By Jenny Wagler
The union representing approximately 1,800 former CanWest Global Communications Corp. employees has launched court action seeking a Canadian heritage minister review of the company’s July 13, 2010, acquistion by PostMedia Network Inc.
The Communications, Energy and Paperworkers Union of Canada (CEP) filed its federal court application April 20. It seeks a judicial review of the March 22 decision by Minister of Canadian Heritage and Official Languages James Moore to reject the CEP’s request that he review the acquisition under the Investment Canada Act.
“Our client’s view is the new ownership of PostMedia is moving very aggressively to cut costs through layoffs, outsourcing, moving more to a digital platform – the kind of things that they believe should be of concern to the government from a cultural and heritage point of view,” said CEP counsel Bruce Ellwood, a lawyer with Arvay Finlay Barristers.
Industry Minister Tony Clement used the act to reject BHP Billiton’s acquisition of Potash Corp. (TSX:POT) last November on the basis that it was not likely to be “of net benefit to Canada.”
According to the CEP’s application, Moore rejected the union’s request because “Canadian businesses with non-controlling foreign partners are not subject to the act.”
The CEP’s application argues that the Investment Canada Act allows the heritage minister to review business related to Canada’s cultural heritage or national identity, such as the newspaper business.
It also contends that approximately 92% of PostMedia’s issued and outstanding shares are owned by non-Canadians and 75% are owned by “a consortium of institutional investors led by GoldenTree Asset Management.”
Ellwood said Moore’s rejection of the CEP’s request for a review of the acquisition ignores his discretion to review the deal for “control in fact.”
“What he’s relying on [in his rejection of the CEP’s request] is simply the voting share structure of PostMedia, which on paper assigns a majority of votes to the shareholders who have, at least in theory, declared that they’re Canadian,” he said.
“But when you drill a little bit deeper into the transaction, it’s clear, in our client’s view, that the acquisition was funded, orchestrated and controlled by a consortium of U.S.-based hedge funds, and what they asked the minister to do was to look at it more carefully.”