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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:

Big Six to feel the sting from Ottawa closing loophole

DAVID BERMAN

Canada’s big banks are starting to discuss the impact from one of the bank-specific proposals in the 2015 federal budget, pointing out that 1 to 2 per cent of their total earnings are likely to disappear if the proposal becomes reality.

The government wants to clamp down on a complex trading strategy, known as synthetic equity arrangements, that has rewarded the banks with unintended tax breaks. The strategy essentially allows banks to get tax-free dividend income using derivatives, and the proposal in the budget intends to stop the practice.

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Canadian pension funds bank on renewable energy

JACQUELINE NELSON

At a time when assets such as toll roads, bridges and airports look expensive in many developed markets, two of Canada’s largest pension plans are turning to renewable energy infrastructure.

The Ontario Teachers’ Pension Plan and the Public Sector Pension Investment Board (PSP) have teamed up with Spain’s largest lender, Banco Santander SA, in an equal partnership to back Cubico Sustainable Investments. The London-based firm will construct new renewable energy projects around the world.

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Lexpert: Pharma M&A in the spotlight

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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Canaccord hires again in U.S., beefs up health-care coverage

TIM KILADZE

Canaccord Genuity is adding more bulk to its U.S. investment banking arm, aiming to diversify its revenues at the same time.

The Canadian dealer has hired two senior bankers and a research analyst in Nashville who will focus primarily on covering health-care clients.

Dudley Baker and Roger Briggs will both assume the roles of managing directors in investment banking, joining from a midterm dealer and a private equity firm, respectively. Mr. Briggs will also cover financial sponsors. Richard Close is heading to Canaccord as a research analyst for health care.

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Plan for voluntary CPP contributions concerns private fund industry

JACQUELINE NELSON

The federal government’s promise to introduce voluntary contributions to the Canada Pension Plan could introduce public-sector competition into a fiercely competitive private industry.

As banks, insurers and independent wealth managers compete to invest and manage Canadians’ savings, it is not yet clear how new discretionary CPP supplements would be managed, whether they could be withdrawn or how much a person could contribute. But in the planned consultations announced by Finance Minister Joe Oliver on Tuesday, industry representatives will almost certainly home in on these potential sticking points.

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Five blessings from Bay Street's bull run

TIM KILADZE

Bay Street is buzzing with deal flow, and that’s created some broad market benefits that are easy to overlook. Below are five blessings from the current bull run:

Non-resource companies finally get some love

In normal markets, materials and energy companies comprise roughly half the S&P/TSX Composite Index. But in these unusual times, spurred by the recent rout in commodity prices, many investors have rotated into sectors such as consumer staples. While there remains a flurry of energy financings – Crescent Point just raised $600-million to finance its acquisition of Legacy Oil + Gas – everything from retail companies to technology startups are getting some love. Such demand allowed Wajax Corp., an industrial parts and service company, to raise $65-million on Tuesday.

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TD eyes U.S. yields in Nordstrom credit-card deal

DAVID BERMAN

After Toronto-Dominion Bank announced a deal on Tuesday that will see the lender acquire retailer Nordstrom Inc.’s U.S. Visa and private-label consumer credit card portfolio, it became clear that the lender’s credit-card ambitions are far from satisfied.

TD has emerged as a serious player since 2013, after acquiring Target Corp.’s $5.9-billion (U.S.) credit-card portfolio and buying half of the Aeroplan portfolio from Canadian Imperial Bank of Commerce for another $3-billion (Canadian) in balances.

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IPO market booming across diverse sectors. But will it last?

NIALL McGEE

Asking an investment banker how the Canadian initial public offering market is in 2015 is a little like asking one of those burly Oktoberfest servers how stein sales are in Munich in October. Clearly, business is good right now. But how good is good? And will it last?

“The pipeline is as heavy as I’ve ever seen in my career,” said Peter Miller, head of equity capital markets at BMO Nesbitt Burns Inc., who was speaking at the TSX Equities Trading Conference 2015 on Tuesday in Toronto.

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John Baird joins law firm Bennett Jones

JEFF GRAY

Law firm Bennett Jones LLP says it has hired former foreign minister John Baird, who abruptly quit politics in February.

The firm says Mr. Baird – who had also served as an Ontario cabinet minister under former Tory premier Mike Harris, where he earned a reputation for feisty Question Period performances – will serve as a senior adviser.

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Montreal’s Stingray upsizes IPO to $140-million

NICOLAS VAN PRAET

Montreal media company Stingray Digital Group is upsizing its previously announced initial public offering amid a frothy market for share sales in Canada.

The privately-held company, best known in Canada for its commercial-free music streaming service Galaxie, now Stingray Music, will increase its planned $120-million offering to $140-million. An overallotment option worth about $21-million and a secondary private placement worth $19-million will bring the total deal to about $180-million.

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If everything's expensive, why are Canadian pension funds buying?

TIM KILADZE

Canada’s biggest pension funds are piling into riskier assets at breakneck speeds, and no one’s saying peep about it.

Either Canadians are incredibly comfortable betting their golden years on private assets such as real estate, infrastructure, and private debt and equity, which are less liquid than your average stock and bond, or they are clueless as to what pension funds are up to.

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Joe Oliver puts U.S. Volcker rule in the crosshairs

DAVID BERMAN

How far is Joe Oliver willing to go to get Canadian bond trading among U.S. banks exempt from the Volcker rule?

Although the federal Finance Minister invoked the North American free-trade agreement (NAFTA) when he spoke in New York earlier this month, implying the threat of a formal complaint in order to ease restrictions, for now he may just stick with making a sound argument to U.S. regulators.

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Despite debt pledge, Valeant’s M&A streak not done

NIALL McGEE

Doing deals is in the DNA of Canada’s Valeant Pharmaceuticals International Inc., so even though the company has lately been emphasizing its growth from operations, investors have applauded its mergers and acquisitions strategy by relentlessly bidding up its stock.

Valeant chief executive officer Michael Pearson didn’t tip his hand in a chat Thursday with The Globe and Mail on when and where the next big deal might come from, but he did suggest how the company might pay for it.

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Bay Street’s astronomical deal flow cause for concern

TIM KILADZE

These are words no one on Bay Street wants to hear: Watch out, these markets are nuts. When deals sell this easily, it usually means there’s far too much market froth.

It used to be that a billion-dollar equity offering was a big event. Yet when Element Financial announced plans to raise $2.2-billion on Wednesday, there was almost no reason to blink. Since January, Canada’s capital markets have seen at least six billion-dollar equity offerings, and such gigantic deals now seem almost run of the mill.

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Investment banks make $9.2-million (U.S.) on Shopify IPO

NIALL McGEE

Early investors aren’t the only people making mad money on the slam-dunk initial public offering of Shopify Inc.

The investment banks that underwrote the share offering are splitting almost $9.2-million (U.S.) in fees. The commission on the share sale was 7 per cent according to the final prospectus filed Thursday, which is 200 basis points more than Cara Operations Ltd. paid out to its bankers earlier in the year when it went public.

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Gluskin Sheff hires former Calgary fund manager

JEFFREY JONES

Leon Knight, who was managing director at Kootenay Capital Management, has joined Gluskin Sheff + Associates Inc. as an investment analyst, specializing in energy.

The move comes about six months after Mr. Knight and Chris Theal, who was Kootenay’s president, wound up their absolute return fund, citing hurdles to more growth, such as difficulties winning acceptance among the big banks and their investment advisers.

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Shopify IPO founders, backers strike pay dirt

NIALL McGEE

While Shopify Inc. doesn’t make any money yet, its early shareholders have made a huge paper gain on its highly successful initial public offering.

The stock, which was priced at $17 (all figures in U.S.) a share in the prospectus, rocketed up to $28.74 a share on the New York Stock Exchange before settling down to around $26 – a 33-per-cent improvement over the prospectus price.

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How two judges came to the same surprising decision in Nortel case

ADRIAN MYERS

I think we should all take a moment to appreciate that the Nortel Networks Corp. decisions of the Ontario Commercial List and the Delaware Bankruptcy Court represent the kind of Bay Street drama more regularly found at Ben McNally or the Canadian Opera Company.

Really, the plot summary is the stuff of Homer. A great house rapidly rises and then spectacularly falls, leaving three different countries to fight over the remains of the estate. They employ “scorched earth” tactics in their battle, hiring a cadre of mercenaries ( lawyers) to do their bidding. Finally, after two grand confrontations in two of the most powerful jurisdictions in North America, the crane lowers two great gods – Justice Newbould of the Commercial List and Judge Gross in Delaware – deus ex machina, to scold the combatants and to mete out justice in a most unexpected way.

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Shift in demographics brings boomer turnover to private equity

JACQUELINE NELSON

As Canada’s baby boomers march toward retirement, investors are lining up to take the reins from aging entrepreneurs parting ways with the small businesses they founded and built.

Some private equity groups are looking to step in and buy up these independent retailers, manufacturers and vendors, when owners can’t pass the business to the next generation or where management teams are unable to buy them.

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Element launches blockbuster $2.2-billion financing

TIM KILADZE And JACQUELINE NELSON

Canadian investment banks are stepping up to buy $2.2-billion worth of Element Financial Corp. shares and bonds – without knowing what the company plans to do with the money.

The offering is split into three tranches: $1.55-billion of subscription receipts, $500-million of convertible debentures and $150-million of preferred shares.

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TMX faces a potential Nasdaq invasion

TIM KILADZE

First Aequitas, now this.

Mere months after rival stock-exchange provider Aequitas Innovations Ltd. launched its new exchange in Canada, aiming to steal market share from the Toronto Stock Exchange, TMX Group Ltd., which operates the TSX, faces the threat of potentially taking on Nasdaq OMX Group Inc., too.

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CIBC bond traders moved out of New York

DAVID BERMAN

Canadian Imperial Bank of Commerce is moving some of its bond-trading operations from the United States to Canada, affecting what the bank called a “small number” of positions in its New York office.

CIBC confirmed that U.S. high-yield corporate bonds will now be covered from Canada, where the bank currently trades other U.S. bonds.

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Canada embraces 'blank cheque' acquisition firms

TIM KILADZE

They came to Canada only three months ago, but special purpose acquisition companies – or SPACs – are already winning over investors.

These acquisition vehicles tap investors for funds, and then use the proceeds to strike a deal. Because they aren’t allowed to have a specific acquisition target in mind while fundraising, SPACs are sometimes called “blank cheque companies.” After fundraising, they have two years to complete a purchase.

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Will Bay Street's bottom line on Hydro One IPO be low enough for Ontario?

NIALL McGEE and DAVID BERMAN

If the Ontario government thinks it can pay a rock-bottom fee to banks for underwriting the Hydro One initial public offering, it may be disappointed.

Charles Sousa, Ontario’s Finance Minister, told Bloomberg News that banks are so hungry for a piece of the action that they would be willing to accept a small slice of their usual fees – say, a quarter of what they earned for IPOs such as Air Canada or Canadian National Railway Co.

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Why Michael Lee-Chin has turned his back on public markets

TIM KILADZE

An hour and a half into my raucous and illuminating meeting with Michael Lee-Chin, the billionaire investor starts to worry he’s crossed a line. “Am I harassing you?” he asks.

Our sit-down isn’t so much an interview as a mental sparring match. Mr. Lee-Chin has a new asset-management company, called Mandeville Holdings Inc., and his aggressive marketing line is that Canadians won’t create wealth unless they invest in private holdings such as venture capital, real estate and private equity funds.

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Power Financial CEO warns against sweeping retirement reforms

JACQUELINE NELSON

Canadians are anxious over their security in retirement, but their fears are likely overblown in the view of Power Financial Corp. chief executive Jeffrey Orr.

Misinformation about what’s best for Canadians’ retirement savings, combined with hand-wringing over the status of their investments, is putting the country at risk of adopting sweeping reforms that don’t benefit at-risk groups, said Mr. Orr, who comes from an investment and banking background.

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Onex dishes on what happened in Vegas

JACQUELINE NELSON

Onex Corp. didn’t think its big investment in Las Vegas was a gamble.

On its first quarter earnings call Friday, the Toronto-based private equity firm detailed how its investment in the Tropicana Las Vegas hotel and casino fell short of its expectations, attributing the disappointment to a slump the city hasn’t yet recovered from, as well as some issues getting people to open their wallets on the casino floor.

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Lexpert: When will deal making return to Calgary?

LEXPERT

Lexpert Roundup on the Business of Law

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.

More »

Bennett Jones hires ex-AIMCo chief

JEFF GRAY

Bennett Jones LLP has hired Leo de Bever, the former boss of the Alberta Investment Management Corp (AIMCo) – one of Canada’s largest pension funds – as a senior adviser to the law firm in Calgary.

The hire is part of a strategy to boost the law firm’s ability to advise clients facing “challenging business environments,” as Alberta’s oil patch faces a prolonged slump in oil prices.

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Boards getting better at battling activists

JACQUELINE NELSON

When the music stopped, there were no seats for Trian Fund Management.

The activist firm run by investor Nelson Peltz was circling U.S. chemical company E.I. du Pont de Nemours & Co. (DuPont), angling for four seats on the company’s board. But DuPont chief executive officer Ellen Kullman prevailed after a shareholder vote on Wednesday.

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