Mr. Speaker, this government's objectives are to put CN on a viable footing so that it maintains competitiveness with other carriers and to maximize the value of the sale of CN's shares to Canadian taxpayers.
To achieve maximum value the broadest possible distribution of shares is necessary. The initial public offering of CN will be the largest such issue in Canadian history. The Canadian equity market may not be large enough on its own to absorb such an issue of this size.
To ensure the divestiture of all the government's equity in CN at maximum value, markets outside of Canada will need to be assessed. The United States in particular will be an important market. Its numerous investors are familiar with the rail renewal and revitalization which Canadian railways and CN in particular are undertaking. Foreign ownership restrictions could jeopardize the participation of these investors.
Canadian rail policy does not restrict or prohibit foreign ownership. More than 30 per cent of CP's limited shares are owned abroad. By not limiting foreign ownership for CN it ensures a level playing field between both CN and CP in their ability to raise equity capital in global financial markets.
The government's financial advisers agree that a foreign ownership limit could reduce the potential size of the issue and would reduce the price. Limits could also prevent the government from selling the majority stake. Given the size of the share offering, a successful issue would be endangered if the potential shareholder base was limited to Canada.
While shareholder investment thresholds under the Competition Act and Investment Canada Act could conceivably have provided sufficient safeguards against an unwanted foreign takeover, the proposed 15 per cent limit on individual share ownership also acts as an effective constraint on foreign control. Past experience with Canadian initial public offerings indicates that foreign sales are unlikely to approach, let alone exceed, 50 per cent.