Canadian Pacific Railway Ltd. says it has made an offer to buy Virginia-based Norfolk Southern Corp.Luke Sharrett/Bloomberg
DEAL OF THE DAY:
CP makes takeover offer for Norfolk Southern
Canadian Pacific Railway Ltd. says it has made an offer to buy Virginia-based Norfolk Southern Corp. for an undisclosed amount of cash and stock in a bid to form the largest railway in North America.
A successful deal would fulfill CP chief executive officer Hunter Harrison's dream of forming a railway with 53,000 kilometres of track and access to three coasts, including the coveted ports in New York City, New Jersey, Vancouver and the Gulf of Mexico.
But first it must win approval of Norfolk Southern's board and shareholders, in addition to regulators in Canada and the United States.
In an apparent attempt to fend off objections from shippers and regulators, CP said the combined company would offer greater access to rivals' networks and expand interchange points in a bid to reduce traffic bottlenecks.
"CP strongly believes that the combined railroad would offer unparalleled customer service and competitive rates that will support the success of the shippers and industries it serves, and satisfy the U.S. Surface Transportation Board and Canadian regulators," CP said. Story
BAY STREET MOVES
Manulife boosts tech focus with new CIO role
Manulife Financial Corp. is adding a chief innovation officer to its executive team, as the insurer looks to keep up with changes in technology and more demanding consumers.
Tim Ramza has been promoted to CIO to monitor disruptive trends in the industry and look for ways to set Manulife apart. Story
Former TMX staffer resurfaces at Nasdaq
A former high-ranking TMX Group Ltd. staffer has resurfaced in a senior role at Nasdaq Inc. at a time when the massive U.S. stock exchange company is rumoured to be on the verge of making a major acquisition in Canada.
A Nasdaq spokesperson confirmed that Brenda Hoffman joined the company last month as head of global technology, U.S. markets systems and global information services. Ms. Hoffman, former group head of information technology with the TMX, left after a management shakeup during the summer.
Ms. Hoffman is the second high-profile ex-TMXer to land at Nasdaq this year. Former TMX chief executive officer Tom Kloet joined Nasdaq's board of directors in March. The beefing-up of the Canadian contingent gives Nasdaq deep expertise in the Canadian market at a curious juncture. Last week, Bloomberg reported that Nasdaq was in talks to buy Chi-X Canada, an alternative trading system that competes fiercely against the TMX. Story
INSIGHT
TMX waived listing fee for Hydro One IPO
Canada's dominant stock exchange let Ontario's government catch a small break by waiving the listing fee for its massive Hydro One initial public offering.
To grant such a rare exemption, TMX Group Ltd. needed the Ontario Securities Commission's approval. Story
Analyst predicts end of 'financial arbitrage' for Concordia Healthcare
Concordia Healthcare Corp. has essentially been forced to turn its entire business model on its head, according to a Bay Street analyst.
Up until September, the Oakville, Ont.-based pharmaceuticals company built its business by making a series of acquisitions that bumped up profit and revenue – in much the same way Valeant Pharmaceuticals International Inc. did. That formerly successful strategy is now in serious doubt.
"The re-valuing of the sector, coupled with Concordia's substantial debt load, probably means the end of its financial arbitrage as a means to continue its non-organic [growth] for the foreseeable future" Doug Cooper, an analyst with Beacon Securities, wrote in a recent note to clients.
Concordia's heavy debt burden stems from its recently completed $2.1-billion (U.S.) acquisition of Amdipharm Mercury Co. Ltd. (AMCo). Concordia was forced to fund a higher portion of the acquisition than planned with debt as opposed to equity. Only $520-million came from an equity increase. The firm had the rotten luck of conducting an equity financing smack in the middle of a stock market storm in the pharma sector. In an interview with The Globe and Mail last month, Mark Thompson, chief executive officer of Concordia, confirmed that the firm didn't raise as much equity as it had hoped and was forced to make up the shortfall with debt.
"This [heavy debt load] has forced the company to change its strategy from a 'growth-through-acquisition' story to purely an internal growth story, driven by the new product launches at AMCo. ... With no imminent acquisition catalysts, we believe the shares will be range bound."
Mr. Thompson told The Globe that the only acquisitions the firm will consider for the foreseeable future will be small, so called "tuck-in" acquisitions.
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Niall McGee