The cancelled $500m deal for a Canadian fibre-optics company has advisors concerned about Canadian equities considering the scathing remarks of the international buyer.
On Monday, Egyptian billionaire Naguib Sawiris, who was set to acquire Allstream – the wireless enterprises services division of Manitoba Telecom Services Inc. – for C$520 million, told Ahram Online Monday that he is wiping his hands of Canada. He is pledging not to invest “even a single penny” in the country.
"The world is big and my money can go anywhere," said Sawiris, adding that he will redirect his investment to Egypt.
Labelling the tycoon’s interest in Canada’s telecom industry as a national threat to security, the government said the transaction didn’t meet the "net benefit" test of the Investment Canada Act.
Still Canadian advisors are weighing the possible implications of Sawiris's very public rejection of Canada and by extension the kind of investment needed to reinvigorate the TSX and other exchanges.
“The government is sensitive about these industries (telecommunications) because there are only a few players,” says Joe Barbieri, a financial advisor with Joe The Investor Group. “If it was a consumer company, I don’t think they (the government) would think twice about allowing someone to buy someone out.”
With Canadian stock markets, including the TSX and TSE, struggling to bring foreign investors to the table, advisors, like Barbieri, question whether the government’s latest move could furtherlimit overseas investment.
“I think it will deter future people,” says Barbieri. “And, if they do come, they’re going to ask more questions and want more upfront promises, so they have more assurance that it won’t fall through.”
On the flip side, some advisors feel this is just a drop in the bucket, soon to be forgotten by those with genuine interest in Canada’s investment offerings.
“Everyone has their own investment strategy and what one high-profile investor decides about (investing in) Canada does not negate the fact that Canada is attractive to many international investors and has a lot to offer,” says Barbara Garbens of B L Garbens Associates Inc. “I don’t think this will affect the Canadian market.”
Sawiris argues that he was “never told” of an objection to the bid and that the Canadian government should never have allowed the acquisition – which was announced in May – to go through. “We had been totally pre-cleared.”
In a statement, Manitoba said that Accelero had proposed 'far-reaching, comprehensive and binding undertakings' to the government, including a commitment to invest $300 million over three years to pursue Allstream's capital plans.