Is Canada for sale?

(Fortune Magazine) -- Canada is in the grip of what may be the biggest invasion since the War of 1812. In the past two years many of its best-known companies have been taken over by foreigners. And now even easygoing Canadians are wondering what can be done about it.

Hudson's Bay, the largest and oldest retailer in the country - sold to South Carolina billionaire Jerry Zucker. The Four Seasons Hotel chain, based in Toronto - acquired by Prince Alwaleed of Saudi Arabia and his partners, including Bill Gates. Vincor International, Canada's biggest winemaker - swallowed by Constellation Brands (Charts, Fortune 500) of upstate New York.

Fairmont's Chateau Frontenac is now Saudi-owned.

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Going, Going, Gone! Some of Canada's most prominent companies that have been sold Company Acquiring company Country Deal date Size of deal Alcan Rio Tinto Britain July 2007 $38.1B Inco CVRD Brazil Oct 2006 $17.6B Falcon- bridge Xstrata Switz- erland Nov 2006 $17.3B Four Seasons Hotels Kingdom Saudi Arabia April 2007 $3.8B Hudsons Bay Jerry Zucker U.S. Jan 2006 $1.5B

The latest insult and biggest foreign takeover in Canadian history: Alcan (Charts), the giant aluminum company, bought this summer by British mining conglomerate Rio Tinto (Charts) for $38.1 billion.

It was enough to provoke Thomas Caldwell, chairman of Toronto's Caldwell Securities, to take out full-page ads in Canada's three biggest daily newspapers accusing his country's business elite of failing to provide any resistance to the tidal wave of foreign takeovers. "The loss of head offices and industrial leadership by Canada," Caldwell's open letter said, "is one of the great corporate tragedies of our time."

That may sound melodramatic. But demand for Canadian assets is so hot that M&A activity initiated by foreigners jumped in the first seven months of this year to $154.8 billion, up from $45.5 billion for the same period last year and more than the record $105.5 billion worth of foreign M&A activity for all of 2006.

Most of the activity has been in the mining and metal sectors. Nickel giant Inco was taken over by Brazil's CVRD for $17.6 billion last year. Falconbridge, another nickel company, was bought by Switzerland's Xstrata for $17.3 billion. Steelmakers Dofasco, Algoma, and AltaSteel were scooped up by Luxembourg's Arcelor, India's Essar Global, and Sweden's SCAW, respectively.

"We look like boy scouts with our open-door policy," says Jack Layton, leader of the National Democratic Party, which has called for emergency hearings on the takeover issue. "The rest of the world is scratching its head, wondering why we're not more firm when it comes to our national interest." Says Ken Neumann, national director for Canada of the United Steelworkers union: "I'm very concerned that we're losing our manufacturing capacity. My prediction is that there won't be a Canadian steel producer by the end of 2007."

Worldwide appetite for Canada's resource and energy companies is not expected to slow anytime soon, despite August's stock market correction and tighter credit. That's because M&A activity in those sectors is not driven by private equity financing.

"We're mainly seeing multinationals making cash offers," says Jeff Rubin, chief economist at CIBC World Markets, a Toronto investment bank. He adds that the $6.2 billion acquisition in July of Western Oil Sands by Houston's Marathon Oil (Charts, Fortune 500) is probably the first in a string of such deals in Canada's oil patch.

With so much talk of hollowing out, the country's ruling Conservative Party called for a review of the Investment Canada Act, which governs foreign takeovers. But the report won't be ready before next June. "The government is not acting with appropriate urgency," says former Liberal Party cabinet minister John McCallum, whose party has called for an immediate halt to foreign takeovers pending a three-month review of investment rules. Says Layton of the National Democratic Party: "A year from now many more horses will be out of the barn."

Could more foreign buying sink Prime Minister Stephen Harper's pro-business, pro-American minority government? "The labor movement in this country is making foreign takeovers a key election issue," says the Steelworkers' Neumann. "These jobs belong to us."