Brian Mulroney’s legacy as Canadian prime minister includes at least one example that has been celebrated by many investors: his push to privatize several government-owned corporate entities.
Under his leadership, Ottawa embarked upon a dizzying pace of transferring ownership to the private sector, starting in the mid-1980s. The moves created several stock market success stories and established the merits of privatization for other governments to follow.
“Brian Mulroney can certainly be given credit as a successful architect of privatization in Canada during his tenure as prime minister,” said Robert Gill, portfolio manager with Toronto-based wealth manager Goodreid Investment Counsel.
Mr. Gill added that privatized companies have incentives to invest and innovate, and greater competition offers consumers more choice and better service.
Investors can’t complain either.
Mr. Mulroney drove deals that saw Air Canada, Cameco Corp., Petro-Canada (now a subsidiary of Suncor Energy Inc.) and Canadian National Railway Co. – to name several standouts – become publicly traded companies that had to compete for the affection of investors who wanted efficiency and profits.
Several provincial governments have pushed through their own privatization deals, which include Alberta Government Telephones (now Telus Corp.), Potash Corp. of Saskatchewan (now Nutrien Ltd.), Nova Scotia Power Corp. (now Emera Inc.) and Hydro One Ltd.
The ride for investors wasn’t always smooth, as fluctuating commodity prices and economic activity could sometimes deliver nasty surprises.
For the most part, though, Mr. Mulroney’s privatizations enhanced Canadian stock market diversification and offered even small investors the chance of becoming shareholders in long-lasting success stories, defined by rising dividends and share prices.
“It was innovative in the sense that it gave every Canadian an opportunity to benefit from the privatization,” said John O’Connell, chief executive officer of Davis Rea, a Toronto-based wealth manager.
“It wasn’t just ideology. They were attractive investment opportunities, and they were open to the average investor,” Mr. O’Connell said.
CN, which listed its shares through an initial public offering in 1995, shortly after Mr. Mulroney left office in 1993, offers one of the clearest examples of how the then prime minister’s policies toward privatization paid off handsomely for investors.
In 1995, the railway’s operating ratio – the percentage of revenues used to operate and maintain the rail network – trailed the industry at 89 per cent (lower is better). Ten years later, the ratio had improved to an industry-leading 64.4 per cent.
The railway’s market value has climbed to $113-billion today, up from $2.25-billion at the stock’s debut in 1995. And over the past 20 years, to the end of 2023, the stock outperformed the S&P/TSX Composite Index by more than 1,250 per cent, including dividends.
“The company grew from an inefficient rail operation as a crown corporation, creating repeated deficits, to an industry leader in operational efficiency, customer service and supply chain partnership and one of Canada’s largest publicly traded companies,” CN said in a statement to The Globe and Mail.
Air Canada offers a bumpier example, given that the airline filed for bankruptcy protection in 2003 and suffered a severe downturn after COVID-19 travel restrictions.
“In general, privatization makes sense in competitive industries. Air Canada’s privatization was into a highly regulated, highly concentrated industry and did not make so much sense,” said Anthony Boardman, a professor at the University of British Columbia, who has studied privatization.
Even so, the airline generated a profit of $2.3-billion in 2023 and offers nimble investors a chance to score big gains on upturns. The share price soared 4,500 per cent from 2012 to its record high in 2019.
Cameco, the Saskatoon-based uranium producer, has delivered a lot of volatility as well, as nuclear power has moved in and out of favour with governments. The stock would have looked like a dismal example of privatization from 2007 through 2020, when the price slid toward 16-year lows.
But with nuclear power now gaining support for being clean and reliable, Cameco’s share price hit record highs in January. It is one of the top performing stocks within the S&P/TSX Composite Index over the past 12 months, gaining 50 per cent.
Mr. Mulroney’s push to privatize didn’t produce all success stories, but it certainly gave investors a bigger basket of stocks to choose from.
Do you have a favourite memory from meeting Brian Mulroney?
The Globe and Mail wants to hear from readers about their stories and meetings with Mr. Mulroney, who was known as much for his charm as his political savvy. Where and when did you meet him? What do you remember most about that experience? Share your experience below.
David Berman