The Canadian Pacific railyard is pictured in Port Coquitlam, B.C., in this file photo taken Feb. 15, 2015.BEN NELMS/Reuters
DEAL OF THE DAY
CP's $28.4-billion bid a 'substantial' premium for Norfolk investors
Canadian Pacific Railway Ltd. has released the letter it sent to Norfolk Southern Corp.'s (NSC) chief executive officer outlining the proposed $28.4-billion (U.S.) takeover of the Virginia-based railway.
In the letter dated Nov. 9, CP says the cash-and-stock offer of $46.72 a share and 0.348 in stock is a "substantial" premium to form a combined company that will be able to achieve more than $1.8-billion in cost savings "over the next several years."
"In addition to providing NSC shareholders with a significant cash payment, the proposed transaction will provide NSC shareholders with an opportunity for meaningful upside appreciation in the future as synergies are realized as NSC shareholders will own 41 per cent of the new company," reads the letter to Norfolk Southern CEO James Squires and signed by CP chief Hunter Harrison.
In a press release accompanying the release of the letter on Wednesday morning, CP said it was trying to counter the "misconceptions" that its offer is too low. Story
CP's main rivals criticized railway mergers long before $28-billion offer
If nothing else, Keith Creel is courageous. It takes some audacity to argue that North American railways are ripe for mergers when major rivals have scoffed at the idea.
On Tuesday, Canadian Pacific Railway's chief operating officer told a Toronto transportation conference that when it comes to consolidation, "it's not if, it's when." His competitors have been arguing the opposite for months.
Ever since CP tried, but failed, to merge with CSX Corp. in 2014, consolidation has been a hot topic in the industry; railway executives have been asked about it countless times at conferences over the past 13 months. Their answer is almost always the same: The regulatory burden is way too high. This very message was voiced as recently as last week, when word started to leak that CP was considering a $28-billion (U.S.) offer for Norfolk Southern Corp. Story
MERGERS AND ACQUISITIONS
ConAgra Foods to spin off frozen potato unit
ConAgra Foods Inc. plans to spin off its frozen potato products business into a separate public company that will carry the Lamb Weston name.
The remainder of the businesses will be subsequently called Conagra Brands Inc.
Omaha-based ConAgra has struggled of late, partly because of the shift among consumers away from packaged processed food to fresh and healthier alternatives. Story
ON Semi to buy Fairchild
ON Semiconductor Corp. is buying Fairchild Semiconductor International Inc. for $2.4-billion (U.S.), the latest big deal in the semiconductor industry this year According to Thomson Reuters data, mergers and acquisitions in the sector have been in excess of $80-billion in 2015. Story
Industrial Alliance buys Burgeonvest Bick
Industrial Alliance Securities Inc. is buying privately held Burgeonvest Bick Corp., which operates Ontario brokerage firm Burgeonvest Bick Securities Ltd., for an undisclosed sum.
The deal, which was announced Tuesday, means increased distribution for Quebec City-based Industrial Alliance.
Burgeonvest Bick, headquartered in Hamilton, has $840-million in assets under administration. Its roughly 30 advisers work with retail clients across Southern Ontario.
In an interview, Richard Legault, president of Industrial Alliance Securities, says the Burgeonvest acquisition will beef up its presence in the wealth management industry.
Industrial Alliance Securities was founded in 2002 and is a subsidiary of Ia Financial Group. This is the second acquisition for Industrial Alliance Securities in recent months. It recently bought privately held Fin-Xo Securities of Montreal for an undisclosed sum, adding 30 advisers in the process.
Mr. Legault said Burgeonvest's motivation for selling is partly because of the "difficult environment for smaller independent firms" and the increased costs brokerages are facing such as compliance.
"You need to have some scale to survive." Mr. Legault said. Once the deal with Burgeonvest closes, Industrial Alliance will have approximately 300 advisers under its banner and $7.5-billion under administration. Press release
BAY STREET MOVES
Raymond James hires again, adds senior investment banker
Intent on building out its Canadian investment banking team, Raymond James has added another seasoned professional to its ranks.
Glenn Gatcliffe has joined the Canadian dealer to cover the consumer, agriculture and manufacturing sectors. Mr. Gatcliffe was most recently at BMO Nesbitt Burns, where he advised many of the same companies. Story
EXCHANGES
Aequitas's latest dust-up with TMX
The head of Canadian stock exchange operator Aequitas Innovations Inc. has sounded a warning to TMX Group Ltd. to not copy its technology in launching a new mutual fund trading platform.
"They've been working on it [new mutual fund trading platform] for a while and what I saw is that the direction that they are taking now is different than the approach they seemed to be taking in the past," Jos Schmitt, chief executive officer of Aequitas, said in an interview.
"It starts to look and smell very close to our approach and what we are doing."
Aequitas plans to launch a mutual fund trading platform in the first quarter of next year that uses technology developed by fund company Invesco. TMX is planning on launching a competing product in the second quarter.
"They just have to be very cautious and careful about the fact that there are provisional patents in progress around this," Mr. Schmitt said.
"So they'll have to very careful that they don't re-utilize some of those patents."
A spokesperson with Invesco confirmed that patents have been filed, but not yet granted.
"We believe we have developed an implementable solution, in collaboration with the industry, that best meets the market's needs," TMX spokeswoman Carolyn Quick said when asked about Mr. Schmitt's concerns that TMX could end up copying Aequitas's technology.
Mr. Schmitt likes to stir the pot. He has made repeated strikes at the incumbent TMX Group since bursting back onto the scene earlier this year. (Mr. Schmitt previously ran Alpha Trading Systems, which was acquired by TMX.) Aequitas operates exchanges that compete against the TMX, and has amassed around 4.5-per-cent market share in trading, versus approximately 65 per cent for the TMX. In the past he has blamed TMX for a "liquidity crunch" in the stock market and says TMX charges "exorbitant" trading data and stock-listing fees.
For his part, TMX CEO Lou Eccleston has generally taken the high road – rarely engaging with Mr. Schmitt – except for the one time when Mr. Schmitt cheekily issued a number of "challenges" to Mr. Eccleston on Business News Network last summer.
"I don't know why I would accept a challenge from a competitor. ... I don't know where his role became challenging Lou Eccleston," Mr. Eccleston told The Globe and Mail at the time.
Mr. Schmitt's antics may arise partly out of frustration. A number of innovations that Aequitas introduced, including a "speed bump" to take away the minuscule advantage high-frequency traders sometimes have in the marketplace versus other traders, have been replicated by the TMX. (Mr. Schmitt has not made any claims about TMX infringing on its intellectual property in this area.)
Patent pickles aside, Mr. Schmitt claims that since Aequitas's mutual fund trading platform is coming to market sooner than TMX's version, he'll have the upper hand. So far, only Invesco has committed to using its platform. TMX has 18 interested parties that are considering using its platform.
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Niall McGee