Harper Says Canada Won't Change Investment Rules for Alcan

May 31 -- Canadian Prime Minister Stephen Harper won't change investment rules "in midstream" to make it easier for Alcan Inc. to fight off a takeover bid by Alcoa Inc.

"I don't think players who are involved in takeovers or the subject of takeovers can expect the government to change rules in midstream," Harper said today in an interview.

Canada's Conservative Party government earlier this week rejected calls to expedite a review of the country's investment rules, amid a rash of foreign takeovers of Canadian firms like Alcan. Alcoa's May 7 hostile takeover bid for Montreal-based Alcan triggered a backlash from opposition parties, who say foreign acquisitions of Canadian companies may lead to job losses.

The bid for Alcan brought to almost 600 the number of announced foreign takeovers in the past 16 months, valued at a combined $156 billion, according to Bloomberg data. That compares with $43 billion in 2005.

"I don't want to get in the marketplace and say, this transaction we'll allow, and that transaction we won't allow, and then try to micromanage international investment flows," Harper said. "That would be a disaster."

Still, a review of foreign-investment rules is "long overdue," Harper said. "What we want to see as a government ultimately is Canadian champions in sectors like mining and other sectors where we're world leaders," he said.

The government this week said it would appoint a panel of experts within a month or two to review Canada's competitiveness policies, including rules on foreign investment. The government first announced plans for the review last November.

"But we're not going to do anything rash, do anything that could endanger the superior economic performance this country's in fact engaged in," Harper said.

'Net Benefits'

Under current Canadian investment law, Industry Minister Maxime Bernier can block any takeover of a Canadian company worth more than C$265 million ($248 million) if the deal doesn't provide "net benefits" to the economy. Such benefits include increased productivity or research and development.

The government has said it will wait for advice from Bernier's ministry before deciding whether to approve Alcoa's cash-and-stock offer, which is valued at about $27.7 billion.

The main opposition Liberal Party has called for a three- month moratorium on acquisitions, and asked the government to appoint a panel of experts to use the time to study whether foreign-investment laws in Canada are lax compared with elsewhere. Bernier responded that the government didn't plan any changes to the rules before the next budget.