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The China Minmetals Corporation
is expected to make a formal bid for Noranda, Canada's largest
mining company, next month. But just the announcement that it
is interested in taking over Noranda has set off protests by both
Canada's political right and left.
The biggest concern seems to be that China Minmetals is government-owned.
While several government-owned companies in China, including Minmetals,
have purchased foreign companies, those deals have usually involved
small, privately held operations rather than a large, publicly
traded corporation like Noranda.
In addition, some of the political critics have raised questions
about the Chinese company's commitment to environmental protection.
In the province of Quebec, Bloc Quebecois politicians are concerned
that Minmetals will move ore processing to China. And Stockwell
Day, a member of Parliament from the Conservative Party, has said
that Minmetals' labor practices need to be scrutinized.
David Kilgour, a Liberal member of Parliament, said that if one
commercial company was taking over another, "nobody would
bat an eyelash." But, he said: "This is a branch of
a government department in China. I had two town hall meetings
last week and everyone said, 'No, don't do it."'
Noranda is the world's largest zinc producer and is ranked ninth
in copper. It owns 60 percent of Falconbridge, a leading nickel
producer. Minmetals, based in Beijing, is a former metals trading
company that now controls mines, iron and steel operations. A
deal would represent a shift by Minmetals from simply purchasing
resources abroad to acquiring the Western companies that produce
them.
On Thursday, Derek G. Pannell, chief of Noranda, said the due
diligence process by China Minmetals was nearly completed. In
a conference call with analysts, Mr. Pannell said that any deal
with Minmetals was unlikely to close before the first quarter
of 2005.
The proposed takeover of Noranda, which is expected to be valued
at more than 6 billion Canadian dollars ($7.4 billion), comes
at a sensitive time for the Canadian government. The country's
relatively new Liberal government needs support from opposition
parties to maintain power. But not only are politicians from all
those parties criticizing the takeover, they have been joined
by several Liberals, including Mr. Kilgour. At the same time,
the Liberals have made improving trade and economic ties with
China a component of their economic program. Any move to block
China Minmetals, advocates of the Noranda takeover say, would
undermine that goal.
"We expected some negative reaction," said Denis Couture,
a spokesman for Noranda, which is based in Toronto. "But
we were surprised at the number of people who reacted negatively."
"The Chinese are going to invest several billion dollars
to conclude this transaction. They don't want to risk that investment
and they don't want to risk their reputation as they're going
to want to make more transactions like this in the future."
But critics said they would be more comfortable if Minmetals was
privatized first.
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"What's the business
of a government in operating a natural resources company?"
said Roy J. Cullen, another Liberal member of Parliament who was
once the vice president of a forest products company when it was
owned by Noranda. "Is there a net benefit to Canada in this?
Personally, I need some convincing."
Minmetals announced its intention to make an all-cash bid for
Noranda last month. The bid is endorsed by the company as well
as its major shareholder, the conglomerate Brascan, based in Toronto.
Like all major foreign takeovers, the proposal will undergo a
review by Industry Canada, the government agency that oversees
such deals. All such reviews are conducted in private to protect
corporate information.
Mr. Kilgour and others are critical of that system, contending
that the agency largely rubber-stamps the deals it reviews. Because
the agency does not report what deals it rejects or what deals
are withdrawn, there is no way to confirm independently its power
or effectiveness.
Mr. Kilgour is working with members of other political parties
to demand that the government establish a special subcommittee
of Parliament to investigate the merger.
To date, the government has fended off most questions about Noranda
by noting that no formal offer has been made. Industry Minister
David Emerson, however, has said that his department will consider
China's human rights record in any review, although he has also
emphasized the importance of economic links to China.
Last week, Mr. Emerson told reporters that the unusual nature
of the takeover meant that it would probably be discussed in Parliament.
He declined, however, to commit himself to establishing a special
committee to review the deal, saying only that he would consider
the idea.
Stanley H. Hartt, the chairman of Citigroup Global Markets Canada,
which is advising Minmetals, said the negative publicity would
not stop the Chinese company from proceeding with its bid.
Mr. Hartt, who was chief of staff to Brian Mulroney, the former
Conservative prime minister, also dismissed criticism of the takeover
as a creation of the editorial pages of The National Post, a politically
conservative newspaper based in Toronto. Much of it, he said,
will vanish when Minmetals discloses the terms of its bid.
"I don't think this thing has legs at all," Mr. Hartt
said. "A lot of this hand-wringing is speculation upon speculation.
This is a commercial company, not a political arm of the Chinese
government."
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