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A look at North American equities heading in both directions

On the rise

Shares of Suncor Energy Inc. (SU-T) were higher by over 2 per cent after Canada Infrastructure Bank (CIB) said it will invest $277-million in its joint venture with shell to construct a carbon recycling facility in Quebec.

The facility will generate hydrogen and oxygen by using electrolysis to convert non-recyclable waste and residual biomass into biofuels with a capacity of up to 130 million litres annually.

Proman and the government of Quebec are also partners in the joint venture running the facility in Varennes. The project is expected to cost $1.2-billion.

Construction at the $1.2-billion has already begun and commercial output is expected to begin in 2025.

Toronto-based Li-Cycle Holdings Corp. (LICY-N) rose 0.4 per cent after it said on Monday it will build a French facility to break down batteries from forklift manufacturer The Kion Group, marking the latest expansion by the rapidly growing recycling company.

The French facility, which is expected to open in 2024 and complement similar sites under development in Germany and Norway, will break down lithium-ion batteries that power Kion’s forklifts and other heavy machinery, giving Li-Cycle a fresh source of batteries to recycle beyond the consumer automobile market.

Li-Cycle declined to disclose how much it is spending on the French operation, though the company has a US$40-million budget for the year to build such battery processing facilities across the globe.

“We believe strongly in a regional approach to recycling as our customers begin to localize their own supply chains,” Tim Johnston, Li-Cycle’s executive chairman, told Reuters. “Europe continues to be a growth center for electrification, so we are going to continue to grow there.”

Li-Cycle estimates that a majority of Kion’s 1.7 million forklifts are powered by lithium-ion batteries. Given their heavy use, those batteries are likely to wear down faster than those powering consumer automobiles.

Li-Cycle’s European plan is based in part on its North American hub-and-spoke network, in which the company has built collection and processing facilities across the continent to turn batteries into black mass, which is essentially shredded battery parts.

A central facility under construction in Rochester, New York, will further break down that black mass into lithium, nickel and other metals. Li-Cycle plans for now to produce black mass at its French and other European sites, and then ship that material to Rochester for processing, Johnston said.

Cameco Corp. (CCO-T) gained 1.7 per cent after saying it expects to receive a refund of about $300-million after the Canada Revenue Agency issued revised reassessments for the 2007 through 2013 tax years.

The refund includes $89-million in cash and $211-million in letters of credit, which the company had remitted based on prior reassessments CRA issued in a long-standing tax dispute.

Cameco says the timing of the refund has not yet been determined.

The uranium miner has been tied up for years in a dispute with the tax agency over a foreign subsidiary.

Cameco has won a series of court decisions for the 2003, 2005 and 2006 tax years, however issues remain for 2007 through 2013 and the company continues to fight with CRA over those years.

The company says CRA continues to hold $480-million, including $206-million in cash and $274-million in letters of credit, that it has remitted.

First Citizens BancShares Inc. (FCNCA-Q) jumped 55 per cent after it said on Monday it would acquire the deposits and loans of failed Silicon Valley Bank (SIVB-Q), closing one chapter in the crisis of confidence that has ripped through global financial markets.

Toxic Treasuries could lead to more turmoil in global financial system

The Federal Deposit Insurance Corporation (FDIC), which took control of SVB earlier this month, said in a separate statement it has received equity appreciation rights in First Citizens BancShares stock with a potential value of up to US$500-million as part of the deal.

First Citizens, which described itself as having completed more FDIC-assisted transactions since 2009 than any other bank, said the combined company would be resilient with a diverse loan portfolio and deposit base.

Under the deal, unit First–Citizens Bank & Trust Company will assume SVB assets of US$110-billion, deposits of US$56-billion and loans of US$72-billion.

“Prudent risk management approach will continue to protect customers and stockholders through all economic cycles and market conditions,” the statement said.

First Citizens will also receive a line of credit from the FDIC for contingent liquidity purposes and will have an agreement with the regulator to share some losses on commercial loans to provide further downside protection against potential credit losses.

Analysts said the move was positive for financial stability and the venture capital industry but only up to a point.

“I think First Citizens Bank’s acquisition of the SVB loan book and deposits does not add much to solve the number one issue that the U.S. banking system is now facing: deposits leaving smaller banks for larger banks or money market funds,” said Redmond Wong, Greater China market strategist at Saxo Markets.

SVB was the largest bank to fail since the 2008 financial crisis when California regulators closed the bank on March 10, sparking massive market disruption and heightening stresses across the banking sector globally.

On the decline

Australia’s Origin Energy Ltd on Monday agreed to a A$15.35 billion (US$10.21-billion) takeover offer from a consortium led by Canada’s Brookfield Asset Management (BAM-T), nearing the conclusion of one of the biggest private equity-backed buyouts in the country announced last year.

Brookfield shares closed down 0.3 per cent in response to the announcement.

Once the deal is finalized, Origin will be broken up into two businesses – Energy Markets business to be acquired by Brookfield; while MidOcean Energy, the other consortium partner, would take control of Origin’s integrated gas business.

Brookfield has enlisted Singaporean funds GIC and Temasek to back their bid and become co-investors, according to a statement published on Monday.

MidOcean Energy, which will gain control of Origin’s 27.5-per-cent stake in Australia Pacific LNG (APLNG), has reached an agreement with ConocoPhillips to sell it a 2.49-per-cent stake in the project, Origin said in a statement.

Under the scheme, Origin shareholders would receive an implied offer price of A$8.912 per share, representing an enterprise value of A$18.70 billion and a 9.1-per-cent premium to Origin’s last close of A$8.17.

The implied offer value is slightly higher than the A$8.90 per share bid tabled on Feb. 22 after the offer composition was tweaked to A$5.78 per share and $2.19 per share in cash. Under the previous offer outlined last year, investors would have received payment in Australian dollar for up to 100,000 shares held but all will now be paid in both currencies.

The Origin board encouraged its investors to support the bid.

“The board is unanimous in its view that this transaction is in the best interests of shareholders,” Origin Chairman Scott Perkins said.

“Our discussions with the consortium confirm a high degree of alignment with Origin’s strategy and a desire to accelerate initiatives consistent with Origin’s critical role in Australia’s energy transition.”

Onex Corp. (ONEX-T) was down 1.7 per cent on news it is offering to shorten a sunset clause that would keep founder Gerry Schwartz in control of the company to three years in a bid to win support from shareholders over the founder’s plan to step down as CEO.

Mr. Schwartz, 80, is chairman and chief executive officer and also controls the $50-billion private equity and asset management company through multiple voting shares. He plans to step aside this spring, with president Bobby Le Blanc taking over as CEO.

Currently, those voting shares are set to expire when Mr. Schwartz leaves the CEO role. But as part of the transition, Onex initially asked shareholders to extend the dual-class share structure for another five years, keeping Mr. Schwartz in control.

On Monday, the company proposed an amendment to shorten the sunset provision to three years “following consultation with shareholders.”

“I am grateful to shareholders for their continued support and for providing feedback on the voluntary proposal,” Mr. Schwartz said in a prepared statement.

The proposal goes to a vote at Onex’s annual meeting on May 11. If investors turn down the extension, Mr. Schwartz would remain CEO.

- James Bradshaw

Toronto’s Dye and Durham Ltd. (DND-T) declined 0.4 per cent after saying it is considering spinning out its TM Group business in addition to a possible sale after agreeing with the United Kingdom’s competition regulator last year that it would dispose of the business.

The UK’s Competition and Markets Authority (CMA) ordered the sale of the software company’s July 2021 acquisition after it found it would “substantially” lessen competition in property search reports in England and Wales.

Dye & Durham says a sale of TM Group remains its first and preferred option, but that it is also looking at a spin out as an alternative.

The company says it has engaged with multiple bidders as part of an auction process.

However, it says it believes having two options helps ensure the disposition generates maximum shareholder value.

Both plans are subject to CMA approval, among other conditions.

Cruise operator Carnival Corp. (CCL-N) gave back early gains after it reported a smaller-than-expected first-quarter loss and beat Wall Street estimates for revenue on Monday, helped by resilient demand for leisure travel and on-board spending.

Consumers at the higher end of the income rung who remain undeterred by elevated levels of inflation helped boost booking volumes and occupancy rates as restrictions imposed during the pandemic were lifted.

Carnival also benefited from easing of on-board COVID-19 protocols that ensured strong spending in casinos and spas.

The company was well booked for the remainder of the year at higher prices, Chief Executive Officer Josh Weinstein said.

Carnival posted an adjusted net loss of 55 US cents per share in the first quarter, compared with estimates of a loss of 60 US cents per share, according to Refinitiv.

The company’s revenue rose to US$4.43-billion from US$1.62-billion a year earlier, beating estimates of US$4.33-billion.

With files from staff and wires

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