Daily Deal Roundup: Wekerle to cash out Difference debt

Share

DEAL OF THE DAY: Wekerle to liquidate remaining stake in Difference debt

Michael Wekerle is set to liquidate his remaining $5-million debt stake in Difference Capital Financial Inc.

A year ago, the star of CBC's Dragons' Den had holdings worth $10.75-million in the merchant bank he co-founded in 2012. Mr. Wekerle is tendering to the firm's own buyback offer that will see him receive 88 cents on the dollar – or about a 12-per-cent haircut. Story

Concordia more exposed than Valeant to shaky U.S. market

Concordia Healthcare Corp.'s shareholders endured another punishing day of losses.

Are you ready for some sobering stats? After losing 25 per cent on Monday, the Canadian pharma company lost another 15.5 per cent Tuesday on the Nasdaq. Since announcing it had priced its $520-million (U.S.) public offering at $65 a share on Thursday night, investors who bought in – and bear in mind we are talking about the so-called "smart money" here, U.S. institutional investors – have lost almost half their investment. The offering hasn't closed yet, so those institutions haven't even taken possession of their shares yet. That's a hard pill for investors to swallow – pardon the awful pun.

The majority of the continued selloff in Concordia seems to be due to the fear that its days of ramping up pricing on its U.S. drug portfolio may be over. Or worse than that, worries that the company could be forced to roll-back price increases as the chief executive officer of Turing Pharmaceuticals has pledged to do.

That infamous U.S. pharma company was the subject of a scathing New York Times piece that pointed out it had jacked up the price on one of its medications from $13 to $750 a tablet. CEO Martin Shkreli, an ex-hedge fund manager, made matters worse for himself – and arguably his industry peers – by later going on CNBC and defending the company's price hikes in what was an awful television performance. Since the airing of that CNBC segment and the continued public outrage and political hand-wringing in the wake of the Times piece, Mr. Shkreli has indicated he will cut pricing on the offending drug.

Shares in serial Canadian pharma company acquirer Valeant Pharmaceuticals International Inc. have also taken a shellacking since that episode blew up, and suffered a further drop on Monday after Democratic politicians asked for a subpoena to force the company to give up documents that would detail price increases on some of its U.S. drugs. On Tuesday, Valeant had another bad day, trading down 4 per cent. Concordia though got hit even harder. So what's going on with Concordia?

The short answer is that Concordia is extremely exposed to the U.S. market – more exposed than even Valeant is, on a percentage of its current business.

"Concordia's business before [the Amdipharm Mercury Ltd. acquisition] was 100 per cent U.S. and 100 per cent driven by price increases, as opposed to Valeant where 30 per cent of the business is outside the U.S.," said Neil Maruoka, analyst with Canaccord Genuity Corp. in an interview.

That business model worked nicely until recently for Concordia. As long as price increases on drugs outstripped volume declines, Concordia was able to grow its sales.

But suddenly the new concern is, as Mr. Maruoka calls it, "reimbursement risk."

"How much longer is the government and probably more importantly the insurance companies willing to put up with these price increases?" Mr. Maruoka asked.

Closing the Britain-based Amdipharm Mercury acquisition, can't come too soon for Concordia, as it will crucially diversify its business.

MERGERS AND ACQUISITIONS

AltaCorp joins with China's Nanjing amid energy downturn

AltaCorp Capital Inc. has formed a partnership with a Chinese investment bank as the Calgary-based brokerage expands its focus amid a sharp downturn in the Canadian energy business.

AltaCorp, chaired by financier George Gosbee, and Nanjing Securities Co. Ltd. will explore co-operation in investment banking, equity and debt financing, sales and trading and research.

The partnership will allow each firm access to the other's main markets, they said. Nanjing Securities chairman Guoxun Bu said AltaCorp is its first partner outside China. Story

Japan Tobacco to buy overseas assets of Reynolds' Natural American Spirit

Japan Tobacco Inc. said Tuesday that it would buy non-U.S. rights to the Natural American Spirit cigarette brand from Reynolds American Inc. for about $5-billion. Story

Business Insider sold to Axel Springer

Eighty-eight per cent of Business Insider (BI) has been sold to German media company Axel Springer SE for $343-million. BI was founded by former dot-com era analyst Henry Blodget. It is a valuable brand in business journalism, but it's decidedly not where your grandfather would have read his business news.

Want to know the secret to BI's success? Take a listen to this exchange on Bloomberg Television from Tuesday between contributor Tom Keene and straight-man Michael McKee.

My favourite bit:

Keene: "What did Henry Blodget do with that morning dump in Business Insider?"

McKee: "He took the idea that had been percolating around the web of aggregating the news, find the stories on various platforms, rewrite them, put a catchy headline on them and have them all on one place."

Although BI does some reporting of its own, the site is mainly a hodgepodge of click-bait headlines and brief, graphic-laden posts that often feature jokey/mocking pictures of subjects/victims.

Here's a not-entirely-flattering picture of U.S. presidential candidate Donald Trump, sporting a distinctive orange hue from Tuesday featured on a BI post.

Here's another one of activist investor/agitator Carl Icahn appearing extremely concerned about something or other. Story

Nassau Reinsurance to take Phoenix Cos. private

Nassau Reinsurance Group Holdings L.P. agreed to acquire Phoenix Cos. in a deal valued at $217.2-million that will take the Hartford, Conn.-based life insurer private.

Phoenix shareholders would receive $37.50 a share in cash, nearly triple the stock's Monday closing price of $13.03. The stock was halted premarket. Through Monday's close, Phoenix's shares have tumbled 81 per cent this year. Story

BAY STREET MOVES

Allen & Overy shuts Toronto office

In a time when massive foreign law firms – Norton Rose Fulbright, Dentons, DLA Piper – have been making big moves into Canada, word that Allen & Overy, a charter member of London's elite, so-called "Magic Circle," had opened a representative office in Toronto last year staffed by two lawyers barely made a ripple.

But now, a year later, A&O's not-so-bold Canada gambit is over. Toronto-based Partner François Duquette is moving in-house to the Caisse de dépôt et placement du Québec and back home to Montreal. He starts in a month, with the title senior director of investments. Story

Canada's Hootsuite taps Open Text executive Kini as CFO

Hootsuite has tapped Open Text Corp's principal accounting officer Sujeet Kini as its chief financial officer, according to a source familiar with the matter, potentially moving the Canadian tech startup a step closer toward listing. Story

INSIGHT

Bay Street's next big struggle: keeping top young talent

My colleague Tim Kiladze published a thought-provoking column arguing that Bay Street firms are in danger of losing the next generation of talent to Silicon Valley and fintech in particular. The draw of the startup is two-fold: The possibility of striking it rich, but also the culture of creativity, innovation and let's call a spade a spade – "fun" – that a career in finance no longer, if it ever did to begin with, offers.

Tomorrow I am moderating a panel in Toronto, called The Future of FinTech and Banking Innovation, featuring a number of fintech entrepreneurs in Toronto. As it happens, one of the startups, RentMoola,was founded by an ex-investment banker, Patrick Postrehovsky.

As Tim says in his column as a kind of warning to Bay Street firms, "There are some brilliant young minds hidden within your organizations. If you don't tap them, some startup will." Story

Got any Bay Street buzz? If you have any story suggestions for the Daily Deal Roundup, e-mail us at deals@globeandmail.com or nmcgee@globeandmail.com