The Stench of Business

Here was an innocuous line from a recent Toronto Star story about the latter acts of the corporate soap opera that has been the battle for control of Inco and Falconbridge:

“Inco must now pay Phelps a break fee of $125 million (U.S.), plus an extra $350 million if Inco “consummates” another deal by Sept. 7.”

These merger and takeover battles are usually about enriching shareholders and a few executives.  The promised “synergies” almost never arise.  More often than not, the “winning” company finds itself bogged down in debt.

But this new habit of sealing insider deals with not just a “handshake,” but a massive “break up fee,” surely crosses the line.  Inco started this saga out as the hunter, trying to buy out Falconbridge (which similarly agreed to a massive break-up fee).  Then it became the hunted.  So Inco insiders tried to work out a friendly deal with another white knight corporation (included in the deal, of course, would be job security and/or golden parachutes for Inco’s top execs).  To try to shut out the competition, the execs willingly agreed to this break-up fee — which is larger than the amount of capital spending that Inco undertakes in all of Canada in a typical year.

How come every penny that government “wastes” generates headlines and inquiries — yet these now-routine but nevertheless abusively wasteful and self-serving corporate practices just melt into the backdrop?