April 11, 2008
Protectionist Canada: Ohio has a new shinning example
Canada invoked the rarely used Investment Canada Act of 1985 to block a negotiated acquisition of a Canadian company, MacDonald Dettwiller, by an American company, Alliant Technsystems. The Canadian company is in the satellite business. On the announced of the block, the stock in the Canadian company dropped immediately about 9 percent on the Toronto stock exchange. The Investment Act allows the Canadian government to block any foreign acquisition of a Canadian company worth more than $295 Canadian dollars if the acquisitions does not provide "net benefits'' to the Canadian economy, such as increased productivity and research and development. This is a version of the first generation state anti-takeover statutes that first appeared in the United States in 1969. Ohio was second in line to adopt one. The United States Supreme Court declared them unconstitutional in Edgar v Mite in the early eighties. Ohio still has it, in a substantially diluted form so as to satisfy the opinion. We are moving in the direction of the Investment Act, with new modifications of our foreign anti-takeover legislation and rules, but our federal system is light years away from the Canadian act (we have more stringent requirements for a threat to "national defense" or "critical infrastructure"). The current Congress, of course, would pass the Canadian language it if could get away with it. The Canadian Act is very, very shortsighted, making every foreign acquisition a political question handled by a government bureaucrat. The Act has sat on the books usued for twenty-five years and now has been rediscovered by Canadian politicians. We, of course, must now threaten to block all Canadian acquirers of United States companies until we get reciprocity. Wonderful.
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This helped me out immensely, it's good to finally read something this enlightening, thanks!
Posted by: Ari Rochmann | Oct 5, 2008 6:03:36 PM