THE Canadian government has earned more than $3 billion (Canadian; US $2.6 billion) from its six-year-old privatization policy, including probably well over C$500 million from partial sale of the national oil company. Shares will start trading today.
Perhaps more than the money flowing to the treasury, the privatization has changed the face of Canadian business and the amount of government involvement in a wide range of firms.
The firms were acquired by the Canadian government over the past 75 years, stretching from a national railway to a satellite communications business. The switch to a Progressive Conservative government in 1984 started the sell-off with the theory that the private sector runs things far better than government.
Petro-Canada, Canada's government-owned oil company, is being sold to the public at what political critics say are bargain-basement prices. The sale is the latest - and possibly the last - in a series of privatizations of Canadian-government assets.
The Petro-Canada shares are being issued at C$13 apiece. Analysts had been expecting a price of at least C$15, but after Petro-Canada reported a C$52 million loss for the first quarter, its shares were marked down. Investors gobbled them up at the lower price.
"The issue is totally sold out," said Toronto stockbroker Susan Rodgers, who had to turn down last-minute requests from clients.
"In Europe the issue is already oversubscribed," said a corporate finance official at RBC Dominion Securities. "The Europeans have had good experience with the privatization of government firms in the past."
The underwriters and investors are using Shell Canada and Imperial Oil, two large publicly-traded Canadian oil firms, as yardsticks in determining the value of the government-owned oil firm.
Petro-Canada was formed by an act of Parliament in 1975 as a Canadian "window on the oil and gas industry." Its first acquisition was Atlantic Richfield Canada. In the early 1980s, Petro-Canada expanded as part of the "National Energy Program" of the Liberal government of Prime Minister Pierre Trudeau. It bought the Canadian assets of Belgian-owned Petrofina. In 1983 it purchased the refining and marketing …