CDN FDI Canadian Foreign Direct Investment examples of Canadian FDI in other countries.

an example of a Canadian company doing FDI by acquisition in the resource sector

Case Study- Vancouver based Eldorado Gold Corp.  www.eldoradogold.com buys China's Sino Gold to make Eldorado the top foreign player in China 2009 Aug "a reversal of the recent trend that has seen Chinese companies buying into the Canadian resource sector, Vancouver's Eldorado Gold Corp. is about to become the biggest gold miner in China"  Richard Blackwell, Globe FDI by acquisition FDI will increase capacity, and competitiveness of target Sino Gold has significant intel on gold deposits in China FDI to take advantage of a 4X advantage the Canadian dollar trading high against the Australian dollar strategic purchase of a market player China is (2009) the largest gold producing country in the world "establishes Eldorado as the unequivocal leader among international gold producers in China, the world's largest gold producing country" Eldorado Press release 2009 Aug 26th kewl point - Eldorado does not need Chinese gov't permision - why?, because it is making the acquistion from an Austalian company

an example of a Canadian company doing FDI by acquisition in the high tech sector

Case Study- Thomson  thomson.com buys Reuters Reuters is most well known for providing stock market information from which traders make timely decisions to buy and sell commodities.  It also provides a news service which is picked up by all the major newspapers.

an example of a Canadian company doing FDI by acquisition in Latin America - mfg sector

Case Study- Quebecor   KEY POINTS FDI by acquisition is something most Canadians are familiar as being "done to us", as opposed to "doing to others". To give an example of Canadian FDI by acquisition - done in a strategic way with consideration for future trends, etc. etc., .. we will discuss briefly the case of Quebecor investing in Mexico. Quebecor. FDI by acquisition FDI will increase capacity, and competitiveness  strategic purchase of a market player host gov't supports the market for the sector population consuming the product is growing market sector is growing WTGR .In case you didn't know it ... Quebecor World  Inc. is the largest commercial printer and image-management company in the world.!!! with more than 40,000 employees worldwide.

an example of a Canadian company doing FDI by acquisition in Latin America - mfg sector

Case Study- Quebecor. In early August 2001, The Star carried a Canadian Press story about printing company Quebecor World Inc.'s purchase of the assets of one of Mexico's leading commercial printers. ."The purchase is expected to increase  Quebecor's sales in Mexico by six times to  about $105 million. Grupo Serla of Mexico City is primarily a printer of educational textbooks and telephone directories... Quebecor spokesperson Tony Ross said in 2001,  "...Quebecor World will print 20 billion directory pages a year in Mexico, equal to more than 75 per cent of the  Mexican directory market. Quebecor noted that this is almost the volume of all the directory pages it prints in Canada, where it has more than 90 per cent of the market.... To meet the demand, three directory press lines will be moved to Grupo Serla's plant from the United States.... Charles Cavell, chief executive of Quebecor World, described the deal as  ``an investment in the future." As for the book division, Cavell noted that Grupo Serla's primary  customers are the Mexican government agencies responsible for  purchasing primary and secondary school textbooks.... He said that more than one-third of Mexico's population of 98 million  people is under the age of 15 and the government is committed to  increased spending on education."

an example of a Canadian bank doing FDI by acquisition in the U.S. when the dollar is high

..  A CANADIAN PRESS story carried by the Toronto Star TD buys Commerce Bancorp October 2007 TD's CEO was quoted as saying The deal creates "the first North American bank," Clark said, making TD the continent's fifth-largest bank by deposits with $312 billion, and seventh-largest by number of branches with 2,100 locations. "With this deal we have achieved critical mass in the United States." FYI - The same week that TD bank announced it bought a U.S. bank for $ 8.5 billion, RBC announced they bought a bank in Trinidad for $ 2.2 billion  - RBC also cited the high Cdn dollar

an example of a Canadian bank doing FDI by acquisition in the Caribbean when the dollar is high

..  A CANADIAN PRESS story carried by the Toronto Star Royal Bank eyes Trinidad bank October 2007 The same week that TD bank announced it bought a U.S. bank for $ 8.5 billion, RBC announced they bought a bank in Trinidad (RBTT) for $ 2.2 billion  RBTT was Royal Bank Trinidad & Tobago RBTT was the biggest bank in Trinidad The purchase gives RBC control over $13 billion in assets and 130 branches and 7,000 employees in 18 countries in South America and the Caribbean

an example of a Canadian company doing FDI by acquisition in Latin America - service sector

Case Study - Scotiabank in Mexico .  The National Post carried a short story May 24th, 2003 written by Reuters writer Noel Randewich, about Scotiabank expanding their existing investment in a bank in Mexico .. "Toronto-based Bank of Nova Scotia acquired 36% of Mexican financial group Scotiabank-Inverlat from the bank bailout agency IPAM last April [2002] bringing it stake in the once bankrupt Inverlate bank to 91%" "Following the 1994 peso crisis, Mexico's banking industry collapsed under 100% interest rates and the inability of borrowers to repay their loans... Since Scotiabank bought in to the Mexican banking industry, other foreign investors have followed".

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an example of a Canadian company doing FDI by acquisition in Latin America - service sector

Case Study - Scotiabank in Mexico - details from Scotiabank's Press releases . . This screen capture shows the first couple of paragraphs of Scotiabank's April 2003 Press Release on this FDI situation in Mexico Click on the image to see the larger readable view .

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an example of a Canadian company doing FDI by acquisition in Latin America - service sector

from the Press Release http://micro.newswire.ca/releases/April2003/29/c5828.html/85223-0 "Scotiabank has operated in Mexico since opening a representative office in 1967. In 1996 Scotiabank purchased a 10 per cent stake in Grupo Financiero  Inverlat SA, and later increased the stake to 55 per cent in 2000, establishing Grupo Financiero Scotiabank Inverlat."  "Grupo Financiero Scotiabank Inverlat S.A. de C.V. is one of the principal financial groups in Mexico, with approximately 400 branches and 1,000 ATMs  throughout Mexico. It employs almost 7,000 people in its main affiliates, Scotiabank Inverlat S.A. and Scotia Inverlat Casa de Bolsa S.A. de C.V."

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KEY POINTS

FDI by acquisition is something which can be effected by the political environment in terms of rules and regulations the company might have to follow. The various national governments in the countries in which the company operates, may block the takeover taking place. Blocking takeovers might happen if a government thinks the subsequent giant company can exert a monopoly position in a key industry and negatively effect the business of companies of that country. WTGR

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an example of a Canadian resources and mining company doing FDI - effected by the political environment

Case Study - Alcan , navigating the Political Environment . .  Montreal based Alcan is now, by its recent [2003]  FDI acquisition the largest aluminium mining and mfg. company in the world  www.alcan.com On Alcan's Press Release page you can see it annoucing this FDI in a measured series of releases  www.alcan.com/corporate/AlcanCom.nsf/libweb/press+releases 10/07/2003  Alcan Launches Offer for Pechiney in France 09/29/2003  Alcan's Offer to Acquire Pechiney Cleared by Department of Justice 09/29/2003 Alcan Offer for Pechiney Receives European Commission Clearance 07/07/2003 Alcan announces offer for Pechiney..

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an example of a Canadian resources and mining company doing FDI - effected by the political environment

Case Study - Alcan , navigating the Political Environment . .  The ability for Alcan to do this takeover is a result of Alcan being very skillful at navigating the political / regulatory environment in the United States and Europe.  Because the takeover would create a giant sized company that will dominate the market, Alcan had to convince regulatory bodies in the U.S. and Europe that there would still be a competitive environment left in some aspects of the aluminium industry.

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FDI (ALCAN) summary

Alcan's acquisition of Paris based Pechiney merged company will combine Alcan's 54,000 employees with Pechiney's 34,000 employees annual revenue will be aprox $24 billion WTGR

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an example of a Canadian resources and mining company doing FDI - effected by the political environment

Case Study - Falconbridge falconbridge.com seeking French Gov't subsidies  The Basics: Falconbridge wants to build a giant nickel processing plant on the Pacific island of New Caledonia. This island is land still controlled by France. The French gov't wants the investment to go ahead and would own 51% and the Canadian company will take 49%. The French gov't is worried about the future economic environment and they asked Falconbridge to guarantee loans made to the joint venture in case the international price of nickel falls and the plant is not able to make enough profit to sustain the operations. It's going to cost about $2 billion to get this operation off the ground and Falconbridge doesn't want to be pressured too much by the French government. A Falconbridge vice president told the media in Nov 2005 "We have turned down the offer not because of the package but because the state [France] is imposing financial conditions that are unacceptable..." . .  KEY POINTS In mid-2005, Falconbridge Limited and Noranda Inc. merged under the name Falconbridge Limited. This huge mining company has sales in the range of $5-$6 billion per annum. Later in 2005, Inco Ltd., launched a $10 billion friendly takeover of Falconbridge.

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an example of a Canadian company doing FDI by acquisition in Latin America - agri-food products

. KEY POINTS Reading newspaper stories of Canadian companies involved in FDI is useful and interesting - it is also valuable to know some of the sectors in which Canadian FDI takes place - expansion overseas in the agri-food industry is not as common as mining or automotive, but, it does take place every once in a while WTGR .  2003 Oct 3 A CANADIAN PRESS story carried by the Toronto Star "Saputo to buy Argentine processor: Gains access to cheap milk source" . Allan Swift writing for Canadian Press (as quoted in the Toronto Star) says "Saputo, the leading cheese maker in Canada and a large player in the United States, had been seeking an international platform ever since a WTO World Trade Organization ruling last year prohibited Canadian cheese exports because of government control over milk prices. see the Saputo entry in  www.witiger.com/internationalbusiness/wto.htm (a consequence of influences in the Political / Regulatory Environment) "Saputo Inc. announces that it has entered into a preliminary agreement with Molinos Rio de la Plata S.A., a public company  from Argentina, to acquire 100% of Molfino Hermanos S.A. (Molfino), the third  largest dairy processor in Argentina....Molfino operates two plants and employs 850 people.... Exports sales, mostly comprised of milk powder and cheeses, are conducted in more than 30 countries and account for approximately 40% of the total sales." from Saputo's press release section of their website www.saputo.com

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FDI summary

Saputo   FDI by acquisition FDI to grow the company worldwide FDI to avoid trade barriers now it can get around the old WTO ruling cause it will be exporting out of Argentina FDI will increase capacity, and competitiveness of target strategic purchase of a market player host gov't supports the market for the sector third  largest dairy processor in Argentina FDI as a result of following your customer Mr. Lino Saputo Jr. said the company "has indicated for quite some time now we'd like to be a world class dairy player" His company has pizza makers who have expanded into Mexico and Asia "So we wanted to be in a country that allows us the opportunity to follow our customers all over the world" WTGR

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an example of a Canadian company doing FDI by acquisition in Latin America - agri-food products

From Saputo's website "By giving the Company the opportunity to establish itself in a market where the raw material is accessible at competitive international prices, this proposed transaction is in line with Saputo’s goal of becoming a world-class cheese  company. Assuming completion of the transaction, Saputo would have annualized revenues of more than $3.5 billion, 47 plants and 7,850 employees in three countries (Canada, United States and Argentina)." The Influence of the Geographic Environment Argentina is in the southern hemisphere. The cattle industry in Argentina has the opposite seasons to Canada, therefore, an investment in this region will allow Saputo to have access to product 12 months of the year

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an example of a Canadian  financial company doing FDI by acquisition in U.S.A.

Case Study - Bank of Montreal in the U.S.A. - details from Scotiabank's Pres releases . KEY POINTS A lot of what we talk about in this course, including this section on types of FDI, can be easily found in newspaper articles and cross referencing with the press release sections of the particular company websites. WTGR .

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an example of a Canadian  financial company doing FDI by acquisition in U.S.A. an example of a Canadian  financial company doing FDI by acquisition in U.S.A.

. . This screen capture shows the short article that appeared in the Toronto Star (which was carried by Canadian Press) which explains BMO's reasons for FDI in the U.S.A. BMO clearly states that the motivation is based on unified branding which is part of "FDI as a result of following your customer" and "FDI to "buy" marketshare" BMO has many large Canadian clients operating in the U.S. and with this acquisition they have an additional capability to serve those customers.   .

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an example of a Canadian  financial company doing FDI by acquisition in U.S.A.

From the BMO website under the section of corporate press releases, BMO said "It also strengthens the organization’s Canadian franchise by providing significantly expanded research on U.S. companies to BMO’s Canadian institutional clients, and accelerates BMO’s growth in key markets across the U.S. This acquisition is a sound strategic fit that will benefit our Canadian clients and advance our U.S. growth strategy,” said William Downe, Deputy Chair, BMO Financial Group and Chief Executive Officer"

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FDI summary

Bank of Montreal FDI by acquisition FDI to "buy" marketshare" strategic purchase of a market player FDI to grow the company worldwide FDI will increase capacity, and competitiveness of target doing trade research on U.S. customers FDI as a result of following your customer WTGR

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an example of a Canadian  financial company doing FDI by acquisition to cut out the competition

RBC has a subsidiary company that deals with the personal businesses of really really rich people  (a polite term for this is wealth management) The private banking business is highly competitive and there are a lot of companies that offer private banking services other than traditional large branded banks. Some of these private banks operate in places of the world were personal tax considerations are advantageous and privacy concerns are handled delicately - such as in the Cayman Islands, Switzerland and the Channel Islands. In late 2005, RBC, which had already been making inroads into the higher levels of private banking, bought one of its rivals in the Channel Islands.  RBC purchased Abacus Financial Services Group. RBC execs were quoted in the media as saying this "eliminates a formidable competitor" in the Channel Islands. Abacus had a client list of about 2,000 super rich individuals and families. Before it got taken over by RBC, Abacus had £23 billion assets under management so it was a "player".

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FDI summary

Royal Bank  FDI by acquisition FDI to strategically eliminate the competition                 (the main reason in this example of RBC) FDI to "buy" marketshare" strategic purchase of a market player FDI to grow the company worldwide FDI will increase capacity WTGR

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an example of a Canadian  transportation company doing FDI by acquisition in U.S.A.

. . The transportation sector is critical to "doing international business" since it is this sector that allows for the goods to physically move between buyer and seller.  It is good to see the Canadian transportation sector investing in the U.S. since this will facilitate Canadian companies exporting to the U.S.

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FDI an example of a Canadian company doing FDI by acquisition in Europe

. KEY POINTS FDI by acquisition is not just by Canadian companies in Latin America and Asia - it is still developing in Europe as many wealthy Canadians of European background go back to the countries of their birth, or ancestry, and make huge investments there. WTGR .  . In mid-February 2002, The Star carried a story about Magna, the large, and still growing Canadian autoparts company, making a play to buy a DaimlerChrysler plant in Austria. Austria is the country in which Magna's founder, Frank Stronach, was born, and still spends a lot of time for business and family. "A subsidiary of Magna International Inc. yesterday [2002, Feb 14] announced a deal to buy a  DaimlerChrysler AG assembly plant in Austria and confirmed it will revisit the idea of merging with another arm of the parent firm.... Magna International chief executive Belinda Stronach said the company would look at a merger of subsidiaries Magna Steyr, which is buying the Austrian plant,  with Tesma International Inc.[Tesma is a subsidiary of Magna]"

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FDI summary

Magna FDI by acquisition FDI will increase capacity, and competitiveness of target strategic purchase of a market player host gov't supports the market for the sector WTGR

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FDI an example of a Canadian company doing FDI by acquisition in Europe

.Lavalin  www.snc-lavalin.com In early July 2003, The Star carried a story about Canadian construction company Lavalin acquiring three French engineering firms. .  Lavalin has acquired French Engineering firms     o Trouvin     o Fimatec France     o S.A.M. Fimatec SNC-Lavalin is based in Montreal. This Canadian company is one of the biggest engineering and construction firms in the world - sales are $3 billion and they have 13,000 employees worldwide

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FDI summary

Lavalin  www.snc-lavalin.com FDI by acquisition FDI will increase capacity, and competitiveness of target the three French engineering companies can now bid for bigger projects strategic purchase of a market player acquire local management expertise helps diversify the company geographically WTGR

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FDI an example of a Canadian company doing FDI by setting up a subsidiary office in Japan

.. Information summarized from Ivanhoe Energy Inc. Press Release by the Asia Pacific Foundation of Canada  .  Ivanhoe Energy Creates New Subsidiary in Japan  "Vancouver-based Ivanhoe Energy has incorporated a new subsidiary in Japan to facilitate the participation of Japanese companies in the gas-to-liquids (GTL) project Ivanhoe is negotiating in Qatar. GTL Japan Corporation is currently 100% owned by a subsidiary of Ivanhoe Energy. GTL technology uses  the Fischer-Tropsch synthesis process to convert natural gas into liquid synthetic fuels. The fuels can be used to run diesel engines, jet and natural gas  turbines and can also be used in fuel cells.".

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Foreign Direct Investment Where is Canada putting its dollars around the world

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Canadian FDI has been predominantly in the U.S. - historically second place was Europe since many of the  business people had personal and professional connections in Europe. Since the 1980's Canada still continues to increase investments in Europe, but growth has also taken place in Japan in the 1990's. China has become popular for investments ony recently in the late 1990's and early 2000's - previously, it was Hong Kong until 1997.
 

Outward Foreign Direct Investment to the World  (C$ millions)   1980 1990 1996 2001 2002 2003 United States 17,849 60,049 93,939 190,528 197,128 164,874 Europe 5,066 22,089 39,632 98,452 107,882 114,942 Mexico & Caribbean 2,109 6,019 19,091 56,462 63,676 59,561 Asia ** 1,605 7,370 15,841 25,977 33,159 32,386 South and Central America 1,162 2,341 9,952 22,532 22,779 22,324 Other Regions *** (includes Africa, Middle East) 622 534 2,783 4,904 5,009 5,047 Total 28,413 98,402 181,238 398,855 429,633 399,134

** Includes Asia up to the Pakistan-Afghanistan border, plus Australia and New Zealand.
 

Source: Statistics Canada, Canada's International Investment Position,  as shown on the website of the Asia Pacific Foundation   www.asiapacificbusiness.ca/stats/trade/index.cfm

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Foreign Direct Investment Where is Canada putting its dollars in Asia

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Canadian FDI has growing in Asia due to the rise in the number of Asians moving to Canada, some of them becoming citizens, others  here for business. One of the consequences of so many Asian people in Canada is, presumably, an enhanced ability for Asian-Canadians to invest in businesses back in the Asian country they came from.

However this theory is not born out in reality. The number of people in Canada from China is much greater than any other Asian country, but Canadian investment in China is only 540 million in 2003 - this is less than South Korea, less than Malaysia and almost the same as New Zealand !!
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Canadian Outward Foreign Direct Investment to Asia (C$ millions) sources - see  www.dfait-maeci.gc.ca/asia/trade/menu-en.asp
	1980	1990	1995	1998	1999	2001	2002	2003
Japan	109	917	2,739	3,404	4,076	1,013	9,514	9,123
Australia	694	2,401	3,080	3,882	3,766	4,525	7,040	7,750
Hong Kong, SAR	39	670	2,400	3,015	3,063	3,020	2,760	2,535
Singapore	8	1,837	2,342	2,071	2,358	4,493	4,299	3,735
Indonesia	590	934	1,472	1,972	1,982	2,524	5,746	5,542
New Zealand	69	180	1,446	1,871	1,701	377	404	454
China	0	0	366	392	420	589	601	542
South Korea	0	24	146	208	398	725	777	609
Malaysia	19	81	96	306	324	636	723	716
Taiwan	16	161	252	287	276	146	73	162
India	61	94	179	145	148	145	183	184
Total Asia	1,700	7,500	16,000	19,000	20,000	26,000	33,000	32,000

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Source: Statistics Canada, Canada's International Investment Position,  as shown on the website of the Asia Pacific Foundation www.asiapacificbusiness.ca/stats/trade/general_dataset5_toasia.cfm . see also  www.asiapacificbusiness.ca/stats/trade/index.cfm

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