Wednesday, February 22, 2012 4:00 PM EST
What’s next for Encana after its big deal?
TIM KILADZE
Now that the fanfare around Encana’s $2.9-billion asset sale to Mitsubishi has died down, everyone wants to know what’s next.
The deal, for the most part, was pretty widely praised. Encana got a good price, and the sale generates some desperately needed cash in a low natural gas price environment. But now what does the company do? Analyst Greg Pardy of RBC Dominion Securities sought to address that very question in a new research note. As he put it, “the journey begins.”
The main message: Encana must quickly diversify its natural gas predisposition.
Link to this post
Wednesday, February 22, 2012 6:46 PM EST
Why banks don’t fret about household debt
TIM KILADZE
For all the talk about Canada's sky high household debt loads, you don’t see much action from Canada’s banks. In fact, for a brief moment there, Bank of Montreal BMO-T led a charge that forced a number of them, including Royal Bank of Canada RY-T and Toronto-Dominion Bank TD-T, to lower their mortgage rates below 3 per cent.
The laissez-faire attitude has prompted outrage. How can they encourage borrowing when Canadian households’ ratio of debt to personal disposable income was last pegged at a high of 152.98 per cent?
Take a look at the banks' portfolios, as outlined in a recent Moody's report, and you’ll understand why. For credit cards, Canadians' payment rates are much, much better than the U.S. and the U.K., and have been for the past decade. As for mortgages, the percentage whose payments are 90 or more days past due is quite low -- and even lower than the peaks at two different periods during the 90s. On top of that, the banks insure these mortgages to offset losses.
Wednesday, February 22, 2012 9:37 AM EST
EdgeStone's burger company put in receivership
BOYD ERMAN
With no acceptable bid found by a deadline of Tuesday, EdgeStone Capital Partners portfolio company New Food Classics has ended up in receivership.
EdgeStone bought the hamburger patty maker about six years ago. The deal ran into trouble last year as beef prices soared and New Food Classics was unable to pass on price increases.
The company, which had received court protection from creditors, was seeking a buyer who would operate its food plants, as reported Tuesday. The hope was at least the banks could get some of their money back. (You can read that post here.)
However, the process failed to drum up a bid that was satisfactory to New Food Classics' main lender, Bank of Montreal BMO-T , by a deadline of Tuesday. The decision was made instead to put the company into receivership, according to a report by the bankruptcy monitor.
Local media in the Niagara region of Ontario and in Saskatoon, Saskatchewan, where the company had plants, reported that employees were locked out when they showed up for their shifts.
Wednesday, February 22, 2012 9:11 AM EST
The £1.7-million lunch: RBC's BlueBay battles over payout
BOYD ERMAN
Be careful who you invite to lunch. Royal Bank of Canada's BlueBay Asset Management unit and a former employee are in a court fight over a £1.7-million ($2.7-million Canadian) payout to the former employee, all sparked by what appears to be an innocuous invitation to a midday meal.
According to the Daily Mail, former BlueBay sales manager Fahim Imam-Sadeque is suing BlueBay.
The fight stems from an email inviting a former co-worker to lunch, which caused BlueBay to stop the payout of £1.7-million in fund units.
Tuesday, February 21, 2012 4:24 PM EST
Buyout firm EdgeStone burned in burger business
BOYD ERMAN
EdgeStone Capital Partners' foray into the burger market has ended in insolvency, after a company owned by the private equity firm was forced to seek court protection.
Soaring beef prices left EdgeStone-owned New Food Classics unable to keep operating unless it got court protection, the company said in court filings last month. The company, which manufactured hamburgers and had expanded into other ready-to-eat products, was granted protection and is now well into a court-supervised auction process.
The sale is being expedited because the burger-maker market is at the hottest heading into barbecue season. According to the most recent report from the bankruptcy monitor, 22 potential purchasers signed confidentiality agreements to look over detailed information on New Food Classics.
The final bid was to be selected on Feb. 17, and the company's main lender had until Tuesday to decide whether it was satisfied with the auction's outcome.
Tuesday, February 21, 2012 6:54 PM EST
For value, look past front line energy producers
TIM KILADZE
In a hot crude market, playing the front line producers is the easiest way to get into the game. Their production metrics are readily available, and their proven reserves give you a sense of what could come.
But there are also lots of companies operating behind the scenes that provide good value for investors, or that could get wrapped up in a deal. For proof, look no further than Flint Energy Services Ltd. FES-T, which is being bought by URS Corp. URS-N for $1.25-billion, a whopping 68 per cent premium.
With crude sitting at $106 (U.S.) per barrel, expanding your scope of energy names is pretty much a no brainer. “With oil sands spending expected to reach about $20-billion in 2012 (according to industry sources), Flint, which offers diversified activities spanning the full cycle of oil and gas exploration and production, is well positioned to capitalize on the capex up-cycle; a point not lost on URS as evidenced by yesterday’s announcement,” noted Altacorp analyst Maxim Sytchev.
Tuesday, February 21, 2012 1:11 PM EST
Weston hires dealmaker as CFO, signalling action
BOYD ERMAN
It seems that billionaire Galen Weston Sr. is getting ready to do some deals.
Weston's family controlled food company, George Weston Ltd. WN-T, hired a new chief financial officer Tuesday with a background as a dealmaker. Mr. Weston flagged the new man's "transactional experience" as a key reason for the addition.
The new face is Bank of Montreal investment banker Richard Dufresne, who becomes Weston's chief financial officer. Most recently, Mr. Dufresne was CFO at grocer Metro Inc. MRU-T .
Mr. Dufresne is joining at "a pivotal and exciting time," Mr. Weston said in a statement. "We are confident that his strategic focus and transactional skills will be a valuable addition to the Weston team in achieving the strategic vision for our businesses"
Tuesday, February 21, 2012 10:35 AM EST
Fortis tries its hand at another U.S. takeover
TIM KILADZE
Less than a year after Fortis was outbid for an integrated electric utility in Vermont, the power distribution company has come back to the table with a new offer for a different firm.
On Tuesday, Fortis FTS-T announced a $1.5-billion (U.S.) bid, including debt, for CH Energy Group Inc. CHG-N, a New York energy delivery company. Its main business, Central Hudson, is mostly engaged in distributing electric power, with the remaining one quarter of its operations focused on natural gas.
The deal comes after Fortis was outbid by Gaz Metro in its quest to acquire Central Vermont Public Service Corporation for $700-million, including debt, last year. That deal made a lot of sense for a Canadian company, because much of the energy sold by CVPS was acquired from Hydro-Québec. Moreover, CVPS is located in the coveted New England region, and Canadian firms have had their eyes on this for some time. Capital Power, for instance, has struck three acquisitions in the area.
Tuesday, February 21, 2012 6:38 AM EST
What was private equity doing in 2011?
BOYD ERMAN
Private equity firms were doing deals last year. You just didn't notice because they were mostly small add-on acquisitions.
According to tracking firm Preqin, private equity firms did a record number of so-called bolt-ons, where a manager makes a smallish acquisition for a portfolio company. Last year set a record for the number of bolt-ons, according to Preqin, while the business of buying big new companies for the portfolio lagged.
A lack of consistently available loans has hampered large private equity transactions in the past year. Because add-ons are smallish transactions, bank funding is less of a critical element.
Tuesday, February 21, 2012 11:40 AM EST
Natural gas asset sales hot trend for producers
TIM KILADZE
If you’re a natural gas producer and you expect prices to remain low in the near future, there’s only so much you can reduce capital spending to preserve cash. At some point, you may need to take the plunge to sell-off assets.
The industry appears to be at this point. Earlier this week, Chesapeake Energy Corp. CHK-N announced that it will sell $10-billion to $12-billion (U.S.) of non-core assets to raise cash amid decade-low natural gas prices. And on Friday, Encana ECA-T announced a $2.9-billion (Canadian) joint venture, selling off a 40 per cent stake in its Cutbank Ridge Partnership.
For agreeing to the sale, Encana will receive $1.45-billion in cash up front, and the remainder to be carried over five years.
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Streetwise Contributors
Boyd Erman
Boyd Erman is a long-time business journalist who has worked at Dow Jones, Bloomberg, and the National Post before joining the Globe and Mail. Over the years, his areas of coverage have included economics, monetary policy, debt markets and corporate finance.
In addition, he is a regular commentator and guest host on Business News Network.
Tim Kiladze
Tim Kiladze is a business reporter with The Globe and Mail. Before graduating from Columbia University’s Graduate School of Journalism, he worked in equity capital markets at National Bank Financial and fixed-income sales and trading at RBC Dominion Securities. Tim has a Bachelor of Commerce in finance from McGill University.
Tara Perkins
Tara Perkins has been a business reporter since 2004, following a brief stint as overnight editor of globeandmail.com. She has been writing for the Globe's business section since the spring of 2007, covering the banking sector during the course of the financial crisis. Prior to that, she worked for the Toronto Star. Tara has a Bachelor of Journalism from Ryerson University and a Bachelor of Commerce from the University of Guelph.
Grant Robertson
Grant Robertson joined The Globe and Mail as a business reporter in 2005 after five years as a business writer at the Calgary Herald. His areas of coverage have included the oil and gas industry, the transportation sector and media & telecom. He now covers the banking sector for The Report on Business and writes for Report on Business Magazine.
Jeff Gray
Jeff Gray covers legal affairs for The Report on Business. For five years, he covered Toronto’s city hall and wrote a column about urban transportation. In 2002, he worked for the world desk of BBC News Online in London and freelanced for The Globe. In 2000, he helped launch The Globe’s first breaking-news website. He started at The Globe in 1998.
David Parkinson
David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics.
