Provincial Transport

"The structure of Gelco, 75 percent owned by Desmarais and 25 percent owned by Parisien, meant that as Desmarais directed, so went Gelco. As Gelco directed, so went its 57-percent-controlled subsid¬ iary, Trans-Canada Corporation Fund. That meant Desmarais called the shots at Provincial Transport, Les Joumaux Trans-Canada and Imperial Life, and had a major voice in the policies and direction of The Investors Group. Desmarais also held a 15 percent position in Montreal Trust company through Investors.1 Overall, by 1968, the Desmarais-built empire had reported assets of $75 million, and a record of success in controlling or influencing the profitable direction of companies worth about $2.5 billion. Desmarais’s track record showed, by this time, two critical elements necessary to continued success and growth in business. One, he was loyal to and worked well with shareholders and other backers of companies he controlled. Two, when prepared to follow his lead, these “partners” in his success profited. “He’s been accused of being tough on shareholders,” said David Schulman. “And that’s because he can tolerate more risk than some of the people who buy in. But the record shows that those who stick by him do well.”"

"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."

"Transportation Management in turn owned wholly the assets of Provincial Transport, worth about $7.8 million; 50 percent of Gelco, worth about $2 million, which in turn held 51.2 percent of Imperial Life, worth $10.2 million. Transportation Management’s investment portfolio also held, among other investments, shares worth about $2 million in Trans-Canada Corporation Fund, the investment and hold¬ ing company dominated by J. L. Levesque, with investments of $66 million."

"By the end of 1965, Desmarais’s Gelco acquisition plan would be near enough completion that it could be seen for what it was — brilliant in its conception of interlocking wheels within wheels, yet simple in its execution, exemplifying the clarity of vision that seized upon the opportunity. The strategy had been formed because, as quickly as he had acquired 50 percent control of Gelco (as senior in the partnership that controlled the holding company), and as quickly as the redirected Gelco investment portfolio had furthered Desmarais’s ambitions, suc¬ cess wasn’t happening fast enough for him. After Gelco bought control of Imperial Life, Desmarais paused in the acquisition and growth game to consolidate what he had already acquired. To recap: at this point, Transportation Management owned wholly the assets of Provincial Transport, worth about $7.8 million; 50 percent of Gelco, worth about $6 million (at a cost of $2 million)."