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Report on Business


News and analysis on Bay Street and the world of finance
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Montreal media company Stingray unveils IPO


Montreal media company Stingray Digital Group is going public with a $120-million share offering, testing investor appetite for its lucrative business as its core television platform is under threat from alternatives such as Netflix.

The privately held company is best known in Canada for its flagship product Galaxie, a continuous, commercial-free music streaming service that has become a staple on pay TV channel lineups across the country and in 110 other nations. It filed plans with regulators on Friday to list shares on the Toronto Stock Exchange.

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OPTrust keeps an eye on risk amid investment gains


Amid strong returns in 2014, OPSEU Pension Trust is looking to ratchet down the amount of risk in its investment portfolio.

The fund, better known as OPTrust, said it earned a 12-per-cent return on its investments last year, net of external management fees, and saw its assets grow to $17.5-billion from $16-billion one year earlier. The pension plan has more than 86,000 beneficiaries and contributors who are Ontario government employees from the OPSEU union.

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Controversial CIBC director won’t seek re-election


Canadian Imperial Bank of Commerce shareholders’ meeting Thursday marks the end of the tenure of one of the bank’s more controversial directors.

Leslie Rahl is not standing for re-election after eight years on the CIBC board. Ms. Rahl drew the attention of governance activists and shareholder-advisory firms for her service on the board of the U.S. Federal National Mortgage Association, better known as Fannie Mae, as it collapsed in that country’s housing crisis. Ms. Rahl served on several of the company’s committees, including compliance and “risk policy and capital.”

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OSC ruling fuels stock exchange feud over ‘speed bumps’


A ruling Tuesday by the Ontario Securities Commission is expected to add fuel to already-heated arguments over whether all stock exchanges with market “speed bumps” should be treated the same by regulators.

These speed bumps, made popular in Canada by a new stock exchange run by Aequitas Innovations Inc., are designed to create a level playing field with high frequency traders (HFTs). By slowing down high-speed trades, speed bumps purportedly eliminate any advantage such traders would have over average traders.

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Ambiguity, legal awkwardness of bitcoin complicates fraud lawsuit


Some people think that bitcoin is the next Facebook for the guys who would have invented Facebook but, with the recent bankruptcies of bitcoin miners CoinTerra and Aquifer and the 2014 bankruptcy of the bitcoin exchange Mt. Gox, things don’t look so great for bitcoin proponents these days. Part of this is driven by the fact that bitcoin isn’t the quite as liquid and stable as its proponents once said.

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BMO restructures capital markets arm, cuts jobs, realigns roles


Bank of Montreal is quietly making strategic changes to its capital markets arm, announcing jobs cuts and a realignment of roles throughout the month of April.

In total, roughly 50 people have lost their jobs, according to people familiar with the situation – many of whom are senior professionals, including directors and managing directors.

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Why Canada’s banks care about ‘synthetic’ trade crackdown


Bay Street is struggling to quantify how badly Canada’s banks will be hurt by Ottawa’s decision to tighten rules for arcane transactions known as ‘synthetic equity arrangements,’ but some people familiar with these trades stressed the impact should not be underestimated.

As part of the federal budget, Finance Minister Joe Oliver, who once worked on Bay Street, proposed preventing banks from making these arrangements in order to dodge taxes. At the moment, it is unclear how many Big Six banks still utilize these trades, which are conducted on what are known as “Delta One” desks, but they were once widely used.

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Pension funds to revisit 30-per-cent investment restriction


The federal government is reigniting a debate over whether to ease investment restrictions on some Canadian pension funds.

Tuesday’s budget included plans for a public consultation on whether to change rules that limit federally regulated pension funds from owning more than 30 per cent of the voting shares of a corporation. Pension groups and other stakeholders will now have a chance to weigh in on the merits and perils of reducing ownership restrictions that bind many pension funds across the country.

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Upstart energy firm tests investor appetite with $100-million share sale


Deventa Energy Inc., a small, private energy company, is pounding the pavement looking for $100-million in a big test of investor appetite for early-stage Canadian energy plays in a depressed market.

Deventa has assembled a sizable land position in the southern part of the prolific Alberta Montney region and is now looking for capital to start drilling $10-million horizontal wells.

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Dragons' Den star Wekerle facing $1.3-million lawsuit for wrongful dismissal, assault


Michael Wekerle is being sued by his former personal shopper who alleges Mr. Wekerle fired him from a snazzy high-end Toronto clothing store last year without cause, and failed to pay him profits in the store he says he was a part-owner in.

Peter Halpin also alleges the star of CBC’s Dragons' Den and CEO of Difference Capital Financial Inc. had him forcibly removed from the Da Zoo clothing store in May, 2014, and assaulted him. Mr. Halpin is asking for $1.3-million in damages, including $100,000 for assault and battery.

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Three ways this budget may whack bank profits


The Conservative government’s 2015 budget was short on specifics for how Ottawa would ensure that taxpayers won’t have to bail out systemically important banks during the next financial crisis. That came as a surprise to some observers who had expected more clarity on the Taxpayer Protection and Bank Recapitalization Scheme after consultations were launched in August.

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Caisse wins rare job protections for Quebec in Cirque du Soleil deal


The business of acquiring Quebec companies could become more onerous if the $1.5-billion takeover of Cirque du Soleil is approved by regulators.

According to people familiar with the fine print of the planned acquisition, private equity giants TPG Capital and Fosun Capital Group have committed to some of the toughest job protections yet seen in Canada. If the deal is approved by regulators over the next few months, it’s a good bet future suitors will be hearing similar proposals at the Quebec deal table.

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Gentility in short supply as activist investors muscle into oil patch


Zach’s back.

The co-founder of Connecticut-based FrontFour Capital Group, Zachary George, has amassed a sizable stake in Canada’s Legacy Oil + Gas, and unless its board sees things his way, and fast, things could get unpleasant.

Mr. George, of course, is an activist investor who made a splash in Calgary in 2013 when he questioned the independence of directors at Renegade Petroleum and locked horns with its chairman, former investment banker Tom Budd – no shrinking violet himself.

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What Canada’s scorching IPO market needs most: caution


Call it the ultimate banker’s dilemma. The floodgates for initial public offerings have unexpectedly flown open – yet there’s every reason to be worried. If underwriters aren’t careful, this party will be broken up far too soon.

As energy prices crashed in the second half of last year, Canadian investors took part in a classic rotation, selling resource stocks with abandon and buying shares in nearly every other sector.

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Cara CEO says low debt load frees it up to make acquisitions


The CEO of Cara Operations Ltd. says the company’s recent IPO puts it in a position to make new acquisitions – Something Cara’s previously high debt load did not allow.

Pre-IPO, Cara had $278-million in debt with a debt/EBITDA ratio of 3.1 “which doesn’t allow you any room to go and do an acquisition.” said Bill Gregson in an interview. Cara had earmarked funds raised from the IPO to pay down debt. Earlier this month, Cara whipped up $230-million in a hugely successful public offering with demand for the shares outstripping supply by a factor of 20 to one. On its first day of trading the company’s stock rose 43 per cent.

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Hydro One bondholders greet IPO news with yawns


News of the Ontario government’s planned initial public offering of Hydro One has landed in the bond world with a big yawn. And when bondholders are yawning, that’s a reassuring sign that nothing crazy is about to happen.

Since the Kathleen Wynne government last week confirmed earlier Globe and Mail reports that it will float a 15 per stake in its electricity transmission and distribution utility, spreads on medium-term bonds over Government of Canada paper have widened by about one basis point, and on longer-term (30-year-plus) bonds by about two to three points. That’s a nothing-to-see-here reaction to a fairly significant event affecting one of the biggest and best-rated borrowers in Canada. Even after Standard & Poor’s Corp.’s ratings services trimmed Hydro One’s credit rating by a notch to A from A+ late Monday, the move had no discernible effect on prices, bond traders told the Globe and Mail.

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Canaccord Genuity brings managing director back home


Jamie Brown has made the journey from the den of a dragon back to Canaccord Genuity Corp.

Mr. Brown is rejoining Canaccord Genuity as vice chairman and managing director of investment banking. Before January 2015, he was managing partner and a key leader at Difference Capital Financial Inc., the merchant bank co-founded in 2012 by Michael Wekerle, a dragon on CBC’s business-oriented reality TV show, Dragon’s Den.

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Why bringing retail investors into Hydro One IPO is a smart move


It’s a common refrain from retail investors — that on a hot initial public offering, retail often gets the short end of the stick. They usually have to wait until a stock starts trading on the secondary market before they can get a piece of it. By that point, it may be too late to benefit from any initial pop in the share price.

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Goldman COO offers real talk on energy prices, markets


Canadian energy investors who continue to pile into new energy financings ought to consider hearing Gary Cohn out.

The former commodities trader, who is now Goldman Sachs’s chief operating officer, knows a thing or two about crude, and his expertise has convinced him that oil prices should stay suppressed for quite some time. The way he sees it, supply is now so robust that a quick rebound doesn’t make sense.

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Ex-clerk of privy council Wayne Wouters joins McCarthys


The federal government’s former top civil servant, Wayne Wouters, is joining McCarthy Tétrault LLP as a part-time strategic and policy adviser, the firm is to announce on Monday.

The long-time federal bureaucrat retired last summer after five years as clerk of the privy council of Canada, the head of the federal civil service who reported directly to Prime Minister Stephen Harper.

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Cirque du Soleil sold to U.S., Chinese investors for $1.5-billion


Guy Laliberté, the audacious street performer who transformed his fire-breathing act into a global circus empire, has agreed to sell control of Cirque du Soleil to two of the world’s largest financial investors for about $1.5-billion.

Sources close to negotiations said Mr. Laliberté has agreed to sell majority control of the Cirque to TPG Capital, a Texas-based private equity fund, and Fosun Capital Group, a privately owned fund manager based in Shanghai.

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Terminal fail turns Bloomberg user’s day inside out


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


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 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


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


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


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


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


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


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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