These are stories Report on Business is following Wednesday, Nov. 14, 2012.
CIBC warns on foreign investment
One of Canada’s major banks is taking a firm stand in the heated debate over state-owned firms buying Canadian resource companies, stressing Canada must welcome foreign investment but that such companies must play by our rules lest they face rejection
“As I have often made clear in my meetings with the CEOs of some of China’s largest state-owned enterprises: Free markets don’t mean a free pass,” Jim Prentice of Canadian Imperial Bank of Commerce said today, stressing that Canada must be open to foreign investment.
“And while Canada is most definitely open for business – it is not for sale.”
Mr. Prentice isn’t just the vice-chair of the bank. He’s also Canada’s former industry minister, and, thus, had a hand in drafting the current rules.
His comments at a conference in London comes amid controversy over two proposed takeovers, one a bid by Malaysia’s Petronas for Progress Energy Resources Corp., the other by China’s CNOOC Ltd. for Nexen Inc.
The Canadian government has rejected the Petronas deal, though the Malaysian company says it’s still trying to win approval, while the CNOOC proposal is under scrutiny, highlighting the sensitivity surrounding government-owned companies and Canada’s rich resources.
At the same time, there are urgent calls for Canadian energy companies to move aggressively into Asian markets as the United States, their only oil and gas market, boosts its own production.
“Coupled with continuing continental pipeline bottlenecks, this represents a significant structural impediment to the industry, the immediate consequence of which is a staggering discount on Canadian oil prices,” Mr. Prentice said.
“The situation will get worse before it gets better.”
Thus, turning China away would be “patently unwise,” particularly when there’s no threat to “Canadian values” or environmental and labour regulations.
Mr. Prentice quoted The Economist magazine in saying that “the defining battle of the 21 Century will not be between capitalism and socialism, but between different versions of capitalism,” noting that this battle is now playing out in Alberta’s oil sands.
It’s only logical that the Canadian government would look differently at state-owned companies and “free-market capital,” Mr. Prentice said,, adding that some of the criticism aimed at Ottawa is because CNOOC “meticulously respected” the guidelines.
“It is reasonable to expect that the Canadian government’s new framework will give careful consideration to how SOEs will be governed in a North American context: Whether they should have public shareholders, independent directors, audit committees and shareholder oppression remedies,” Mr. Prentice said.
Foreign investors have, of course, been waiting for some time for the government to spell out its rules.
Ottawa should not fret over the “ethnicity of money,” and shouldn’t try to force countries such as China to “be like us,” Mr. Prentice said.
“The question must instead be whether the capital in question, once lodged in Canada, will adhere to market principles and to North American standards of governance and transparency,” he said.
“If so, then it should be welcomed. If not, then the investments should be scrutinized closely and potentially refused.”
- CNOOC bid puts Nexen's reputation in play
- In China, growing frustration over Canada's 'outdated' oil sands
Strikes cripple Europe
Social unrest sparked by the euro crisis is mounting as strikes sweep Europe today.
Millions of people demonstrated against the punishing austerity measures that have hobbled some economies and driven unemployment to new heights.
In some cities, police again clashed with protesters, and services were crippled across the continent.
The strikes come as the situation becomes ever bleaker in Europe, with countries such as Greece and Spain deep in recession and ongoing questions surrounding the bailout of Athens.
“Though Greek politicians may have bought themselves more time with respect to meeting their budget goals the extra money to do that has divided their creditors more than ever, with no-one prepared to consider any form of restructuring or writedowns, with the IMF looking increasingly isolated,” said senior analyst Michael Hewson of CMC Markets in London.
He was referring to the fact that European finance ministers have given Athens two more years to meet fiscal targets, and that this was opposed by one of its lenders, the International Monetary Fund.
“In any case Greece could be given 10 more years and it wouldn’t make a jot of difference given that the Greek population has no appetite for any further austerity, along with the rest of peripheral Europe,” added Mr. Hewson.
“Today’s general strikes in Greece, Portugal and Spain are testament to that.”
Investor seeks to oust Rona board
A major investor is trying to kick out the board at Rona Inc., the Canadian home improvement retailer recently the target of a takeover advance by U.S. suitor Lowe's Cos. Inc.
Invesco Canada, an investment manager that says it controls some 10 per cent of Rona's shares, said in a statement today it wants a shareholder meeting.
"Invesco Canada Ltd., on behalf of the investment funds and client accounts managed by it, announces today its intent to requisition a meeting of shareholders of Rona inc. for the purpose of removing Rona's current directors and electing new directors in their place," the company said.
Most recently, Rona's chief executive officer left the company after a weak earnings report.
Earlier, Lowe's walked away after being rebuffed by the Canadian chain, and by the government in its home province, Quebec, in a bizarre suggestion that the company was a strategic asset that needed to be sheltered.
Grocers hike dividends
Food costs may be up by 1.6 per cent from a year ago, but, hey, shareholders in Canada’s major grocery chains are making some of that up through dividend increases.
Loblaw Cos. Ltd., the country’s biggest, announced an increase in its quarterly dividend to 22 cents. That’s only up a penny, but it’s a hike of 4.8 per cent.
Loblaw boosted the payout as it posted a drop in third-quarter profit to $222-million or 79 cents a share from $236-million or 84 cents a year earlier.
Revenue rose to $9.8-billion from $9.7-billion.
Last week, Metro Inc. hiked its dividend by 11.7 per cent to 21.5 cents. Today, it posted an increase in fourth-quarter profit to $145.1-million or $1.46 a share from $84.4-million or 83 cents.
Revenue increased to $2.9-billion from $2.6-million.
Teck boosts dividend
Teck Resources Ltd. is hiking its dividend by 12.5 per cent to 45 cents, giving back some of the $4-billion-plus in cash it has amassed amid years of prudent spending, The Globe and Mail's Pav Jordan reports.
The move reflects a growing trend among global miners to give more back to shareholders and keep them loyal as many investors shy from an industry better known in recent years for a single-minded focus on growth at any cost.
Iceland hiked its key lending rate by one-quarter of a percentage point to 6 per cent today, citing “uncertainty about exchange rate developments,” among other things.
Iceland will soon be relaxing controls on its krona, which could prompt the currency to drop in value.
All I’ll say is that they could have had Canada’s loonie, but rejected it.