two companies are owned by a government holding company, Canada Development Investment Corporation (CDIC), which also has up for sale Teleglobe Canada, the country's sole overseas telecommunications carrier, and Eldorado Nuclear Ltd., which mines and refines uranium.
CDIC is scheduled to announce the bids for Teleglobe next Monday. The book value of the telecommunications concern is around $300 million. But, depending on conditions of its sale, it could command a premium above book value.
Among the bidders are Telecom Canada, a grouping of domestic telephone companies that are Teleglobe's main customers (including Bell Canada); CNCP Telecommunications, which provides about 11 percent of Teleglobe's business; Power Corporation of Montreal; and a grouping of pension funds.
Eldorado has attracted no bids yet, but ``some interest.''
Another government company up for sale and ``ready for final bids'' is Canadian Arsenals Ltd., a Quebec City manufacturer of ammunition.
Other crown corporations include such major concerns as Air Canada (the major government airline), Petro-Canada (the national oil company), Canadian National (which runs a cross-country railway and other properties), Via Rail (a passenger railway, similar to Amtrak in the United States), Atomic Energy of Canada Ltd., and perhaps even the Royal Canadian Mint.
Some of these, such as the first two, are not likely to be sold. But if many of these were successfully knocked down on the auction block, the government could raise billions of dollars.
The government has found, however, that selling crown companies is a far more complex issue than first appeared. The Privatization Secretariat was created by the Mulroney government, now 14 months in office, to systematize the sales process.
``Our motto is `We do it right the first time,' '' says Mr. Beneteau of that secretariat.
The Conservatives know that the opposition parties are watching closely for any missteps.
In principle, the Liberals are not opposed to denationalization, says Raymond Garneau, that party's critic on economic affairs. But the party will want to be sure that privatization does not counter the original purpose of nationalization.
For instance, he explained, one reason for Air Canada was to provide reasonably priced air service to more-remote or smaller communities. If a private company was to take over the airline, there would have to be some assurance that such service was not soon ended.
Also the government wants to avoid any appearance of selling crown corporations at bargain prices or to companies that quickly put them out of business.
One example in which such concerns are important is De Havilland. The government has invested more than $700 million (US $550 million) over the last few years to cover the concern's large losses and help it develop the Dash-8. It will want to be sure the buyer preserves that investment and the 4,400 jobs and sophisticated technological skills the company commands.
When it unloads Teleglobe, it must tell the buyer whether it will continue its monopoly on overseas communications for 10 years, five years, or not at all. It will make a key difference to the buyer.
Referring to such factors as employee concerns, foreign or Canadian ownership, tax considerations, regulation, and so on, an official here noted: ``You want to have a clear idea on all these things before you sell these companies.''