BUSINESS/ECONOMY

A takeover with a message

THERESA TEDESCO July 21 1986
BUSINESS/ECONOMY

A takeover with a message

THERESA TEDESCO July 21 1986

A takeover with a message

THERESA TEDESCO

It was the clearest signal yet that Canada is indeed, as Prime Minister Brian Mulroney declared 18 months ago, “open for business.” Last week a ruling by Investment Canada, the federal agency designed to examine and approve foreign investment, permitted the $2.6-billion sale of Hiram Walker-Gooderham & Worts Ltd., a 130-year-old Canadian distillery, to

British conglomerate Allied-Lyons PLC. Last July the government took a promised first step toward creating a cordial environment for foreign investors when it dismantled the Foreign Investment Review Agency (FIRA) and replaced it with what was billed as a more friendly Investment Canada. Now, the new agency’s decision on Hiram Walker is likely to be widely interpreted in Canada and abroad as an indication of Mulroney’s determination to diminish economic nationalism.

The ruling also marked a crucial turning point in an increasingly bitter battle between Toronto’s wealthy Reichmann brothers, who control Gulf Canada Corp., and Allied-Lyons. The Reichmanns gained control of Hiram Walker Resources Ltd., parent of

Walker-Gooderham, in late April for $3.3 billion, then attempted to block the previously arranged sale of the newly acquired company’s liquor division. Hiram Walker’s board had arranged to sell the distillery to AlliedLyons for $2.6 billion in March, as part of an unsuccessful defence against the Reichmanns’ takeover bid.

Allied-Lyons, a $6.5-billion London-

based distillery giant, had already achieved some success last week in its struggle to secure WalkerGooderham. In a unanimous ruling, the Supreme Court of Ontario upheld an earlier court decision that the deal arranged between Allied-Lyons and the former management of Hiram Walker was valid. Declared Allied-Lyons chairman Sir Derrick Holden-Brown: “This confirmation relieves much of the frustration we have suffered over the past few weeks.” But the Reichmanns were expected to return to court again this week to argue that the agreement is not binding on them as Hiram Walker’s new owners.

In their battle for the coveted distillery, both sides have made direct appeals to the public and vigorously lobbied politicians. And an unlikely alliance had formed between the foreign-owned Allied and Robert White’s Canadian zAuto Workers Union (CAW), which represents Walker-Gooderham employees. In a confidential

letter to Mulroney and several of his senior cabinet ministers, obtained by Maclean's, the CAW gave “overwhelming” support to Allied-Lyons, which had offered employment assurances. But that likely proved less compelling than political needs. Although Investment Canada announced the decision, it was actually made by Mulroney’s inner cabinet, which discussed the problem two weeks ago during a three-day policy conference in Saskatoon. A source close to the Prime Minister told Maclean's that the government approved Allied-Lyons’s bid to prove a point: that the Tories’ election pledge to open up Canada to foreign investment still stands.