Supercorp Flop – You Read It Here First
The front page of todayâ€™s Globe and Mail (Ontario Edition) proclaims, â€œSupercorp is dead.â€
The story goes on to note, â€œmany government insiders have suggested that opponents of a potential deal got too much of a head start on framing the issue.â€ Indeed, this blog got a head start framing the issue back in December, when The Globe reported that the Ontario government was considering privatization.
Todayâ€™s Globe story provides the Ontario governmentâ€™s reasons for rejecting the Supercorp privatization proposal. First, the proceeds would have to be put against the provincial debt, which would generate a minimal return equal to the provincial bond rate. Second, potential investors were not keen on an unwieldy conglomerate in which the government would hold a controlling interest. Third, partially privatizing provincial enterprises could expose them to federal corporate tax.
The Ontario government paid Goldman Sachs and CIBC $200,000 to provide this assessment of the Supercorp option. It could have gotten the same analysis for free from this blog.