Trans-Canada Corporation Fund

"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.”"

"which they so excelled. They traded their assets to acquire control of Power. The deal worked this way: 1. Power created a special 5 percent second preferred share issue of 10,000,000 shares at $12 per share ($120 million total). 2. The number of 6 percent participating preferred shares — the ones that carried 10 votes each, and dictated control of the company — was increased. 3. Enough of the 5 percent second preferred shares were offered to Trans-Canada Corporation Fund shareholders on a one-for-one trade for Power to acquire all tccf shares. 4. Gelco received 57 percent of the Power second preferred shares offered for purchase of tccf; the remaining 43 percent of tccf shares were redeemed from their holders, making tccf a 100- percent owned and controlled Power subsidiary. 5. Then Peter Thomson traded a bit more than half of his 6-percent participating preferred shares of Power — the ones that carried 10 votes each — to Gelco on a two-for-three swap for the new 5- percent second preferred shares (with no votes). 6. The trade gave Desmarais voting rights through Gelco on Power’s board slightly greater than those of Thomson, who held his Power shares through a recently created holding company, Wamock- Hersey International, which held a number of Thomson’s non- Power investments. 7. Between them, Desmarais and Thomson controlled about 61 per¬ cent of Power’s votes and, consequently, Power’s board. 8. Desmarais became chairman and chief executive officer and Peter Thomson deputy chairman. 9. Desmarais and Thomson entered into a voting trust, whereby Thomson’s voting shares were voted by Desmarais."

"By the time he acquired Trans-Canada Corporation Fund, Des¬ marais had position. His companies and employees dealt directly with clients; he was the dealmaker. The tccf acquisition put him in the offensive position. He had accumulated the resources and was big enough to go head-to-head with a major corporation, but he didn’t have to. He occupied a beautiful situation. Canada’s corporate world in the 1960s was, essentially, ossified and backward-thinking, led by old-line “old-boys” who weren’t professional business people. They resisted change and were unable or unwilling to accept that Canadian society and culture had changed since the 1930s. To a young man who had prepared himself to be a professional and successful owner-operator on a large scale, they were sitting targets. Desmarais didn’t even have to adopt costly offensive measures. By using guerrilla and flanking tactics, even though he was in an offensive position, by not risking too much of what he had already earned, by moving quickly and planning well ahead, he appeared unpredictable to those he challenged. This enabled him to infiltrate the established corporate world, and claim from it the bits he wanted."

"on the national, continental and global fronts. Desmarais himself had also participated in general market investments through a maze of personal and family-held investment and holding companies so inter¬ twined that even their names seem to merge: Prime, Gabriel, Gelco, Trans-Canada Corporation Fund, Sanpalo, Pansolo, Nordex, Probec, Abonnec, Primgab, Beldo, Polprim, Louidem, Paquerais, Adremed, Sofiamar — all were vehicles to ensure that the portion of wealth accruing to the Desmarais family interest in Power and its holdings, along with other, private investments, moved upward as dividends, at the minimum rate of personal tax payable by individual family members, for management, reinvestment and other dispositions."

"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."

"“It [the purchase] moved him from being a small operator, largely in the French Canadian milieu, to the big leagues,” said journalist Amy Booth. “It was a major turning point, and the Royal Bank was clearly involved. One day Desmarais was doing his own thing and the next day the Royal Bank was effectively his partner. Booth was referring to the large block of Desmarais-owned (through Gelco) Trans-Canada Corporation Fund shares which the Royal Bank held as security for loans and returned so he could have bargaining chips when working out the Power deal. Until the Power acquisition, the Royal Bank had bankrolled most of Desmarais’s deals since 1955, but not out of any conscious attempt to become kingmakers. “I don’t think they’ve ever thought that far,” said Booth. “Maybe the bank would like to think so now, that it set him up in Power, but I don’t think that was the case. Bankers aren’t that smart.”"