Of Takeovers, Foreign Investment and Human Rights: Unpacking the Noranda-Minmetals Conundrum

In September 2004 Toronto-based Noranda Inc., one of the world's largest producers of nickel and copper, and China Minmetals Corp., a state-owned Chinese company, announced exclusive talks regarding a potential 100 percent buy-out of Noranda. The proposed friendly takeover was expected to be valued at approximately $7.4 billion USD. The dynamic shifted, however, in mid-November when Noranda announced that the exclusivity period for negotiations had expired and would not be renewed. In early March 2005 Noranda expressed frustration at the continuing lengthy process, which was depressing its share value. At the time, Noranda owned 59 percent of leading Canadian nickel producer Falconbridge Limited. On March 9th it was announced that the boards of Noranda and Falconbridge had unanimously agreed to a merger that would be effected by a share exchange takeover bid by Noranda. The successful amalgamation was announced on June 30th and had the effect of ending Minmetals' interest, as purchasing the merged company would prove too costly. While this factual matrix is seemingly innocuous, Minmetals' proposed takeover of Noranda actually catalyzed an intense controversy that focused on substantive human rights concerns specific to the bidder. Had a final agreement between Noranda and Minmetals been reached, it would have required the approval of the Canadian government. For example, a finalized deal would have engaged Canada's foreign investment review process under the Investment Canada Act. The human rights concerns associated with Minmetals were considered to be of such salience that the federal government, acknowledging its own trepidation, surprisingly announced that these concerns would be taken into consideration during any governmental review of the takeover. Thus far, the proposed Minmetals bid has not been the subject of scholarly inquiry. I hope to offer a beginning point for discussion by exploring certain issues arising from the proposed transaction. This paper proceeds in three parts. The first provides the landscape of the Canadian foreign investment review process by discussing its recent historical background and delineating the mechanics of a proposed foreign investment. Following this is an overview of the human rights issues germane to Minmetals and the resulting public discourse. A puzzling disconnect between the rhetoric and the reality is revealed. Namely, despite the federal government's overtures, it appears that it actually has no legal basis for integrating human rights issues into the review process. Further, while Noranda publicly defended the proposed bid and was dismissive of the broader context at issue, it will be argued that this position was unfortunate and merits reconsideration. In that regard, the balance of the paper attempts to situate the Noranda-Minmetals conundrum within the context of directors' duties owed to the corporation. In particular, employing a progressive construction of the fiduciary duty and the duty of care, it is suggested that the preferred approach would have been for Noranda's board to have incorporated the human rights concerns into its consideration of the proposed bid and any actual bid that may have followed.

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