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Streetwise

News and analysis on Bay Street and the world of finance
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Entry archive:

Terminal fail turns Bloomberg user’s day inside out

NIALL McGEE

Currency strategist Camilla Sutton got into her downtown Toronto office this morning at the ungodly hour of 4:30 a.m. Today was no ordinary day, though. Her Bloomberg terminal was down.

“I could look up where the dollar was trading but I couldn’t really see where it was trading in relation to everyone else at the same time, what had happened in rates markets, what had happened in equities. You’re kind of blind to the news flow,” said Ms. Sutton, who is chief FX strategist with Bank of Nova Scotia.

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Fairfax's bearish market outlook shaped Brit deal

JACQUELINE NELSON

Fairfax Financial Holdings Inc. chief executive Prem Watsa says his bearish market views played a key role in a recent pension fund partnership.

In February, Fairfax made an offer to acquire London-based Brit PLC in a deal valued at about $1.8-billion (U.S.). Two private equity sellers owning about 73 per cent of the specialty insurance company supported the deal and agreed to lock up their shares, i.e. they would not sell them to a rival bidder. Fairfax quickly went out to raise more than $1-billion via the sale of debt and equity securities. By late March, the takeover had been declared unconditional as to acceptances, meaning it had enough shareholders on its side to proceed with its offer.

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Lexpert: Insolvency work ain’t what it used to be

LEXPERT

Lexpert identifies and reports on emerging business issues and practice areas in the business of law. Whether online, in our magazine or in the DealsWire e-newsletter, we chronicle deals and lawsuits of interest, and cover issues of broad concern to the legal profession and those who purchase legal services. We hope you enjoy this sample of our latest content.

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Bay Street prepares for Hydro One IPO

SEAN SILCOFF, NIALL McGEE and ADRIAN MORROW

Ed Clark is warning his former Bay Street colleagues not to expect a bonanza of fees from the initial public offering of Hydro One, which could be the largest Canadian new stock issue in 15 years.

“We are quite determined that when we do go public, you will see a fee structure that the industry has never seen before. So there is not going to be a lot of money made off this in Bay Street, I can tell you that,” said Mr. Clark, the retired chief executive officer of Toronto-Dominion Bank who is leading the Ontario government’s asset sale efforts.

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Asset manager Aston Hill looks for a buyer with no deal guaranteed

TIM KILADZE AND NIALL McGEE

Executives at Aston Hill Financial Inc. have been shopping their firm to other asset managers, hoping to find a buyer.

Over the past two months, senior employees at Aston Hill, whose operations are largely split between Calgary and Toronto, have reached out to several Canadian firms and expressed interest in selling their company, according to multiple people familiar with the discussions.

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Shopify paves the way for Canadian tech IPOs

SEAN SILCOFF AND JACQUELINE NELSON

Going public used to require having a good reason for raising capital, and many tech companies just don’t seem to need the capital for growth. So why is Shopify Inc. doing it – and will other likely candidates among Canadian firms follow suit?

For a venture capital darling such as Shopify, whose initial public offering has been hotly anticipated for months if not years, the appeal is obvious.

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Report on Caisse de dépôt CEO's earnings doesn’t tell the whole story

JANET McFARLAND

The new annual report published this week by Quebec’s giant pension fund manager includes an unusual feature that you won’t see in an annual reports from its peers.

The Caisse de dépôt et placement du Québec published a chart demonstrating how much less its top executives earn each year compared to executives at other major pension funds. The chart compares the pay for various categories of top executives at the Caisse – including the CEO, chief investment officer, and the head of private equity investing – to average pay for the same jobs at other major funds.

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Cirque du Soleil nears deal with U.S. private equity giant TPG, Caisse

JACQUIE McNISH AND NICOLAS VAN PRAET

U.S. private equity giant TPG Capital is in the final stages of negotiating a takeover of Quebec’s Cirque du Soleil in a deal that is expected to include the Caisse de dépôt et placement du Québec and one of China’s largest investment funds.

According to people familiar with the discussions, the Cirque’s founder and majority owner Guy Laliberté has accepted preliminary terms of a takeover offer from TPG and its minority partner Fosun Capital Group of Shanghai. When Mr. Laliberté hired Goldman Sachs Group Inc. late last year to auction the company he founded 30 years ago, he was initially seeking $2-billion from buyers. The company’s struggles with mounting production costs and some box office disappointments has discouraged a number of interested suitors and it is expected the sale price will fall below Mr. Laliberté’s target.

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Shopify, Cara IPOs bring welcome fees to the Street

NIALL McGEE

The $100-million initial public offering of Shopify Inc. is expected to generate around $5-million in investment banking fees among six firms, including two Canadians.

The exact commission rate payable to its investment bankers will be made public when Shopify files its final prospectus, but it is expected to be around five percent on an IPO of this size. IPOs are generally among the most lucrative of functions investment banks perform, and fees are typically about 100 basis points above what a firm would make in leading a bought-deal financing.

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Shopify insiders poised for multi-million-dollar payday

SEAN SILCOFF

Several insiders of Shopify Inc. stand to become paper multi-millionaires with the Ottawa software company’s upcoming initial public offering.

The company hasn’t yet disclosed what price it will set for the public offering of its stock or specified how much it will sell, saying only it plans to raise up to $100-million (U.S.). However, in its registration statement filed Tuesday with the U.S. Securities Exchange Commission, the company determined the fair value of its pre-IPO common stock to be $10.72 per share.

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Bought deal juggernaut rolls on as Freehold upsizes offering

CARRIE TAIT

Investors are hungry for discounted shares of Freehold Royalties Ltd. and showing support for the company’s latest acquisitions.

Freehold on Wednesday increased the size of its bought deal – a type of corporate financing where underwriters purchase equities from a company and re-sell them to investors – to $324-million from the $297-million deal it announced late Tuesday. Freehold could also collect up to an additional $48.6-million if demand exceeds the supply available in the revised bought deal. The $33-million private placement with Canadian National Railway Co.’s pension funds, also part of Tuesday’s announcement, remains unchanged. Put it all together and Freehold could rake in about $406-million. The equity offering is now priced at $18 per share, compared to Tuesday’s closing price of $18.98.

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Canada’s latest gold deal highlights merger law loophole

TIM KILADZE

A private financing embedded in Canada’s latest gold merger has thrust a grey area of corporate takeover law back into the spotlight.

On Monday, Alamos Gold Inc. and AuRico Gold Inc. announced plans to join forces in a $1.5-billion (U.S.) merger, creating a miner expected to produce 700,000 ounces of gold annually.

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Old-school diversification reaps rewards in the oil patch

JEFFREY JONES

When times are good in the oil patch, fever spreads.

Energy executives and corporate boards get pitched on splitting their companies along lines of geography, commodity or business unit, with the promise of “unlocking value” in the utopia of the pure play.

Now that the energy sector has been hobbled by the collapse in oil and gas prices, some of the players that were swayed have watched their value get locked up tight. Companies that have stuck to old-school diversification are now rewarded for their stubbornness and even a lack of pizazz.

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FirstEnergy Capital lays off staff amid oil slump

JEFFREY JONES

FirstEnergy Capital Corp. has laid off about 12 per cent of its staff as the energy-focused brokerage digs in for a lengthy downturn in oil and gas markets.

Nine staffers have been handed pink slips at the Calgary head office, including two research analysts who covered oil-field service providers and exploration and production companies. Another five employees connected to the firm’s London trading desk have also been let go.

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Canada’s venture capital pool is deep now, but could dry up in the future

NIALL McGEE

The Canadian venture capital industry is off to its strongest start in eight years on the investment side, but funds for the next generation of entrepreneurs may be drying up.

According to preliminary data from Thomson Reuters, $431-million was funnelled into the sector during the first three months of this year, the most since 2007. Information technology accounted for $260-million in the first quarter, or about six out of every 10 dollars invested. Life sciences (pharmaceuticals and biotechnology) was the second-strongest sector, raising $106-million. Unusually, there was broad-based strength and lots of medium-sized deals across the industry.

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Growth numbers point to economic success under Indian PM Modi

DAVID BERMAN

When Bhim Asdhir, president and chief executive of Excel Funds Management, recently visited India, he was dazzled by what he saw there.

“There is so much energy and enthusiasm about the future of India,” he said, adding that the changes he noticed go beyond his personal impressions: Economic numbers also point to a revitalized country.

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CIBC Mellon names new board chair

NIALL McGEE

Samir Pandiri has been named chairman of the board of CIBC Mellon. He took over on Apr. 1 from Vincent Sands. CIBC Mellon is co-owned by Bank of New York Mellon Corp. and Canadian Imperial Bank of Commerce.

Mr. Pandiri also serves as CEO, asset servicing with Bank of New York Mellon Corp, a position he has held since March 2013. He spent 11 years at JPMorgan Chase & Co. in the corporate trust department before joining BNY Mellon in 2005. He works out of New York City.

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The mining industry’s best hope for survival has some flaws

TIM KILADZE

It has come to this: the largest gold deal in a year is one where no premium is paid and no cash is exchanged.

During the commodity boom, miners of all stripes were scooped up at prices sometimes worth over 50 per cent of their market values. Three years after the bull run ended, Alamos Gold Inc. and AuRico Gold Inc. have proposed merging in a share-for-share deal worth $1.5-billion (U.S.) that contains no takeover premium whatsoever. The motivation is to combine finances and assets to make it through this storm.

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Could Imperial Oil be eyeing rivals?

JEFFREY JONES

Imperial Oil Ltd.’s deep pockets and extensive oil sands holdings have prompted speculation that it could take advantage of the crude-price collapse and bulk up on assets.

Investors and analysts have suggested Canadian Oil Sands Ltd. could be in Imperial’s sights, as the two are partners in the Syncrude Canada Ltd. joint venture. FirstEnergy Capital Corp. has run some numbers on that prospect and other potential targets, MEG Energy Corp. and Cenovus Energy Inc. among them.

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Why a Canadian bank will love GE Capital’s assets

DAVID BERMAN

You could certainly see the excitement after General Electric Co. announced last week that it will sell most of GE Capital Corp., its finance arm, repatriate overseas cash to fund share buybacks and unload its real estate holdings: GE shares jumped nearly 11 per cent on Friday.

But GE investors (full disclosure: I am one of them) are not the only ones excited about the transition back to the company’s industrial roots. Could Toronto-Dominion Bank also be perking up?

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RBC’s McKay favours U.S. among ‘core’ markets

DAVID BERMAN

Royal Bank of Canada’s chief executive has made it clear where his focus is right now: The United States.

In a press conference following the bank’s annual general meeting on Friday, Dave McKay answered a question about the bank’s commitment to developing markets – it recently withdrew from Suriname and Jamaica – by calling the U.S., Canada and Europe RBC’s “core” markets.

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The private placement wrinkle in the Alamos-AuRico gold merger

TIM KILADZE

Here’s a rare deal structure: the proposed $1.5-billion (U.S.) merger between Alamos Gold Inc. and AuRico Gold Inc. contains the promise of a private placement, no matter what happens to their tie-up.

Share-for-share mergers, like this one, are usually pretty straightforward. Two companies come together, and the buyer either offers some of its own stock, instead of paying cash, or the deal is sold as a ‘merger of equals’ and shareholders of both firms get stock in a ‘new’ company. The latter is happening here – though, funnily enough, that ‘new’ company will be known as Alamos.

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Why HarbourVest sees Canada as the next venture capital hot spot

JACQUELINE NELSON

Private equity group HarbourVest Partners LLC sees potential in Canada’s growing tech and start-up market and is establishing an office in Toronto to build its venture capital investment business.

HarbourVest, which manages $1.5-billion (U.S.) on behalf of Canadian institutional investors, has hired Senia Rapisarda to lead the Canadian office as principal. Ms. Rapisarda has been getting to know the firm for more than a year as a consultant, and has a VC background.

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Cara’s CEO scores $60-million windfall from IPO

TIM KILADZE

The chief executive officer recruited to turn Cara Operations Ltd. around is roughly $60-million richer because of the company’s initial public offering, at least on paper.

Bill Gregson, a respected retail industry veteran, was hired by Fairfax Financial Holdings Ltd. in 2013 to start fixing the troubled restaurant company, which owns chains such as Harvey’s, East Side Mario’s and Swiss Chalet. On top of his annual salary and bonus, the CEO’s compensation package included stock options with an exercise price of only one penny.

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The agenda when Scotiabank’s Porter meets India’s Modi

DAVID BERMAN

Meeting with Narendra Modi is a hot ticket for business leaders. If you’ve won a ringside seat when India’s superstar prime minister visits Canada later this month, what should you expect?

Bank of Nova Scotia’s chief executive Brian Porter confirmed that he’s participating in a breakfast meeting with Mr. Modi, with other business leaders. Mr. Porter will get an up-close look at India’s shifting policies toward business and foreign investment – and an important one, given Scotiabank’s focus on developing markets in Latin America but relatively small footprint in India.

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Bay Street veteran to help govern Ottawa’s private assets

TIM KILADZE

The corporation tasked with managing the federal government’s private assets, as well as weighing any future privatizations, has added some Bay Street bench strength to its board.

Mike Mackasey, who has been an investment banker for more than 30 years, is joining Canada Development Investment Corp.’s board of directors. CDEV, as it is referred to, was the corporation responsible for holding Ottawa’s shares of General Motors Co., which were sold earlier this week.

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Brookfield, Macquarie scoop up Australian energy business for $2.1-billion

JACQUELINE NELSON

Brookfield Asset Management Inc. is teaming up with Macquarie Capital Group Ltd. to acquire Apache Corp.’s Australian energy business.

The two firms will buy the Houston, Tex.-based oil and gas company’s Australian subsidiary called Apache Energy Ltd. for $2.1-billion (U.S.) in cash, with ownership split equally between the two firms and their funds. Brookfield’s commitment in this deal will come from its private equity funds.

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Top-ranked TD research analyst takes on banking gig

TIM KILADZE

One of Toronto-Dominion Bank’s best-known research analysts is moving to the other side of the wall.

Scott Penner, who previously covered technology companies such as BlackBerry Ltd., CGI Group Inc. and Open Text Corp., has joined the dealer’s investment banking group – which is on the other side of the proverbial Chinese wall that separates deal-makers from research analysts.

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Brookfield Infrastructure not scared off by asset-sale frenzy

JACQUELINE NELSON

Infrastructure deals don’t come cheap these days with many pensions funds, sovereign wealth funds and other institutional players all chasing the action. But with the right discipline, Brookfield Infrastructure Partners L.P. says, there are still good opportunities to buy real assets.

Brookfield Infrastructure said Wednesday that it would increase the size of its latest equity offering to about $890-million (U.S.) from the $750-million proposed a day earlier, due to strong demand from investors.

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Five reasons why a Scotiabank-HSBC Mexico tie-up is unlikely

DAVID BERMAN

A Canaccord Genuity analyst caused quite a stir this week with a note examining the possibility of Bank of Nova Scotia buying HSBC Mexico for an estimated $11.5-billion. But is a deal really in the works?

The official word from Scotiabank and HSBC is “no comment,” although a Scotiabank spokesperson did add that the bank is “focused on investing in our priority markets,” which includes Mexico.

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