Looser merger laws recommended

Looser merger laws would help Canadian industries reshape themselves to compete in world markets, A. J. MacIntosh, chairman of Canadian Corporate Management Co. Ltd. of Toronto, told the company’s annual meeting.

Changes to the Combines Investigation Act are being considered, Mr. MacIntosh said. “It is essential that those amendments recognize the very special problems which could be created by any free-trade arrangement” with the United States.

Mr. MacIntosh said removal of trade barriers would not have a major effect on Canadian Corporate Management, whose holdings include Cashway Building Centres, Direct Film and Tender Tootsiesfootwear.

In reviewing the effects of free trade on their divisions, some of the company’s managers concluded they may have to move production to the United States to compete with U.S. producers. Others saw profit opportunities in increased imports. Neither of these developments would help Canada, Mr. MacIntosh said.

The findings show a careful assessment of the effects of changes in trading relations is needed. “I don’t mean to suggest that we can or should maintain the status quo.” But free trade should not be entered into “either as an act of faith or with the steely determination with which one enters a cold shower. . . . “Instead, I suggest that we should make a much more determined effort than has been done to date to assess the alternatives and the realities of our position.” The company, which executives describe as a microcosm of the Canadian economy, is expected to do well this year if the economy continues to grow and interest rates do not rise.

Last year the company’s income before depreciation, taxes and minority interest tumbled 15.6 per cent even though sales rose 22.1 per cent. This situation was caused by problems in the consumer products division. Net profit fell to $14.6-million or $3.09 a share from a record $16-million or $3.41 a share a year earlier.

Despite the weak first quarter, net profit this year “should improve over our 1984 results,” Peter Cameron, president, told shareholders. Last year’s results were hurt by Direct Film and the direct mail catalogue business.

The Regal gift catalogue’s entry into the keenly competitive U.S. direct mail business was expensive and consumers’ response poor. Regal sells toys, general merchandise and greeting cards.

The Jay Norris fashion and cosmetic catalogue business acquired last year also did poorly. To reverse the disappointing trend, the company changed its fashion marketing approach and dropped the cosmetic line.

These steps “are expected to have a positive impact later in the year,” Mr. Cameron said. “The same is true of one or two other companies with less than satisfactory results in the consumer products group.” With the other four divisions – electrical and electronics, residential building supplies, graphics and industrial metal products – expected to maintain or increase profit growth, “this should have the effect of improving our over-all results in 1985.” Canadian Corporate Management buys companies that have strong growth potential in specialized markets. Although the acquired companies are given considerable operating leeway, the parent provides expertise in finance, marketing, technology and strategic planning.


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