For sale: five huge American shopping centers, from New Jersey to Washington State, and 691 stores spread all over the country, including the famed Brooks Brothers and Bonwit Teller chains. No retailing experience necessary. Foreigners welcome.
Giant Allied Stores never ran such an ad and never planned to sell itself off -- certainly not to a Canadian real estate company. But last week, after resisting for two months, New York City-based Allied (1985 sales: $4.1 billion) agreed to become a subsidiary of Toronto's comparatively tiny Campeau Corp. (1985 revenues: $155 million). The price tag of $3.6 billion made it the biggest Canadian takeover of a U.S. corporation in history. While Allied executives were a bit stunned, Campeau's chairman, Robert Campeau, was unabashedly delighted. "It's the best deal I've ever made in my life!" he said. "It's a terrific company, everything I want."
Once unknown in the U.S., Campeau is the latest in a long line of Canadians who are streaming across the border with bundles of cash and a sharp eye for lucrative opportunities. The invaders range from hit-and-run investors mainly interested in fast profits to empire builders who have put down deep roots in the U.S. As the money pours into stores, skyscrapers and factories, capital has suddenly become the most visible Canadian export to the States since ice hockey.
Department of Commerce figures show that Canada's direct investment in the U.S. surged from $11.4 billion in 1983 to $16.7 billion in 1985. That total places Canada fourth among foreign investors in the U.S., behind Britain, the Netherlands and Japan. The current value of American companies and other assets in which Canadians hold at least a 10% stake is even more impressive: $105.6 billion. Toronto's Reichmann brothers, for example, now own 8% of all the office space in Manhattan. Last March a subsidiary of Vancouver-based B.C.E. Development bought $1 billion worth of real estate in five U.S. cities, including 13% of the office space in downtown Minneapolis. Other Canadian investors have purchased gold mines, chains of movie theaters and California wineries.
Canadians put money into the U.S. for many of the same reasons that other foreign investors are drawn to the dynamic $4 trillion American economy: high return on capital, low taxes and skilled labor. What is more, the targets in America are tantalizingly close across the 5,526-mile border. Although Canada is larger than the U.S., its economy is smaller than California's, and its population, at 25 million, is roughly the size of the Golden State's. Furthermore, 24% of the relatively small pool of Canadian assets is already owned by foreign investors. Americans alone own 45% of Canada's oil and gas industry and 29% of its manufacturing sector. Says Ted Zahavich, director of research for Investment Canada, a federal agency in Ottawa that fosters foreign investment: "The U.S. is attractive to Canadian investors because there are limited opportunities in Canada for the big players. They've outgrown the playpen."