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A survey of North American equities heading in both directions

On the rise

Manulife Financial Corp. (MFC-T) was higher by 3.2 per cent on Monday after announcing it will reinsure $13-billion of its reserves with Global Atlantic, a move that will free up $1.2-billion in capital to buy back shares.

The reinsurance deal, which according to Manulife is a full risk transfer, reduces Manulife’s long-term care (LTC) reserves by $6-billion, or 14 per cent of its total reserves.

CEO Roy Gori said the deal was the “largest LTC reinsurance transaction ever in the insurance industry,” and would help the company reduce risk and invest in high-potential growth areas.

LTC insurance includes coverage for people with a chronic or disabling condition who need constant care, typically those above the age of 65.

Apart from LTC, the reserves range across multiple product lines including payout annuities and whole life policies helping Manulife dispose another $1.7-billion of alternative long-duration assets (ALDA), the company said.

The transfer, which is expected to close in the first half of 2024, is expected to improve the profitability and risk profile of the inforce business.

Last month, Manulife reported better-than-expected earnings in the third quarter, boosted by insurance sales in Asia and higher returns on investment amid rising interest rates.

Global Atlantic, an existing reinsurance partner of Manulife, serves policyholders through its retirement and life insurance products. It was set up by Goldman Sachs in 2004 and separated as an independent, privately held company in 2013.

A contract between a reinsurer and an insurer typically reduces the risk for the latter, allowing them to remain solvent by recovering a part of the payout.

Waste management firm Secure Energy Services Inc. (SES-T) soared 10.2 per cent after it said on Monday it will divest some assets in Western Canada for a total of $1.15-billion to fulfill Competition Tribunal’s conditions for its merger with Tervita.

The latest deal with Waste Connections Inc. (WCN-T) is expected to close in the first quarter of 2024 after regulatory approval. It has agreed to pay Secure $1.075-billion in cash and about $75-million in certain adjustments.

Secure Energy said it was ordered by the Canadian Competition Tribunal to divest facilities owned by waste management services firm Tervita following their merger in 2021.

Following the completion of the deal, Waste Connections will acquire Secure Energy’s portfolio of 30 energy waste treatment, recovery, and disposal facilities in Western Canada, with a combined annual revenue of around $300-million.

Adjusting for the impact of the sale, Secure lowered its 2024 capital spend forecast and said it now expects to spend $60-million on sustaining capital and $15-million on settling the firm’s retirement obligations, down from a previous forecast of $85-million and $20-million, respectively.

U.S. retail Macy’s Inc. (M-N) increased by over 20 per cent on news an investor group consisting of Arkhouse Management and Brigade Capital has made a US$5.8-billion offer to take department store chain Macy’s private.

Arkhouse Management, a real-estate focused investing firm, and Brigade Capital Management, a global asset manager, submitted a proposal to acquire the Macy’s stock they don’t already own for US$21 a share on Dec. 1.

The offer for the Bloomingdale’s parent is a 20.76-per-cent premium from its closing at US$17.39 on Friday.

Fellow department store operators Kohl’s (KSS-N) and Nordstrom (JWN-N) also rose on MOndayt.

The investor group already has a big stake in Macy’s through Arkhouse-managed funds and has discussed the proposal with the department store chain, whose board subsequently met to discuss the offer. It is not clear how the retailer views the proposal, the person familiar with the matter said.

“The buyout group is undoubtedly interested in Macy’s large real estate portfolio, which has attracted activists and potential buyers in the past,” Morningstar analyst David Swartz said in a note.

J.P. Morgan analysts estimate Macy’s total real estate value at about US$8.5-billion, or US$31 per share, including the iconic Herald Square property worth about US$3-billion.

Arkhouse and Brigade believe Macy’s is undervalued in the public markets and have indicated a willingness to raise the offer subject to due diligence, the WSJ report said, adding that an investment bank has provided a letter supporting the group’s ability to raise the necessary financing to get through the deal.

U.S. health insurer Cigna (CI-N) jumped 16.6 per cent in the wake of ending its attempt to negotiate an acquisition of rival Humana (HUM-N) after the pair failed to agree on price, as the company announced plans to buy back US$10-billion worth of shares.

A Cigna-Humana combination would have created a company with a value exceeding US$140-billion, based on their market values, but was certain to attract fierce antitrust scrutiny. The discussions came six years after regulators blocked mega-deals that would have consolidated the U.S. health insurance sector.

The deal talks ended due to the parties not being able to agree on price, two sources familiar with the situation said. There remains the possibility of a tie-up in the future, those sources said.

Cigna, however, on Sunday announced plans to do an additional US$10-billion in share repurchases, bringing total repurchases to US$11.3-billion.

“We believe Cigna’s shares are significantly undervalued and repurchases represent a value-enhancing deployment of capital as we work to support high-quality care, improved affordability, and better health outcomes,” Cigna Chairman and Chief Executive Officer David Cordani said in a statement.

Cordani said the company would consider bolt-on acquisitions aligned with its strategy as well as “value-enhancing divestitures.”

Cigna is still exploring the sale of its Medicare Advantage business, which manages government health insurance for people aged 65 and older, the sources said. That move would mark a reversal of its expansion in the sector.

Occidental Petroleum (OXY-N) gained 1 per cent after it said on Monday it would buy energy producer CrownRock in a cash-and-stock deal valued at US$12-billion including debt, expanding in the lucrative Permian basin.

Investors are pressing oil and gas producers to expand their inventories following Exxon Mobil’s (XOM-N) US$60-billion deal for Pioneer Natural Resources and Chevron’s (CVX-N) US$53-billion agreement for Hess in October.

Houston-based Occidental will finance the purchase of privately-held oil and gas producer CrownRock with US$9.1-billion of new debt, the issuance of about US$1.7-billion of common equity and the assumption of CrownRock’s US$1.2-billion of existing debt.

The CrownRock deal would be Occidental’s first major acquisition since its widely criticized and debt-laden purchase of rival Anadarko Petroleum in 2019.

Occidental had about US$18.60-billion in debt as of Sept. 30, according to a company filing.

The deal, expected to close in the first quarter of 2024, will immediately add to Occidental’s free cash flow and give the company more than 94,000 net acres in the Midland basin of Texas - part of the Permian, the largest U.S. oil-producing area.

Reuters first reported in September that CrownRock was preparing to explore a sale that could value it at well over US$10-billion including debt.

On the decline

BlackBerry Ltd. (BB-T) was lower by 0.7 per cent in volatile trading after it promoted cybersecurity president John Giamatteo to replace recently departed chief executive John Chen and killed plans to spin off its connected car software business into a separate public company.

The assignment, announced Monday, is likely to be transitional in nature for Mr. Giamatteo, who joined Waterloo, Ont.-based BlackBerry in October 2021. The company now plans to restructure its two business units into standalone entities in a way that suggests it is preparing to sell one outright. Mr. Giamatteo will keep his job running the cybersecurity business in addition to his CEO duties.

Under the new plan, the board has ditched plans for an initial public offering next spring that would have seen it float 20 per cent to 30 per cent of its other, internet-of-things (IOT) unit, which sells connected car software. The earlier plan came out of a board-approved strategic review announced two months ago, weeks before Mr. Chen departed BlackBerry after 10 years as CEO. But a recent spate of underwhelming technology IPOs suggests investor enthusiasm for new issues could remain muted well into 2024.

The 2,800-person company’s centralized corporate functions will be separated and streamlined into teams specific to each unit “with a view to each division operating independently and on a profitable and cashflow-positive basis going forward,” BlackBerry said in a press release Monday.

The board believes separating the two “will open up a number of strategic alternatives that can unlock shareholder value,” chairman Richard Lynch, who served as interim CEO after Mr. Chen’s departure last month, said in the release. The company said it will hire a consulting firm to help with the separation and “right sizing process” and move quickly to reorganize.

- Sean Silcoff

Shares of Montreal-based Gildan Activewear Inc. (GIL-T) were lower by 10.9 per cent after it made a sudden change in its senior leadership ranks, replacing long-time chief executive and co-founder Glenn Chamandy after 20 years at the helm.

Mr. Chamandy, who has led the maker of T-shirts and socks since 2004, has left his positions as CEO and board member, Montreal-based Gildan said in a statement Monday morning. He will be replaced in February by former Fruit of the Loom executive Vince Tyra while current Gildan director Craig Leavitt acts as interim CEO, the company said.

In a separate statement, Mr. Chamandy said, “it is unfortunate that my vision of the path forward has differed from that of other board members.”

“Over the span of his 40 year career, Glenn has been a forerunner in our industry, taking Gildan from a small family-owned business to a leading apparel company with over US$3 billion in revenues” said Gildan Chairman Donald Berg. “We thank Glenn for his service and wish him well.”

Gildan’s share price has climbed 30 per cent over the past year. Its current market capitalization is $8.5-billion.

The company vowed in the statement to push on with its existing strategy, building on its strength in large-scale, low-cost, vertically-integrated manufacturing.

- Nicolas Van Praet

Barrick Gold (ABX-T) was down 1 per cent in the wake of saying on Monday the U.S. Bureau of Land Management has approved plan of operations for its Goldrush underground mine at the Cortez Complex near Beowawe, Nevada.

Goldrush is a part of the Nevada Gold Mines — a joint venture between Barrick and Newmont (NGT-T) — and is operated by the Toronto-based miner.

Barrick and Nevada Gold Mines have invested more than $370-million in the project to date and the company anticipates spending a total of about $1-billion to get to planned production.

The mine is expected to start ramping up production in 2024 after the initial project infrastructure. It is forecast to produce 130,000 ounces of gold in 2024 and increase to about 400,000 ounces per annum by 2028.

Barrick in its third-quarter earnings in November had said its Fourmile project together with adjacent Goldrush “would be the largest gold mining operation in the Americas.”

The company also said on Sunday its Porgera mine in Papua New Guinea was set to resume operations later this month, and expected to start pouring gold again in the first quarter of 2024.

Analysts at National Bank Of Canada Financial Markets (NBF) Research expect the Porgera mine to contribute about 2.6 per cent of NBF’s 2024 gold production estimates.

The mine was placed on care and maintenance in April 2020 following a dispute over benefit-sharing terms between the government, local people and Barrick, as part of renewing the mining lease.

With files from staff and wires

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/02/24 4:00pm EST.

SymbolName% changeLast
Barrick Gold Corp
Blackberry Ltd
The Cigna Group
Gildan Activewear Inc
Humana Inc
Kohl's Corp
Macy's Inc
Manulife Fin
Occidental Petroleum Corp
Secure Energy Services Inc
Waste Connections Inc

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