Canada Steamship Lines

"later. In June, 1972, Canada Steamship Lines, Power’s only directly wholly owned subsidiary, bought almost all of Power’s investment portfolio for $145 million. The sale didn’t seem to make sense. For $145 million, csl bought Power’s investments in Dominion Glass Co. Ltd., The Investors Group, Consolidated-Bathurst and the Gesca $19.6-million income debenture. The deal included Trans-Canada Corp. Fund and through it one of its holdings, Shawinigan Industries Ltd., the interests in Laurentide, Argus, Imperial Life and other Power investments. Desmarais had essentially sold Power to itself, accomplishing an internal reverse takeover. Technically, the manoeuvre was a realign¬ ment of assets, because Power didn’t make any profit on the deal. The $145-million purchase price was book value (the value carried on the books computed as total assets less outstanding debt), paid $70.5 million in cash and $74.6 million in promissory notes with 9.5 percent interest, plus a series of debentures staggered to come due at intervals between 1972 and 1992. The sale solved one problem each for Power and csl. One effect was that by transferring some of its debt to csl, Power gave csl a way to reduce its income taxes."

"Desmarais moved further to reshape Power by acquiring control of Canada Steamship Lines (csl). Here he used the reverse takeover with a twist: he sold a wholly owned subsidiary of Power, Provincial Transport, to CSL, a company in which Power already held a major stake (45.7 percent). The selling price was $17,820,000, of which $3.8 million was cash. The rest was enough csl shares to raise Power’s voting stake above 50 percent, giving Power majority control of CSL. Power also acquired majority control of The Investors Group in 1970 through share trades with the Canadian Imperial Bank of Com¬ merce and Canadian Pacific Investments, and purchases on the open market. By the end of 1970, Power held 50.2 percent of Investors voting shares directly, a further 13.2 percent indirectly through Im¬ perial Life, and a further 9.5 percent through Great West Life."

"Then, in November 1971, Power offered to purchase all outstanding shares of Canada Steamship Lines for $40 per share, well above their trading price of about $30. The csl purchase was logical and fully in keeping with what it appeared Desmarais was doing. Buying ownership rather than control may have seemed a bit excessive, given Desmarais’s tendency to buy just enough of a company to get control. But csl had low debt,"

"been delivered to the store you bought them from in corrugated boxes manufactured in a MacMillan Bathurst container plant and carried in trucks owned, operated or dispatched by Kings way Transport, the trucking division of Canada Steamship Lines."

"So, most of Power’s growth during the 1970s had occurred through quiet purchases by its subsidiaries of other, complementary companies that increased their value on the market and to Power, rather than through spectacular coups. Consolidated-Bathurst acquired its sub¬ sidiaries in glass container and packaging products this way; Montreal Trust expanded by buying other trust companies; Investors grew by acquiring other mutual and investment funds, though it also set up more of its own funds; and Canada Steamship Lines grew by pur¬ chasing trucking and courier operations."