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Streetwise

News and analysis on Bay Street and the world of finance
available exclusively to subscribers of Globe Unlimited

Entry archive:

Boris Wertz's Version One raises second VC fund

BOYD ERMAN

Version One Ventures is unveiling a second early stage venture capital fund, giving Boris Wertz and his team $35-million to invest.

The firm will use the money to invest in mobile, software as a service and Internet ventures.

Vancouver-based Version One's first fund, a $20-million fund that closed in 2012, is "well on its way" to providing the target return of three times capital, Mr. Wertz said. Mr. Wertz has backed companies such as Wattpad, a publishing venture, and crowdfunding source Indiegogo. He has been called by Crunchbase "One of (if not the) most well-respected fixtures in the Canadian venture capital scene."

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‘Golden leash’ adds another layer to proxy battles

ADRIAN MYERS

The language of finance is endlessly creative. First it gave us “golden handcuffs,” and then “golden parachutes,” and now we have the most evocative term yet: “Golden leashes.”

If you follow this stuff, you might be familiar with the golden leash from such proxy contests as Jana Partners’ messy attempt to oust Agrium Corp.’s board last year. The golden leash is a deferred payment from activist hedge funds to directors that they nominate during a proxy fight. While funds often give nominees cash compensation to run during a proxy contest, on some recent occasions, nominees have been offered additional rewards if they win, and if the company meets certain stock-price based benchmarks over a multi-year period.

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Canadian activist fund managers prefer to stay under the radar

NIALL MCGEE

So we’re all probably by now familiar with the stereotype of the loud-mouthed, brash, arrogant, activist investor. They’re camera-ready, often American hedge fund managers, who will think nothing of engaging in shouting matches on national television – sometimes with each other. We’re not devoid of these kinds of larger-than-life activist characters in Canada either; to wit, long-time dissident investor George Armoyan, executive chairman of Clarke Inc., has never been accused of being a shrinking violet.

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Déja vu as Kinross sells troubled mine to Lundin company

RACHELLE YOUNGLAI

The latest deal between mining veteran Lukas Lundin and Kinross Gold Corp. is a case of history repeating itself.

This is the second time the Lundin family has ended up on the rosier side of a deal with the Toronto-based gold miner.

Kinross announced this week that it will sell its idled Ecuador gold project to Fortress Minerals Corp., a company controlled by the Lundins, for $240-million (U.S.).

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Edgecrest Capital’s head of sales departs for Laurentian

NIALL McGEE

Jeffrey White, former managing partner and head of equity sales at Edgecrest Capital Corp. has joined Laurentian Bank Securities. Mr. White has taken on the role of head of institutional sales and trading. He started on Monday.

In a telephone interview, Mr. White expressed excitement about his new role and says that when approached by Laurentian he was presented with an “unique opportunity to work in a boutique culture within a bank envelope.” He also likes that Laurentian has a “nice niche” in the small cap field and is a “broadly diversified” firm. Edgecrest, he said, lacks that kind of diversification. He added that his former firm, “like a lot of boutiques, is heavily levered to the resource market – both mining and energy” and is a company that “will do extremely well in a bullish resource market, but in a tougher market, it will be tougher to prosper.”

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TD’s investment banking arm shuffles group leaders

TIM KILADZE

TD Securities, the capital markets arm of Toronto-Dominion Bank, shuffled its client coverage as the fiscal year-end comes to a close.

As of November 1, Sante Corona and Andrew Phillips will split coverage of financial institutions and sponsors.

Mr. Corona, who currently heads the bank’s equity capital markets group, will now also oversee the investment bank’s financial institutions group. Mr. Phillips, who currently heads the bank’s real estate coverage, will now also oversee coverage of financial sponsors, as well as the diversified industries team.

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BLG establishes a toehold in China

JEFF GRAY

National law firm Borden Ladner Gervais LLP is opening a representative office in Beijing, looking to attract more business from China’s state-owned enterprises and other Chinese investors interested in Canada’s natural resources.

The small office in the Chinese capital’s central business district will be staffed with a handful of local business development staff, but no lawyers will be permanently based there. It is BLG’s first office outside Canada since it closed a small London office it had a decade ago.

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Canada’s pension funds not following U.S. lead on hedge funds

TIM KILADZE

Canada’s biggest pension funds are largely staying quiet when it comes to their investments that are managed by external hedge funds.

Amid reports that more U.S pension funds are reconsidering whether external hedge funds should manage their money, a number of Canadian pension funds have opted not to comment when asked if they are doing the same.

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How to invest like an activist – without the migraines

NIALL McGEE

Proxy fights, public spats, personal barbs, expensive legal fights, shorting – Activist investing ain’t for the faint of heart. Also you can forget about being diversified; Activist investing is all about being highly concentrated. Paul Hilal, partner with Pershing Square Capital Management speaking recently at the Activist Investing in Canada Conference said the company “only puts three or four of their eggs in one basket, and takes a small number of swings.”

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Major Indian oil explorer hires former Irving Oil CEO

JEFF LEWIS

India’s largest independent oil explorer has picked a Canadian oil-patch veteran as its new chief executive officer.

Cairn India Ltd., which has a market capitalization of about $10-billion (U.S.), named Mike Ashar to the role on Tuesday, effective Nov. 17.

Mr. Ashar, who will also serve as managing director, was previously president and chief executive of Irving Oil Ltd., owner of Canada’s largest refinery in Saint John, N.B. He also held senior roles at Suncor Energy Inc. and Petro-Canada and is currently a director at Teck Resources Ltd.

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Junior miner Euromax raises eight times its market value

ERIC REGULY

Junior mining companies aren’t having much fun – or luck – raising money for exploration and development. Commodity prices are down, banks and investors are wary and the appetite for political risk is about zero. Plus the stock markets are, suddenly, terribly volatile.

The Toronto Venture exchange’s little Euromax Resources just bucked the dismal trend by raising $175-million (U.S.). That’s about eight times its market value of $25-million (Canadian). Investors liked the deal and drove up the shares by a nickel – about 17 per cent – at the start of trading Tuesday morning.

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One of Canada’s remaining energy trusts has big change of heart

TIM KILADZE

The energy trusts that went public after the financial crisis are scrambling to adopt new investment strategies, and one is especially keen on investing at home.

Four years after going public, Eagle Energy Trust is asking shareholders for the right to invest in Canadian energy assets – a shift that would radically change its mandate.

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‘Boring’ strategy brings in big bucks for portfolio manager Mawer

BOYD ERMAN

After quintupling in size in five years, Mawer Investment Management is finding that boring does indeed make money.

The Calgary-based company has $25-billion of assets under management, up from $5-billion five years ago. About half of the jump comes from rising markets, and half from clients sending in more money for the fund to run. The company ranked ninth on the Benefits Canada list of fastest-growing pension fund managers last year. But measured by percentage growth rather than total dollars, Mawer is growing faster than any of the other firms in the top 10.

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How Pershing Square coaxed Hunter Harrison out of retirement

NIALL McGEE

“It all started with a phone call from my brother.” And so begins the fascinating story of how Pershing Square Capital Management’s Paul Hilal coaxed legendary railman Hunter Harrison out of retirement, and into the role of chief executive officer of Canadian Pacific Railway Ltd.

Mr. Hilal, a partner with Pershing and board member with CP, told the story to a captive audience of corporate directors, hedge fund managers, investment bankers, mergers and acquisitions lawyers and journalists Thursday at the Activist Investing in Canada Conference in Toronto.

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Lloyd’s stands out by insuring unusual risks

JACQUELINE NELSON

Lloyd’s of London has built up its Canadian business by taking on unusual risks. The insurer already offers coverage of offshore oil production, corporate jets and even hockey players, and now it’s looking for pockets of emerging risk to take on, from manufacturing in Ontario to cyber security.

Lloyd’s has a 326-year history of insuring quirky and one-off items, and recently its Canadian business has been growing. The country is now Lloyd’s second-largest generator of premiums outside of its U.K. home base, making up 5 per cent of the insurer’s global premiums.

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Netflix flexes muscle, and cable cringes

Every day ROB Insight delivers exclusive analysis on breaking business news and market-moving events. Streetwise offers news and analysis on Bay Street and the world of finance. Inside the Market delivers up-to-the-minute insights on market news as it develops.

Here are our editors’ picks of some of the best reads available to Globe Unlimited subscribers this week.

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Approach with roses, not Tinder come-ons: Activist investors

NIALL McGEE

Much like poor old Lindsay Lohan, activist investors have a serious image problem. And not just within the general investor community – within their own industry. ”Activists are not evil” said Navi Hehar, principal with Kerrisdale Capital, a New York-based hedge fund. “Activists are not crazy people wanting to destroy [a company],” added Stephen Griggs, CEO of Toronto-based Smoothwater Capital. The “perception problem” was one of the resounding themes coming from the Activist Investing in Canada Conference which took place Thursday in Toronto. The event hosted Canadian and U.S. activist investment companies, investment bankers, lawyers specializing in mergers and acquisitions, fund managers, public relations firms and a smattering of financial journalists.

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Teine holds off on IPO, but Seven Generations goes on

JEFFREY JONES

A rapid deterioration in energy markets has prompted one privately held Canadian oil producer to hold off on plans for an initial public offering, while another tests conditions as it sells its IPO plans to prospective investors.

Teine Energy Ltd., with operations in the Viking light oil play in Saskatchewan, had been expected to launch an IPO worth up to $500-million by around the end of this month, but has decided to postpone the effort for now, according to sources.

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Veresen snags former BG Group executive

JEFF LEWIS

Veresen Inc. has tapped a former BG Group PLC executive to head up a liquefied natural gas project on the U.S. West Coast.

Calgary-based Veresen said Friday it appointed Elizabeth Spomer as president and chief executive officer of Jordan Cove LNG LLC. Ms. Spomer will also serve as executive vice-president at Veresen.

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Sunny days are long gone for Canadian banks’ Caribbean operations

TIM KILADZE

They put on a brave face in public, swearing they are committed to the region, but in private, Canadian bank executives have admitted desires to revamp their Caribbean operations.

If only there were bidders to help them with that task.

The latest sign of the banks’ wavering commitment to their Caribbean arms is that Bank of Nova Scotia is reportedly considering options for its Puerto Rican business, according to Bloomberg. The island’s debt was downgraded earlier this year and there are widespread concerns that the economy will take a long time to rebound.

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Why do we have no good bond pricing? Banks and regulators

BOYD ERMAN

Why does Canada not have a good public system for displaying bond trading? The country’s banks and fragmented regulatory system are at the root of the issue, according to Maureen Jensen, the executive director and chief operating officer of the Ontario Securities Commission.

On a panel at the OSC’s annual Dialogue conference, the focus turned to why markets other than stocks are still so opaque. We have a lot of data, but it doesn’t make it to investors. Consequently, those who make markets in areas such as bonds can still get away with wider spreads than in stocks.

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CIBC hires well-known strategist

BOYD ERMAN

The new heads of Canadian Imperial Bank of Commerce’s securities units are bulking up in research, with one of the first major hires since new management was unveiled at the firm.

Ian de Verteuil, the longtime head of research at Bank of Montreal’s securities unit, has a new role as head of portfolio strategy at rival CIBC.

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CPPIB-owned insurer buys Canadian operations of Aegon

JACQUELINE NELSON

An insurer owned by the Canada Pension Plan Investment Board is buying Netherlands-based insurance company Aegon N.V.’s Canadian business for $600-million.

Aegon’s business, which primarily consists of an individual life insurance provider called Transamerica Life Canada, will be wrapped into U.S. insurance and reinsurance company Wilton Re Ltd. The CPPIB, which manages the assets of the Canada Pension Plan, owns Wilton Re.

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Ackman says Canada better than U.S. for activists

BOYD ERMAN

You get the feeling listening to activist investor Bill Ackman that we might see him on another Canadian proxy fight, as he said in Toronto Thursday that the Canadian system is far better for activists than the U.S.

Mr. Ackman was in Toronto for the Ontario Securities Commission’s annual Dialogue conference. In a panel discussion hosted by OSC chairman Howard Wetston, Mr. Ackman praised the Canadian system.

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NBF names new head for financial institutions coverage

TIM KILADZE

National Bank Financial has named a new group head in its investment banking arm.

Maude Leblond is set to take over as the point person for the bank's financial institutions coverage once Darin Deschamps leaves.

Mr. Deschamps has been with the bank for nearly a decade and is leaving to pursue other endeavours. He and Ms. Leblond have worked closely together for years, and her appointment as group head serves as a succession plan of sorts.

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Fierce debate over CSA’s early-warning proposal isn’t going away

ADRIAN MYERS

The following is an unlikely sentence: Nothing arouses the humours like mandatory disclosure thresholds for share ownership. But it’s also a true sentence – if you don’t believe me, I direct you to the seventy-odd comment letters that the Canadian Securities Administrators (CSA) received last year when they proposed, among other things, lowering the “early warning report” (EWR) threshold from 10 per cent to 5 per cent.

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Elkwater Resources sells $100-million of equity as market skids

JEFFREY JONES

Several investment banks have picked one of the worst months for energy stocks since the financial crisis to launch a $100-million bought deal equity issue for a junior oil company.

Elkwater Resources Ltd. said on Wednesday it is selling the stock to finance a pair of light and medium-gravity oil acquisitions.

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Former Xstrata CEO’s firm adds to funds, stays mum on acquisitions

RACHELLE YOUNGLAI

Mick Davis, the former chief executive of Xstrata, has raised an additional $1-billion (U.S.) to finance his new mining company.

Mr. Davis’ private equity firm, X2 Resources, has now raised $3.3-billion from investors, as well as $1.5-billion in conditional equity funding for a total of $4.8-billion.

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CP-CSX deal could spark new era of M&A in rail

NIALL McGEE

The news that Canadian Pacific Railway Ltd and CSX Corporation could be getting together – with a combined market capitalization of approx. $66-billion (U.S.) – is sending shockwaves through the rail industry. In a telephone interview Fadi Chamoun, analyst with BMO Nesbitt Burns Inc. said CP’s overture towards CSX, and how to respond “is a discussion going on in the board room of every railroad right now.”

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Despite market woes, Sherritt completes complex debt restructuring

TIM KILADZE

On Bay Street, complicated transactions are said to having a lot of “moving parts.” The complex restructuring Sherritt International Corp. just pulled off should be the textbook definition of this phrase.

To fully appreciate the complexity, you need to know the history. Sherritt sold its coal business for nearly $1-billion earlier this year, giving the company some cash to repay its debt and to strike any acquisitions, should it so choose.

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