Canada for Canadians

Long worried by overwhelming U.S. ownership of some major industries, Canadians are trying a new tactic for redressing the balance: they are moving to buy up foreign-owned firms in key areas, particularly natural resources. Last week the government-owned Canada Development Corp. made a $290 million tender offer for shares in U.S.-owned Texasgulf Inc., a large natural-resource company that has piled up high profits by digging deep holes in the ground.

Texasgulf is ideally suited to be the first target in a Canada-for-Canadians thrust. More than 20% of the stock is owned by private Canadian investors, and C.D.C. has already bought up another 2 1/2% in the open market. More than two-thirds of the company's revenues come from Canadian operations, which include mining, oil and gas production, fertilizer making and foresting.

The star of Texasgulf's metals division is the Kidd Creek Mine at Timmins, Ont., the world's richest source of zinc and silver as well as a major supplier of copper, lead and cadmium. In addition to its Canadian holdings, Texasgulf owns sulfur mines in Texas and Louisiana, a potash mine in Utah, three iron mines in Australia and woodlands in Pennsylvania. Despite a somewhat desultory performance in the stock market in recent years, Texasgulf has impressive profits. In this year's first half, it earned $22.9 million, almost double last year's rate, on sales of $175 million.

The tender offer is the largest deal that the C.D.C. has so far attempted. The addition of Texasgulf to its portfolio (other holdings: a synthetic-rubber maker, three medical laboratories in Canada) is expected to speed plans to put C.D.C. stock on sale to the Canadian public. C.D.C. is offering $29 a share for 10 million of the Texasgulf shares held by non-Canadians. Those 10 million amount to one-third of the outstanding stock. If more shares than that are tendered, C.D.C. may buy them too. After the bid, the price of Texasgulf shares rose from $24 to $27.

It is not clear what effects a takeover would have on Texasgulf. C.D.C.'s president, H. Anthony Hampson, the former head of a large Canadian mutual-fund management company, says only that C.D.C. will seek an "appropriate degree" of representation on Texasgulf's board. Fighting back, Texasgulf filed suit in Houston to block the tender offer; a federal judge issued an order restraining the offer until Aug. 6, when a hearing is set on the company's motion for an injunction.

The bid has also drawn fire from some Canadians. Says Allan Aikens, senior partner of the Montreal investment firm Lafferty, Harwood and Co.: "I'm skeptical of the ability of a government-controlled corporation to participate effectively in mineral activity." Complained Gerald Baldwin, House leader of the opposition Conservative Party: "This is public money they're playing around with. It was never the purpose to do this sort of thing." Baldwin is wrong. The C.D.C. was designed "to make equity investments either in new or existing companies."

If the move on Texasgulf succeeds and if C.D.C. or other Canadian government agencies expand the takeover action, the ownership of industry in Canada could be substantially changed. At present, more than 60% of the country's manufacturing, 65% of its mining and smelting, and more than 90% of its petroleum and rubber production are under the control of foreign owners --mostly from the U.S.

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