Quebec's Caisse has a voice in SNC-Lavalin's boardroom, and a role in its future
A logo for the Caisse de Depot et Placements, Quebec's pension fund, is seen Wednesday, February 21, 2018 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
The Canadian Press
Published Friday, March 29, 2019 3:43PM EDT
Last Updated Friday, March 29, 2019 4:51PM EDT
MONTREAL -- Quebec's pension fund manager could play an outsize role in whether SNC-Lavalin Group Inc. eventually pulls up stakes for the United States.
The engineering and construction giant told federal prosecutors that its "Plan B" in the event of criminal prosecution on corruption charges is to move its headquarters south of the border and shed more than 60 per cent of its 8,700 Canadian jobs, internal documents reveal.
Quebec's Caisse de depot et placement holds a roughly 20 per cent stake in SNC-Lavalin, making it far and away the biggest shareholder. The pension fund also has a $1.5-billion loan agreement with SNC-Lavalin stipulating that the firm must remain rooted in Montreal until at least 2024, though refinancing may be an option.
The roughly $1.18 billion in company shares held by the Caisse -- which has a mandate to grow Quebec business -- gives the pension fund extra clout at the boardroom table, said Altacorp Capital analyst Chris Murray said. The loan, while partially paid off, adds leverage to a pension fund whose investing pedigree carries respect.
"A 20 per cent shareholder has some pretty significant influence," Murray said.
The Caisse also aims to grow its investments, making a move to the U.S. potentially more attractive as conflicting mandates collide, said Karl Moore, an associate professor at McGill University's business school.
"SNC being one of our larger firms, it would absolutely fall within 1/8its 3/8 mandate and the Caisse would not want them to move. On the other hand, as good business people, they might see that as the best course.
"They absolutely would have a pipeline to 1/8CEO 3/8 Neil Bruce," Moore added.
Last month Caisse chief executive Michael Sabia said the pension fund would "be a rock"' for SNC-Lavalin and ready to boost its stake in the company, barring any technical barriers.
The Caisse declined to comment for this story.
Internal SNC-Lavalin documents -- part of a PowerPoint presentation for prosecutors last September and obtained by The Canadian Press -- state that criminal prosecution "will likely have very negative consequences for Canadian employees, shareholders, pensioners, customers" and other groups.
Earlier in the week, the firm walked back a statement by its chief executive, who said he never cited the protection of 9,000 Canadian jobs as a reason the construction giant should be granted a remediation agreement.
Opinions vary on the impact of an exit by the 108-year-old company.
SNC-Lavalin is working on the five biggest infrastructure projects in the country, according to trade magazine ReNew Canada. Those contracts alone amount to $52.8 billion, and include projects for Bruce Power and the Darlington nuclear plant in Ontario as well as the Site C dam in B.C.
"It will be sad, very sad, because we will lose decision centres, we will lose key jobs and all of the impacts on the accounting firms and law firms," said Michel Nadeau, a former Caisse executive.
Local construction contractors and suppliers would likely find work for other firms while sought-after SNC-Lavalin layoffs would quickly be snapped up, he said.
But the disruption would still be sizable, according to Murray. "You just can't take something of that magnitude out of the system and not expect there to be impacts."