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Streetwise

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

Capital markets still showing signs of life despite oil patch woes

JEFFREY JONES

A handful of energy companies have enticed investors with share issues, even as the oil patch faces tough times.

In Canada, producers have raised more than $2.1-billion in equity financing since the start of the year, with Cenovus Energy Inc.’s bought deal last week accounting for the lion’s share. That is more than double what the sector raised in the last big drop in activity, in the first three months of 2013, when U.S. benchmark crude averaged more than $95 (U.S.) a barrel.

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Why Canadian banks are racking up trading wins

DAVID BERMAN

The first-quarter reporting season for the Big Six banks hasn’t concluded yet – five down, one to go – but an interesting trend has emerged. Banks are killing it on trading.

Royal Bank of Canada reported trading revenue of $855-million in the first quarter, a near-17 per cent leap over the first quarter of 2014. It’s also up a whopping 118 per cent over the fourth quarter, but that was an unusual quarter because trading revenue was affected by changes associated with compliance to the U.S.’ so-called ‘Volcker rule’ on proprietary trading.

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Avigilon opens its wallet for patent, real estate acquisitions

SEAN SILCOFF

Fast-growing Vancouver tech company Avigilon Corp. has been buying a lot of property of late – both intellectual and physical.

In December and January, the network video and surveillance technology company plunked down $93-million in a pair or transactions to pick up 172 patents and 75 patent applications. Now, it has agreed to pay $42-million for a nine-storey building at 555 Robson Street in Vancouver that will serve as its global headquarters.

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OMERS sets its sights on infrastructure

JACQUELINE NELSON

Stable infrastructure investments are beckoning to Ontario Municipal Employees Retirement System, and the pension fund is willing to pay the price for quality assets.

The pension plan for Ontario municipal employees said it wants to boost its exposure to infrastructure from 14.7-per cent as of its 2014 year, to 21.5 per cent of its total portfolio in the next few years.

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Stikeman Elliott snags M&A lawyer

NIALL McGEE

Mario Nigro, a long-time mergers and acquisitions lawyer with Blake, Cassels & Graydon LLP, has joined Stikeman Elliott LLP, as partner in the M&A and private equity group.

“He literally started this morning. His office – It looks like he’s been here for 10 years already. He’s got his espresso machine going and he’s just raring to go,” said Jay Kellerman, partner with Stikeman Elliott in a telephone interview.

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Laurentian, Manulife executives changing roles

CLARE O’HARA

Two financial services industry executives are moving into new leadership roles.

François Desjardins, president and CEO of B2B Bank, has taken on the role of as chief operating officer at B2B’s parent company, Laurentian Bank of Canada. Laurentian Bank’s Board of Directors also announced its intention to name Mr. Desjardins president and CEO of the Bank effective November 1, 2015.

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Reality check on HBC’s big deal: Does it really create value?

TIM KILADZE

You can often tell when corporate leaders are excited by measuring their volume of buzzwords – the more they use, the merrier they typically are.

Following this rule of thumb, Hudson’s Bay Co. governor Richard Baker was practically ecstatic when announcing his new real estate projects earlier this week. In his words, the deals are a “transformative step” that will undoubtedly “drive value creation.”

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Costs forcing smaller financial dealers into arms of larger rivals

CLARE O’HARA

Increased costs and regulatory pressures are driving more consolidation in the financial services industry, with a number of smaller dealer firms being forced to either exit the industry or merge with larger forces to survive.

As a result of continued weak capital markets activity and low interest rates, and increased regulatory compliance costs, the industry could see further consolidation among small investment firms, says Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC).

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Another former income trust shakes hands with the taxman

SEAN SILCOFF

Another former income trust has settled with Canada Revenue Agency over the tax consequences of its conversion to a corporation. Ag Growth International Inc., a grain handling equipment maker that converted in June, 2009, said it has entered into an agreement with CRA that “will not give rise to any cash outlay” but will result in a non-cash charge as it writes down the the value of its deferred tax assets.

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Former Devon Canada boss joins ARC Financial

JEFFREY JONES

The former head of Devon Energy Corp.’s Canadian operation has signed on with ARC Financial Corp., the Calgary-based private-equity firm, as a senior adviser.

Chris Seasons will work with ARC’s investment committee and board of directors on searching for new deals, as well as contributing to overall strategy and operations, the firm said.

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Insurers struggle to court millennials

JACQUELINE NELSON

The way younger Canadians research and buy insurance is changing and that’s going to require a major shift from the companies that serve them, a new report says.

Traditional insurance products are not well suited to meeting the needs of Generations X and Y, or middle-class families, according to an outlook report on the Canadian life insurance and annuity business released by consulting firm Ernst & Young LLP on Wednesday.

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TransCanada sells stake in U.S. gas pipeline network

JEFFREY JONES

TransCanada Corp. is making good on its pledge to keep selling assets to a U.S. affiliate to help fund $46-billion in expansion plans, even after an activist investor abandoned a campaign for a much bigger shakeup.

TransCanada is selling its remaining 30-per-cent stake in Gas Transmission Northwest LLC, a U.S. gas pipeline network, to master limited partnership TC Pipelines LP in a so-called “drop down” transaction.

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Breaking down HBC’s big deal – and why it matters

TIM KILADZE

Scrap the retail roots – so much of Hudson’s Bay Co.’s future is now tied to real estate.

The repositioning can be hard to follow. In the United States, HBC is teaming up with Simon Property Group Inc. to create a brand new company. HBC will sell 42 of its properties to the new firm and then lease them back, paying $131-million in annual rent. In return, Simon will initially contribute $63-million in equity, and ultimately put in cash and properties worth $348-million.

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Bankruptcy order against Dragons' Den's Wekerle dismissed

Niall McGee

The bankruptcy order taken by Rohit Sehgal against Michael Wekerle, a dragon on CBC’s Dragons’ Den, has been dismissed.

“Mr. Wekerle paid Mr. Sehgal what he was owed. The bankruptcy order was dismissed on consent.” said Jim Grout, lawyer with Thornton Grout Finnigan LLP, who was representing Mr. Wekerle.

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Alberta now has a reason to branch out into renewable energy

JEFFREY JONES

The oil-price crash gives Alberta a solid excuse to finally get serious about green energy.

The province has toyed and tinkered with a strategy for wind, solar and other renewables for years, partly in hopes of showing the country and international trading partners that its leaders have more than just hydrocarbons on the brain.

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Can private equity reap windfalls in the oil patch?

TIM KILADZE

Everyone’s buying the hype.

With energy prices in the gutter, private equity players are angling to score assets on the cheap. Boatloads of cash have already been raised, with The Carlyle Group drumming up $9-billion (U.S.) and Blackstone Group LP hauling in $6-billion. “I think it’s a very good time to be getting into it,” Apollo Global Management’s Leon Black told a conference in Berlin, according to a New York Times report Tuesday.

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Bay Street should banish its annual league tables

TIM KILADZE

Forgive me if this sounds like blasphemy. But for the sake of so many peoples’ mental health, Bay Street should banish its beloved league tables.

For anyone who isn’t well versed in the art of deal-making, league tables are the annual rankings of investment banks and corporate law firms compiled by market data specialists such as Thomson Reuters and Bloomberg. They are one of Bay Street’s most-watched measures of success.

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CGI Group rumoured to be eyeing U.S. tech assets

NIALL McGEE

Canada’s CGI Group Inc. is a potential buyer for U.S. tech firm Computer Sciences Corp’s commercial business unit, which takes in about $9-billion (U.S.) a year in revenue, a source close to the company told the Globe and Mail.

On Friday, Dealreporter, which is part of the U.K.’s Mergermarket Group, tweeted that Computer Sciences, an IT services company whose market cap is in excess of $10-billion (U.S.) is in discussions to sell itself in a two way deal that would see a private equity firm pick up its government services business and a foreign strategic buyer acquire its commercial division. The Dealreporter article cited anonymous sources.

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Big equity sales bring big payday for the Street

TIM KILADZE AND SEAN SILCOFF

Underwriters are looking to clear a nine-figure bounty of fees following a spate of big Canadian equity offerings in the past week.

The bulk of the fees come from three large bought deals last week: There was a $750-million subscription receipt offering from Bombardier Inc. that was upsized thanks to strong demand to $937.5 million (and could top $1.07-billion if the underwriters exercise their overallotment option); a $650-million subordinated voting share offering from Fairfax Financial Holdings Ltd. (plus a separate $200-million preferred share deal); and the biggest fish of all, Cenovus Energy Inc.’s massive $1.5-billion equity offering. Finally, on Monday, TransCanada Corp. sold $250-million worth of preferred shares in an offering announced Monday, led by Scotia Capital Inc. and RBC Dominion Securities Inc.

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Is HSBC Canada the canary in the coal mine for the Big Six?

DAVID BERMAN

HSBC Bank Canada certainly isn’t one of the Big Six, but it appears to be driving sentiment in their share prices after its fiscal fourth quarter results exposed some of the concerns in the banking sector.

Among them: Low interest rates are making life difficult. HSBC’s net interest income, or the income generated when a bank borrows at short-term rates and lends at longer-term rates, declined by $21-million, or 7 per cent, to $295-million from the fourth quarter of 2013.

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Sherry Cooper tracks housing market in new role

JACQUELINE NELSON

Veteran economist Sherry Cooper has taken on a new role keeping an eye on the Canadian housing market.

Ms. Cooper is joining mortgage and leasing company Dominion Lending Centres as chief economist. In the role she will issue quarterly updates on the economy and other statements and reports on the mortgage sector.

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Why Target’s compensation move wouldn’t be allowed here

JANET McFARLAND

Target Corp.’s decision to grant share units to 20 executives and directors on the day before announcing its decision to close its stores in Canada would not be allowed under Canadian law for a domestic company in the same situation.

The board of the Minneapolis-based retailer operates under U.S. rules, allowing companies to grant equity to insiders on a pre-determined date, irrespective of what undisclosed news is in the pipeline, even if the date proves beneficial for those receiving the grants.

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Superior Plus challenges Ottawa over huge tax bill

SEAN SILCOFF

Superior Plus Corp. has asked Canada’s tax court to force the federal government to produce internal emails the Calgary company believes will bolster its claim that it doesn’t owe $83-million in back taxes.

The company intends to challenge a reassessment by the Canada Revenue Agency related to Superior’s conversion to a corporation from an income trust in 2008, chief financial officer Wayne Bingham said in an interview.

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Weighed down by debt, oil patch ditches assets

CARRIE TAIT

Asset sales are starting to shake out in Canada’s oil patch, as debt-heavy companies jettison property to survive and oil’s eight-month slump stretches on.

Enerplus Corp. on Friday cut its dividend, budget, and announced an asset sale. It has agreed to sell property producing about 1,900 barrels of oil equivalent in two deals totalling about $182-million. Enerplus said its Pembina waterflood assets make up the majority of the assets in the transactions. Enerplus did not disclose the buyers.

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Wekerle pays $1.1-million but bankruptcy hearing goes on

NIALL McGEE

An Ontario Superior Court justice has denied Difference Capital Financial Inc. CEO Michael Wekerle’s motion to dismiss the bankruptcy notice taken against him by Rohit Sehgal.

However, the case to have Mr. Wekerle declared bankrupt would appear to have been significantly weakened as it was revealed in court Friday that a few days ago he sent a payment of just under $1.1-million (U.S.) to Mr. Sehgal with the objective of squaring things up.

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Cross border M&A up 20 per cent over last year

DAVID BERMAN

Cross-border deal-making is showing no signs of slowing down this year, after companies announced a total of $138-billion (U.S.) worth of mergers and acquisitions so far in 2015. According to a Thomson Reuters report, that’s up 20 per cent over the same period last year and marks the best start to any year since 2007.

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Lexpert: Why a Samsung bid for BlackBerry would be tricky

LEXPERT

Lexpert identifies and reports on emerging business issues and practice areas in the business of law. Whether online, in our magazine or 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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Wild week: $3.4-billion of equity issued by Canadian companies in three days

TIM KILADZE

It started with a hiccup, but the shortened week ultimately saw some big successful deals. All told, $3.4-billion in equity was sold in just three days.

Early in the week, decent but subdued demand for Cenovus Energy Inc.’s massive $1.5-billion bought deal raised some eyebrows on Bay Street, prompting some people to question investor appetite.

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Bombardier’s $750-million share offering sells quickly

TIM KILADZE

Any worries that Bombardier Inc. would struggle to sell $750-million of new shares were quickly dispelled Thursday afternoon.

Exactly one week after the Quebec-based giant announced a dramatic shakeup that involved naming a new chief executive, Bombardier tapped the market for fresh funds. Heading into the deal there were concerns that investors might be spooked because management had also recently halted the dividend and suggested they might sell assets to raise cash, but almost immediately after the offering launched it was clear that sales were going well, according to two people familiar with the transaction.

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Former income trust Exchange Income strikes deal with taxman

SEAN SILCOFF

Another former income trust has made peace with the taxman, after the Canada Revenue Agency went after several Canadian corporations to claim taxes from transactions done under their previous structures.

Winnipeg’s Exchange Income Corp. said this week it has struck an agreement with the CRA that will see the tax agency drop its claim to taxes it said EIC should have paid after changing its structure from income trust to corporation six years ago. As a result, EIC won’t have to pay out any cash, but said Thursday it took a$22.9-million writedown to the value of deferred tax assets on its books. That dragged the company, which has interests in aviation and manufacturing, to a 79 cent per-share loss in the fourth quarter on revenue of $138.7-million.

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