BUSINESS

Old rivals back in town

Survivors of an epic battle pursue new dreams

JOHN DALY June 21 1993
BUSINESS

Old rivals back in town

Survivors of an epic battle pursue new dreams

JOHN DALY June 21 1993

Old rivals back in town

BUSINESS

Survivors of an epic battle pursue new dreams

JOHN DALY

Five years ago, Bob Blair and Bernard Isautier were locked in one of the biggest and bitterest corporate takeover battles in Canadian history. The contest pitted Blair’s Calgary-based Nova Corp., an oil and gas producer, against Polysar Energy & Chemical Corp., the petrochemical products giant based in Toronto. In the end, Nova chairman Blair prevailed, overcoming the daunting financial and legal obstacles that Isautier, Polysar’s president, threw in his way. But after they completed the $ 1.9-billion deal in June, 1988, both men faded from public view. The imperious,

French-born Isautier resigned and returned to Paris with a hefty severance settlement. Blair, however, had little time to savor his victory. Nova buckled under the debt it had assumed to finance the bold takeover, and he stepped down as chairman in September,

1991. But now, both men are attempting to stage comebacks, and both have chosen to do so in the same city: Calgary.

Earlier this month, Isautier arrived in Calgary to start his new job as president and chief executive of U.S.-owned Canadian Occidental Petroleum Ltd., a midsize gas and oil produc2 er. Blair, meanwhile, has entered politics. Last June, he won the federal Liberal nomination for the riding of Calgary Centre and he is already running hard. Both men have struggled since the last time they crossed paths. So has Nova, which is only now beginning to shake off the costly effects of its purchase of Polysar. Shortly after Blair won the battle for Polysar, the price of ethylene, a principal product and the raw ingredient for plastics, plunged along with other petroleum prices. IT at forced Nova to sell off much of the empire that Blair had assembled, including Polysar’s huge rubber division. Now, Isautier is more willing to reminisce than Blair, saying that he would follow the same strategy again if given the chance. “I have no regrets,” he said. Blair, however, declined to discuss the takeover. “I’ll just keep my counsel about that,” he said.

The 1988 battle was a watershed in the careers of both executives. For Blair, now 63,

the Polysar acquisition capped a decade of expansion for Nova, which he was aiming to transform into the centrepiece of a diversified resource-based economy. But the softspoken, cerebral Blair was an unlikely champion of the Alberta oil industry. He was born in Trinidad in 1929, the son of an engineer who worked for Bechtel Canada, a global contracting firm, and who travelled extensively. As a youth, Blair lived in Scotland, where he acquired a thick burr in his speech, before returning to Canada to study engineering at Queen’s University in King-

ston, Ont. During the 1970s and 1980s, although he was head of a large energy company, he drove a modest compact car and frequently ate at the lunch counter of the downtown Pay & Save.

Isautier, 50, also has an eclectic background. A mining engineer, he worked for the governments of Niger, Tunisia and France before moving to Calgary in 1978 as president of Aquitaine Canada, a subsidiary of France’s state-controlled oil company. In 1986, he was appointed president of the Canada Development Corp. He changed the company’s name to Polysar and tried to focus its operations on energy and petrochemicals.

It was Polysar’s petrochemical business that provoked Blair’s interest in the company. Nova, whose roots were in the gas pipe-

line business, had expanded into basic petrochemical production a decade earlier. Blair saw an opportunity to combine Nova’s pipelines and energy resources with Polysar’s strong and more advanced petrochemical business to create the first truly Canadian integrated petroleum company. “Polysar was a one-time opportunity, the final step towards a world-sized petrochemicals business,” he said in a 1990 interview. “So we stuck out our chin.”

The decision was an easy one for Blair, who had always been something of a maverick in Calgary’s petroleum industry. Most of his counterparts worked for multinational oil companies and took their orders from head offices outside the country. Blair, by contrast, was an economic nationalist who wanted Canada to retain more control over its oil industry. He even supported the National Energy Program initially, a stand that clearly set him apart from the rest of the industry and demonstrated his willingness to take a contrary approach.

But nationalism was only one of the motivations behind his bid for Polysar. He was also attracted by the idea of increasing the steady but unexciting earnings of the utility-like pipeline business with the cyclical but sometimes highly lucrative profits of petrochemicals.

In October, 1987, aided by the stock market crash and its resulting lower share prices,

Blair launched an unwelcome takeover bid by buying Polysar shares on the open market. He also tried, unsuccessfully, to secure seats on Polysar’s board. Isautier did everything he could to block the bid. During an epic 13-hour Polysar shareholders meeting in May,

1988, Blair was allowed only a few minutes at the microphone to formally state his case. Recalling the battle, both Isautier and Blair insist that there is no rancor between them. “We had different objectives,” said Blair. “It was not a situation of hard feelings.” Isautier said that he was only trying to obtain the highest possible price on behalf of Polysar’s shareholders. He added, “In retrospect, I was right.” By dragging out the takeover, Isautier forced Blair to pay the equivalent of $21 a share for Polysar’s stock, almost double what it had been trading at before the takeover bid was launched. Isautier, himself, collected several million from his personal shareholdings. Immediately after the takeover, however, Blair had ample reason to crow: a Western maverick had bested Isautier and a formidable coalition of Bay Street financiers and insiders.

But the deal soon went awry for Nova. Analysts say that Nova had simply paid too much. Said Robert Hastings, an oil-and-gas analyst with Richardson Greenshields of

Canada Ltd. in Toronto: “It became a poker game and Nova just kept upping the bids.” In the end, Nova ended up with a debt of $1.4 billion from the takeover. In the following years, when energy prices and particularly petrochemical prices fell, Nova was forced to gradually sell off prized assets to reduce its debts. In 1991, Nova lost a staggering $923 million, prompting Blair’s retirement.

Isautier has also had his ups and downs over the past five years. In 1990, the urbane Isautier was appointed president of France’s state-owned Thomson Consumer Electronics, whose factories around the world make RCA television sets, Telefunken radios and other brands. At the time, Isautier contrasted the lifestyle of Paris with that of Calgary and was openly delighted to be in France rather than Canada. But just two years later, in February, 1991, Isautier stepped down. “I had some differences of opinion with the chairman of the group, who was a political appointee,” he said. This April, Isautier says that an executive search firm approached him about the Canadian Occidental job. He quickly agreed to take it, even though it meant a return to the city that he was once pleased to leave. One of the job’s principal attractions, he said, is its “North American-style management.” He added, “There are no politicians involved.” Canadian Occidental, which is 30-per-cent owned and controlled by Occidental Petroleum Corp. of Los Angeles, is a diversified energy and chemical company with oiland-gas interests in Canada,

0 the United States, South g America, Yemen in the Mid-

1 die East and Romania. “It has ^ done a great many things ino ternationally, this is in part the g reason why I am so interestu ed,” said Isautier, adding that

he looks forward to travelling.

Blair, by contrast, is abandoning business and is planning to travel only as far as Ottawa. Although he is a close friend of former Conservative Alberta premier Peter Lougheed, Blair said that he chose to run for the Liberals because the party’s ideals match his own—it is a “thrifty, tight organization” that is also “generous to people who haven’t got a fair shake in life.”

Blair and Isautier have seen each other only once since 1988: by coincidence, at Calgary’s Petroleum Club the night of Blair’s retirement dinner in October, 1991. Isautier was in town for a meeting of Ranger Oil Ltd.’s board of directors, from which he plans to resign this summer. But now that Isautier will be living in Calgary, both men say that they will doubtless meet again. When they do, the only thing left for them to debate is what might have been.

JOHN DALY