Piece by Michel Leblanc, President and CEO of the Board of Trade of Metropolitan Montreal and Françoise Bertrand, President and CEO of the Fédération des chambres de commerce du Québec,
and published in Le Devoir.
April 27, 2016
Support for Bombardier must not compromise its Canadian ownership
The issue of government financial aid to complete the financing for the C Series program is generating lively debate in the Canadian business community. If we believe what has been reported in the medias, negotiations between the government and Bombardier are subject to pressures from influencers, some of whom recommend changing the company’s share capital structure. But this would put Canadian ownership of this global leader at serious risk and would create a precedent that could affect other flagships of our economy. It would be a mistake that Canada cannot afford to make.
Protect Bombardier from foreign buyers
Given that the company’s share price and the value of the Canadian dollar are low, Bombardier and its assets are a target for major foreign aircraft manufacturers. Having multiple voting shares is one of the only barriers to this possibility and to the activism of certain shareholders motivated by short-term gains. Changing multiple voting shares into single voting common shares would put the company at serious risk for a hostile takeover bid. Canadians should be concerned about the consequences of this change to the governance structure.
Assurance of performance and stability
Studies conducted by PwC, 5i Research, the University of Toronto and IGOPP have shown that the stock market performance of companies controlled by multiple voting shares is equal, if not superior, to that of companies with diffuse control. Bombardier’s governance structure is therefore not responsible for the challenges the company has faced in recent years. These challenges are instead related to the prevailing conditions in the global aerospace industry when a company embarks on a project as ambitious as the C Series. One could even argue that the current structure has enabled management to stay the course on the corporate vision and long-term objectives, despite a context of uncertainty.
Why put such an important company at risk?
Bombardier is a flagship of the Quebec and Canadian economy. This leading, internationally recognized company generates annual economic benefits of over $12 billion in Canada. It makes a major contribution to the country’s trade balance, with exports totalling $9.1 billion in 2014. Bombardier’s commercial activities maintain around 24,300 jobs in Canada. There can be no doubt about its contribution to Canada’s economic growth, a contribution that must continue to develop.
Mechanisms to maintain control of our businesses
A number of the voices recommending changing Bombardier’s share capital structure come from Bay Street. Yet the major Canadian chartered banks, which are one of the pillars of economic activity in Toronto, in reality enjoy aprotection mechanism against foreign takeover bids by virtue of the Bank Act, which prevents a single shareholder from owning more than 10% of the stock. A major American bank could not take control of a major Canadian bank. We believe that it is equally in Canada’s interest to limit the risk of losing Canadian control of Bombardier.
We need to put an end to the debate, because it is in the entire country’s interest to see this flagship successfully complete one of the most ambitious projects in commercial innovation in Canada in recent decades.