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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:

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.

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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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Judges rip into squabbling Nortel lawyers

JANET McFARLAND

Some of the world’s top bankruptcy lawyers must be smarting after reading parallel rulings issued by judges in Canada and the United States setting out how Nortel Networks Corp.’s remaining assets will be distributed among its subsidiaries.

Lawyers and other professionals working on Nortel’s liquidation have put in thousands of hours and have billed well over $1-billion (U.S.) in fees since Nortel filed for court protection from its creditors in 2009.

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Velvet Energy kicking tires on IPO of up to $1-billion

JEFFREY JONES

Velvet Energy Ltd., a private exploration company operating in Alberta’s Deep Basin, is considering an initial public offering that could be worth up to $1-billion, despite the downturn in the oil patch.

The early reaction to a potential IPO among investors has been positive, chief executive Ken Woolner said. The effort is in its beginning stages, but it could signal an end to a drought in such financings brought on by the collapse in oil prices and slide in oil and gas stocks.

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Bond markets take Bay Street for a wild ride

TIM KILADZE

And traders thought October, 2014, was ugly.

Last fall, fixed-income specialists watched in horror as the market gyrated wildly, sending bond yields plummeting. Benchmark issues fell 20 basis points in a matter of days, only to rebound by roughly the same amount. It all transpired in a couple of weeks, and for a market that would typically fret over a 10-basis point move, this was far too much to take. (A basis point is 1/100th of a percentage point.)

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TMX Group hit hard by dip in financings

NIALL McGEE

Despite headline-grabbing initial public offerings and a few supersized equity raisings, TMX Group Ltd.’s first-quarter earnings were dragged down by a sharp year-over-year decline in financings.

Financing transactions on the TSX Venture exchange fell 22 per cent by volume and 38 per cent by value to $679-million compared with $1.1-billion in the first quarter of 2014. The shortfall was part of the reason shares in TMX Group got crushed today, losing more than 5 per cent – the biggest drop since Oct. 11, 2013.

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Asian investors feeling buyer's remorse over Canadian oil acquisitions

JEFFREY JONES

Asia’s shopping spree in Canadian energy generated some buyer’s remorse in recent years as newly acquired operations suffered hiccups and lost money.

It’s now snowballed into buyer’s rage.

That is the case in South Korea.

Several media outlets reported that 30 prosecutors raided the headquarters of state-owned Korea National Oil Corp., its ex-president’s house, as well as the Seoul office of Bank of America Merrill Lynch on Tuesday.

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More BMO departures as two U.S. executives join same bank

DAVID BERMAN

Two U.S.-based former employees with Bank of Montreal’s capital markets arm have joined KeyBanc Capital Markets, the corporate and investment banking arm of KeyCorp.

Mike Jones has joined KeyBanc’s mergers and acquisitions group as a managing director, leading the bank’s consumer and retail M&A efforts out of Charlotte, N.C. Previously, Mr. Jones was a managing director at BMO Capital Markets in Chicago, where he worked in the bank’s consumer, food and retail practice.

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Halogen Software: a cautionary tale for Canadian tech IPOs

SEAN SILCOFF

With investor interest in Canadian tech initial public offerings starting to warm up – including around the impending flotation of 10 per cent of Shopify Inc. stock – this week marks the second anniversary of another tech IPO many would probably rather forget: Halogen Software Inc.

The cloud-based software company specializing in talent management, which has had a rough ride since its IPO, announced Tuesday it was beefing up its board by adding two International Business Machines Corp. veterans. Deborah Besemer is a past executive vice-president of worldwide field operations at Big Blue, and Les Rechan is the former general manager of a business analytics division within IBM’s software group and previously chief operating officer of IBM-purchased Cognos.

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Relax. Alberta’s NDP isn’t the energy deal killer – the market is

TIM KILADZE

My dear friends in the wild rose province: Deep breaths.

Instead of offering Alberta’s premier-designate time to absorb her party’s shocking majority win, some provincial big wigs – including energy executives, who should know better – have pounced on Rachel Notley, suggesting her victory will spell the end of Canadian energy. The morning after the New Democrats won the election, there were already suggestions the incoming leader must reassure the public that she won’t nationalize the oil and gas industry.

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Long-serving TD economist Alexander moves to think tank

DAVID BERMAN

Craig Alexander is moving to C.D. Howe Institute as vice president of economic analysis, leaving behind Toronto-Dominion Bank where he served as chief economist for the past five years. The bank announced Monday that deputy chief economist Beata Caranci will succeed him.

Nearing the age of 48 and with more than 14 years at TD – much of it spent on the road – Mr. Alexander said the time was right to try something new.

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Equity analysts tout Bellatrix, rating agencies – not so much

TIM KILADZE

Look no farther than commentary about Bellatrix Exploration Ltd. for proof that no one knows what to think about Canadian energy names.

Seventeen equity analysts cover the natural gas producer, and not a single one has a “sell” rating on the company. When Bellatrix reported quarterly earnings on Tuesday, their comments largely suggested the company looks rather decent.

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Canada’s two largest funds take big stake in U.K. telecom

JACQUELINE NELSON

Canada’s two largest pension funds have just taken a significant stake in a business set to be the U.K.’s largest mobile phone operator, but both say the investment doesn’t preclude more deals in the region.

Canada Pension Plan Investment Board and the Caisse de dépôt et placement du Québec joined other institutional investors to take a 33-per-cent stake in the company being created from a merger of two mobile providers – an investment deal worth $5.8-billion. The investment stems from the March deal by Hong Kong billionaire Li Ka-shing’s company, Hutchison Whampoa, to acquire Telefónica S.A.’s subsidiary O2 U.K. and combine the business with its existing telecom operator Three UK. CPPIB said its investment amounts to about $2-billion, while the Caisse’s stake is undisclosed.

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