Changes to Labour Agreements Would Improve Prospects for CN Share Offering according to Survey of Potential Institutional Buyers
CONTACT: Ted Dixon, Survey Coordinator,
The Fraser Institute (604) 688-0221 ext. 549
EMBARGO DATE: June 13, 1995
Media Release
Vancouver, B.C.>> The results of the Fraser Institute's spring Survey of Senior Investment Managers show that potential Canadian institutional buyers of Canadian National (CN) shares believe changes to company labour agreements would improve the attractiveness of the railway's initial share offering. The Minister of Transport introduced legislation to privatize CN on May 5, 1995.
Changes to Labour Agreements Would Improve Attractiveness of CN Sale
Respondents to the survey were asked what steps, if any, should be undertaken by the federal government to improve the attractiveness of an initial CN share issue. Respondents were able to list as many changes at CN as they believed would be necessary to prepare the company for a successful privatization. The most often mentioned area of concern was the need for changes to existing company labour agreements. The labour issue was indicated by 80% of respondents. Seventy-three percent of respondents indicated that CN should abandon, restructure or sell money-losing rail lines. The same percentage (73%) also said there should be a commitment to have a majority of outside Directors on the CN Board. Sixty-eight percent said that the federal government should
Background: The Survey of Senior Investment Managers
The Fraser Institute received 50 responses to its mail survey of 144 Canadian pension fund and investment managers. The Institute sent surveys to the senior investment officer at major investment fund management firms and pension divisions of Canadian organizations that manage their pension plans in-house. Responses were received between March 21 and May 2, 1995. The respondents represent $140 billion of pension fund assets and a total of $230 billion of assets under management. The Institute conducts the survey quarterly and the results are available by subscription.
provide a commitment not to exercise control or interfere with company operations through any residual shares it may retain.
Other steps that were less often sighted included exclusion of any Canadian ownership restrictions on issued shares (37%), change in CN management (34%), merger of the eastern rail network with CP Rail System (27%), provincial railway regulatory reform (17%) and federal government acquisition of all or part of CN debt (10%). Seven percent of respondents mentioned other steps. Only 5% indicated no additional steps were
needed.
Respondents Divided on Use of CN Privatization Proceeds
When asked what do you believe the government should do with the cash proceeds from the sale of CN, 9% said CN should be given all the proceeds from any share issue to improve its balance sheet. Thirty-one percent said CN should keep some of the proceeds from any share issue to improve its balance sheet. Fifty-six percent said the government should keep all the cash from any share issue and apply the proceeds towards its own financial requirements or debt reduction. Four percent did not know.
Most Support Privatization of Canada Post
Respondents were asked if they believe the federal government should privatize Canada Post within the next 4 years. Seventy-four percent said yes. Ten percent said no and 16% did not know.
Canadian Institutional Investors Surveyed Do Not Want Foreign Ownership Restrictions on Privatized Companies
When ask what foreign ownership limits the federal government should place on the shares of companies it privatizes, 80% said no foreign ownership restrictions. Twelve percent said foreign ownership should be restricted to between 26% and 49% of a company's shares after it has been privatized while 4% indicated foreign ownership should be restricted to between 21% and 25% of outstanding shares. An additional 4% said foreign ownership should be limited to between 16% and 20%.
The following are the text and results of the questions:
Click here to view the results of question 1. In the budget, the federal government has promised to reform the National Transportation Act to reduce the regulatory burden on railways. What other steps do you believe should be taken before privatization begins in order to increase the attractiveness of any potential share offering to the market place?
Click here to view the results of question 2. What do you believe the government should do with the cash proceeds from any privatization sale of CN?
Click here to view the results of question 3. Do you believe the federal government should privatize Canada Post within the next 4 years?
Click here to view the results of question 4. What limit on the percent of foreign ownership should the federal government place on the companies it privatizes after the shares have been issued?