How the PM can gingerly tackle Petro Canada deal

Every day brings a different challenge in Ottawa. And today the Federal Conservative Government will be forced to deal with Suncor’s (SU:TSX) $19 billion bid for Petro-Canada (PCA:TSX). The world is in a recession, and selling off the corner gas station will attract some attention. Now’s the time for Canadian Prime Minister Stephen Harper to be nationalistic, but that doesn’t mean he has to block the proposed deal.

Here’s how it can work:

• Suncor is widely-held, so consider the rule that “no single person or company” can hold more than 20% to be applied in an all-stock transaction;
• allow other Canadian-headquartered companies (read Encana) to bid as well, but not Imperial Oil (read Exxon);
• whoever wins the auction for Petro-Canada must inherit the “Petro Canada Act”, or at least the Federal Government’s Golden Share…ensuring no foreign control down the road

A few years ago, CIBC approached then-Finance Minister Paul Martin with the hopes that he’d approve their acquisition of Canada Trust.  He said no.  18 months later, something had changed in his mind, and TD Bank was allowed to buy CT instead.  Business needs to know the ground rules when they interface with government, and the Federal Conservatives have a chance to make the rules clear here.

Letting Inco and Falconbridge go were mistakes, in hindsight (see prior post “Schwartz prescription won’t cure patient” May 15-07). Stopping the MDA deal was easy (see prior post “Prentice is right to reject MDA space deal” April 10-08), and drew considerable applause. This Suncor/PCA situation strikes me as straightforward: proceed, but only if NewCo lives up to the true spirit of the Petro-Canada Act.

I was working for Prime Minister Mulroney’s government when the Hon. John McDermid privatized Petro-Canada. As I recall, widely-held Canadian ownership of the assets was the goal, not necessarily preserving the corporate name for all time.

It’ll be interesting to see how the pitch is made. A strong global Canadian energy company? But they better not mention the synergies.

The deal can be approved. In this case, we can have our cake and eat it too.

MRM