These are stories Report on Business is following Thursday, Feb. 14, 2013.
Balsillie out of RIM
Once a driving force at Research In Motion Ltd., Jim Balsillie is now completely out of the BlackBerry maker.
In documents filed with the Securities and Exchange Commission, Mr. Balsillie, who ran the company with Mike Lazaridis as co-chief executives until a shake-up, reported he holds no shares as of the end of last year. He had held just over 5 per cent.
Mr. Lazaridis still controls almost 30 million RIM shares, or about 5.7 per cent, according to the latest document.
RIM, which is renaming itself BlackBerry, is in the midst of the launch of its latest BlackBerry 10 models.
RIM shares tumbled by more than 8 per cent yesterday, but rebounded today.
More than four years after the collapse of Lehman Bros. sent the world into a tailspin, the global economy is still struggling to fight its way back.
As fresh readings from Europe and Asia illustrate today, several countries continue to grapple with sinking economies and rising unemployment.
Even mighty Germany, the engine of Europe’s growth, has succumbed.
According to the European Union’s statistics agency, the economy of the 27-member EU contracted by 0.5 per cent in the fourth quarter of last year, while that of the smaller euro zone shrank by 0.6 per cent.
The euro zone economy has now contracted for five consecutive quarters.
For the year as a whole, gross domestic product contracted by 0.3 per cent in the EU and by 0.5 per cent among the 17 nations that share the euro.
Struggling with a debt crisis that has only recently eased, and with austerity high on the agendas of many governments, the picture is far worse in some countries, such as Greece and Spain, than others. But, Eurostat said, even among the core euro group nations, Germany’s economy contracted by 0.6 per cent in the fourth quarter as exports took a hit, while French GDP slipped by 0.3 per cent.
In some countries, unemployment is at intolerable levels. Greece today, for example, reported a jobless rate of 27 per cent.
“One must remember that these data are what you see when you look in the rearview mirror,” said senior economist Jennifer Lee of BMO Nesbitt Burns.
“We knew it wasn’t going to be pretty but this is unsettling,” she said in a research note.
“More recent data point to rebound for Germany and France in the current quarter, while Italy is in for another weak year. But today’s data will likely turn up the debate on the [euro], with France’s President Hollande already warning that France’s deficit targets will likely not be met this year.”
Senior economist Krishen Rangasamy of National Bank Financial agreed Germany is likely picking up in the current quarter, based on recent measures of individual indicators. But the troubles for the group as a whole are far from over.
"The euro is undervalued for Germany, as evidenced by its current account surpluses, and that should help support Europe's largest economy," Mr. Rangasamy said.
"But the rest of the zone is set to remain in recession for the next little while, as austerity and credit contraction continue to hinder growth. For the euro zone as a whole, we expect GDP growth of zero this year (i.e. flat, as German expansion offsets declines elsewhere)."
Today’s data also show Italy’s economy contracting by 0.9 per cent, in the run-up to an election that's being fought on the economy.
“Today’s release will likely shake up the Italian election campaign, possibly setting the tone as we head towards polling day on 24 February,” said Paolo Pizzoli of ING Bank.
The picture is also ugly in Japan, though less so, with today’s readings showing a contraction of 0.1 per cent in the fourth quarter, marking a third consecutive quarter of shrinking output. This came as the Bank of Japan today held back from any new measures.
- Kevin Carmichael's Economy Lab: Whatever you call it, the economies of Europe and Japan are depressing
- Euro zone economy plunges deeper into recession
- Japan economy contracts for third straight quarter
- Scott Barlow in ROB Insight (for subscribers): Europe's GDP thrashing threatens global economy
- Kevin Carmichael's Economy Lab: G7 currency squabble a strong case for dismantling the whole group
Buffett in deal for Heinz
Warren Buffett's Berkshire Hathaway is teaming up with 3G Capital to acquire food giant H.J. Heinz Co. in what the companies call the biggest ever deal in the industry.
Berkshire and the investment firm are paying $72.50 (U.S.) a share in cash. Including debt, the deal for the manufacturer of everything from soup to ketchup is worth $28-billion.
Excluding debt, it's valued at $23-billion.
"With Heinz stock recently at an all-time high and 30 consecutive quarters of organic top-line growth, Heinz is being acquired from a position of strength," said Heinz chief executive officer William Johnson.
"As a private enterprise, Heinz will have an opportunity to drive further growth and advance our commitment to providing consumers across the globe with great tasting, nutritious and wholesome products."
- Buffett's Berkshire, 3G Capital to buy Heinz for $23-billion
- Boyd Erman's Streetwise (for subscribers): Heinz creditors not loving Buffett's buyout
Barrick takes huge hit
Africa has not been kind to Canada’s big mining companies.
Barrick Gold Corp. today posted a loss of $3.06-billion (U.S.), or $3.06 a share, with a hit of $3.8-billion on its copper business amid higher costs at a Zambian copper mine.
As The Globe and Mail’s Pav Jordan reports, that came just hours after Kinross Gold Corp. late yesterday announced an impairment charge of $3.2-billion on a project in Mauritania, also amid surging costs.
“Rising costs, poor capital allocation and the pursuit of production growth at any cost in the industry have led to declining equity valuations across the sector,” said Barrick chief executive officer Jamie Sokalsky.
“The message is clear: the industry must chart a new path forward. Barrick highlighted the need for change last year, and we are increasingly taking strong action and re-focusing our business based on the principle that returns will drive production, production will not drive returns.”
- Barrick posts huge loss on $4-billion copper charge
- Kinross takes $3.2-billion hit on African mines
- Tim Kiladze's Streetwise (for subscribers): Canadian mining writeoffs top $12-billion
- Sean Silcoff in ROB Insight (for subscribers): Hidden costs take the gleam off gold miners' stocks
- Gold demand falls in 2012 for first time in three years
AMR, US Air in deal
The parent company of American Airlines today unveiled its long-awaited merger deal with US Airways Group to create the world's biggest carrier that would be valued at some $11-billion (U.S.).
US Airways shareholders will get one share of the new company for each current share.
The two companies said today that, together, they will run more than 6,700 flights a day to 56 countries.
Still, creditors and unions of AMR, which sank into bankruptcy protection more than a year ago, will hold the most stock.
- American Airlines, US Airways unveil $11-billion merger
- AMR, US Airways deal may mean orders for Bombardier - but not right away: analyst
Oil patch pulls back
The latest quarterly results from some key oil patch companies show how pricing pressures are translating into cutbacks or flat growth in their expansion plans this year, The Globe and Mail's Bertrand Marotte reports.
Precision Drilling Corp., for example, is planning $526-million in capital expenditures this year, half the $1.1-billion it budgeted for in 2012.
Encana Corp., Canada’s largest natural-gas company, says its capital investment for 2013 is estimated to be between $3-billion and $3.2-billion, up slightly from last year’s $2.9-billion.
And Cenovus Energy Inc. booked a $393-million goodwill impairment in the fourth quarter related to the decline in estimated future cash flows for its Suffield assets, largely due to a drop in forecast natural gas prices over the long term. Cenovus is planning for between $3.2- and $3.6-billion in capital spending this year, about the same as in 2012.
Streetwise (for subscribers)
- Heinz creditors not loving Buffett's buyout
- Canadian mining writeoffs top $12-billion
- Toronto private equity firm hires Providence veteran
- Tourmaline defies all odds for natural gas sector
- Beacon Securities adds trader, banker
- Whatever you call it, the economies of Europe and Japan are depressing
- G7 currency squabble a strong case for dismantling the whole group
ROB Insight (for subscribers)
- Europe's GDP thrashing threatens global economy
- The wheels have come off France's auto industry
- Too much noise in CRTC's signals to telecoms
- This time is not different for crude oil prices