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A survey of North American equities heading in both directions

On the rise

Shares of TC Energy Corp. (TRP-T) closed narrowly higher on Monday after it said it has agreed to sell Portland Natural Gas Transmission System (PNGTS) to BlackRock (BX-N) for US$1.14-billion as part of its ongoing efforts to reduce debt and fund investments.

Best known for its Keystone oil pipeline, the company is undergoing an overhaul. Last year, it said it would spin off its liquids business to focus on transporting natural gas.

CEO Francois Poirier had said in 2022 TC Energy planned to raise more than $5-billion (Canadian) through 2023.

The company is grappling with long-term debt of about $49.976-billion as of Dec. 31, 2023, as well high costs at its Coastal GasLink pipeline in British Columbia.

“The sale is an excellent first step towards meeting TC Energy’s $3-billion asset sale goal. The valuation is reasonable,” Morningstar analyst Stephen Ellis said

PNGTS is a 475-kilometre transporter of natural gas serving the upper New England and Atlantic Canada markets.

Blackrock will assume US$250-million of outstanding debt at PNGTS. The deal is expected to close mid-2024, with the cash being split pro-rata according to the current PNGTS ownership interests (TC Energy 61.7-per-cent and Energir, owned by Northern New England Investment Company, 38.3 per cent).

The company is aiming to sell at least $3-billion (Canadian) worth of assets this year to reduce debt, likely through two to four sales.

Sudbury, Ont.-based miner Frontier Lithium (FL-X) soared over 28 per cent after it said on Monday it is forming a joint venture with Japanese trading house Mitsubishi to help advance lithium mining and processing in Ontario.

Frontier aims to become a major supplier of the commodity, a key mineral used in batteries for electric vehicles, to the North American supply chain.

The partnership will help finance Frontier’s PAK Lithium Project mine in Ontario and a planned lithium chemicals conversion facility, Frontier said.

As per the terms of the agreement signed last week, Mitsubishi would buy a 7.5-per-cent stake in the project for $25-million , with an option to increase it to 25 per cent.

The PAK Lithium project encompasses about 27,000 hectares of land in Ontario, with two spodumene-bearing lithium deposits delineated since 2013. Spodumene concentrate is a type of lithium mineral ore.

Parkland Corp. (PKI-T) gained 0.8 per cent in the wake of its biggest shareholder Simpson Oil saying it will evaluate options to protect its rights after the Canadian fuel retailer advanced its annual meeting, limiting the shareholder’s ability to nominate directors.

Simpson Oil, which holds about a 19.7-per-cent stake in Parkland, had agreed in December to waive its rights to nominate new directors until March 31. Last week, Parkland announced plans to hold its annual general meeting (AGM) on March 28.

“For the past 10 years, Parkland has held its AGM in the month of May. Simpson Oil waived its rights under the Nomination Agreement on 31 December 2023 in the expectation that it would be able to exercise its shareholder rights free from any restrictions at Parkland’s 2024 AGM,” Simpson Oil said in a statement.

The rift between Calgary-based Parkland and its biggest shareholder came to a head in December when Simpson’s nominees Marc Halley and Michael Christiansen exited Parkland’s board abruptly and Simpson signed an agreement with Parkland the same day, which prohibits the oil company from making any public statements against Parkland.

Parkland is already facing pressure from activist investor Engine Capital which warned the Canadian company in January not to pursue “wasteful litigation with its shareholders” and urged the company to appoint independent board directors.

Engine had said at the time that it was concerned about the departures of Halley and Christiansen after being directors for eight months. The U.S.-based activist Engine had earlier urged Parkland to divest assets.

Simpson Oil said following the 2024 annual general meeting and the termination of the nomination agreement, it “will evaluate and consider its ability to fully exercise and protect its shareholder rights.”

Parkland is one of Canada’s largest fuel retailer with a market value of about $5.53-billion.

MDA Ltd. (MDA-T) rose 2.3 per cent after S&P Dow Jones Indices announced late Friday that it will be added to the S&P/TSX Composite Index, the broadest measure of the Canadian market.

S&P said it will add the aerospace company, while deleting Lithium Americas (Argentina) Corp. (LAAC-T) and Lithium Americas Corp. (LAC-T).

Brampton-based MDA designs, manufactures, and services space robotics and satellite and intelligence systems. At its $14.71 close Friday, it’s more than doubled its 52-week low of $6.24 last May. Its 2023 net income of $48.8-million is nearly double the year prior.

On Oct. 3, 2023, the former Lithium Americas Corp. reorganized into two independent – and therefore smaller- publicly traded companies. Lithium Americas, which describes itself as “a pure-play North American lithium company,” is focused on developing the 100 per cent-owned Thacker Pass project in northern Nevada. It’s down 12.2 per cent so far this year. Lithium Argentina, down 19.9 per cent year-to-date, owns full or partial interests in three Argentinian mines.

Both are Vancouver-based; neither have recorded any revenue.

The changes will be effective at the open of markets on March 18.

No changes are being made to the S&P/TSX 60, a selection of most of the largest companies in the composite.

- David Milstead

Low-cost air carrier JetBlue Airways Corp. (JBLU-Q) jumped on news of the canceled its US$3.8-billion merger agreement with peer Spirit Airlines Inc. (SAVE-N) on Monday, seeing no path forward after a U.S. judge blocked the deal in January on anti-competition concerns.

A successful deal would have created the fifth-largest carrier in the United States and helped Spirit ensure its survival, but the deal had been on the ropes ever since a Boston judge said it would harm consumers by reducing competition.

“With the ruling from the federal court and the Department of Justice’s continued opposition, the probability of getting the green light to move forward with the merger anytime soon is extremely low,” JetBlue CEO Joanna Geraghty told employees in an internal note seen by Reuters.

“Even if the ruling was overturned on appeal, we simply don’t see a path to regulatory approval by the required July 24 deadline.”

Without the deal, Spirit faces a rough road ahead. The ultra-low-cost carrier has grappled with weak demand in its key markets as it seeks to return to sustainable profitability. Some analysts have even suggested the company could face bankruptcy if it cannot shore up finances

The decision is a victory for the Biden Administration’s efforts to lower costs for consumers. The administration has used antitrust action and other enforcement efforts to try to bring down prices for U.S. residents across several industries.

The ruling by U.S. District Judge William Young found the proposed deal was likely to hurt competition in the U.S. aviation market and could harm ticket prices.

AI server maker Super Micro Computer Inc. (SMCI-Q) and shoe maker Deckers Outdoor Corp. (DECK-N) jumped as they will replace Whirlpool Corp. (WHR-N) and Zions Bancorporation NA (ZION-Q) in the S&P 500 index.

Super Micro shares have climbed 1,000 per cent since the end of 2022, including a more than three-fold jump in 2024, taking its market value to US$50.6-billion.

Super Micro and Deckers Outdoor will benefit from readjustments at popular index funds that track the S&P 500 and have assets of about US$7.8-trillion, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

About US$30.1-billion in rebalance trading will take place before March 18, Mr. Silverblatt estimated.

Money managers are on the hunt for other companies that are capitalizing on the AI boom after bellwether Nvidia’s (NVDA-Q) stunning stock rally recently made it the third most valuable U.S. company.

Rob Carrick: Nvidia helps fuel the rise of CDRs as a way to invest in U.S. stocks, tech and otherwise

In late January, Super Micro delivered blowout quarterly results and raised its full-year revenue forecast significantly ahead of Wall Street estimates.

Macy’s Inc. shares (M-N) enjoyed gains on Monday after investors Arkhouse Management and Brigade Capital sweetened their take-private bid over the weekend, valuing the U.S. department store operator at US$6.58-billion.

They raised the offer price to US$24 per share from US$21 for the stake they do not already own, representing a 38-per-cent premium to Macy’s closing price on Dec. 8 when deal talks first emerged.

The retailer’s shares, which have lost 10 per cent of their value so far this year, were hovering a little below US$21, with the investor group leaving the door open for a higher bid.

“We remain open to increasing the purchase price further subject to the customary due diligence,” Arkhouse had said on Sunday.

Macy’s is yet to open its books to the bidders as it was reviewing the new offer after rejecting in January a prior bid from Arkhouse on concerns around deal financing and valuation.

The real estate-focused investing firm has now said it has identified global lenders who will commit to financing the deal if due diligence was granted.

“Macy’s should cooperate with the investment group and pursue a possible sale. If it refuses to do so, it runs the risk of a hostile takeover,” said David Swartz, an analyst with Morningstar Research.

The company has struggled to maintain its sales growth and profitability amid competition from cheaper physical and ecommerce offerings and a value-based shopping pattern due to elevated inflation and higher borrowing costs.

It last week unveiled a turnaround plan that included cutting store counts and job roles, while aiming to revive sales at its luxury labels Bloomingdale’s and Bluemercury by improving merchandise and adding more staff.

Arkhouse, which has an economic exposure of 4.4 per cent to Macy’s along with its affiliates, has piled pressure by nominating nine director candidates with retail, real estate and capital markets experience to the company’s 14-member board.

On the decline

Apple Inc. (AAPL-Q) slid after it was hit with a 1.84-billion-euro (US$2-billion) EU antitrust fine of on Monday, its first ever and comprising mostly a deterrent, for preventing Spotify and other music streaming services from informing users of payment options outside its App Store.

The European Commission’s decision was triggered by a 2019 complaint by Swedish music streaming service Spotify (SPOT-N) over this restriction and Apple’s 30-per-cent App Store fees.

The European Union enforcer said Apple’s restrictions constituted unfair trading conditions, a relatively novel argument in an antitrust case and also used by the Dutch antitrust agency in a decision against Apple in 2021 in a case brought by dating app providers.

The fine dwarfed the 500 million euros sources with knowledge of the matter had told Reuters they expected the Commission to mete out to Apple.

The regulator said in a statement it added an additional lump sum of 1.8 billion euros as a deterrent to Apple and because a significant part of the harm caused by Apple’s conduct was non-monetary resulting in a total of 1.84 billion euros, 0.5 per cent of Apple’s worldwide turnover.

EU antitrust chief Margrethe Vestager said this was the first time the Commission has added a deterrent lump sum on top of an antitrust fine as a deterrent.

“For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store,” EU antitrust chief Margrethe Vestager said in a statement.

American Airlines (AAL-Q) said on Monday it had agreed to buy a total of 260 new jets from Airbus , Boeing and Embraer, as the carrier targets increased capacity to meet soaring demand for travel.

Major airlines are scrambling to buy fuel-efficient planes to beat a growing shortage caused by supply-chain problems and strong demand for new aircraft.

The deal includes 85 Airbus A321neo jets, 85 Boeing 737 MAX 10s and 90 Embraer E175 aircraft, American Airlines said in a statement. The order also included options and purchase rights for an additional 193 aircraft.

Inclusive of the aircraft orders, the airline expects to remain within its previous forecast for capacity and capital expenditures, it said. It had earlier forecast full-year capital expenditures at about $3.2 billion.

Shares of the Fort Worth, Texas-based airline fell in afternoon trade, after the company forecast a 2024 core profit margin of about 14 per cent, lower than its 2023 core profit margin of 14.5 per cent, as the industry grapples with higher labor costs.

Since 2014, American Airlines has taken delivery of more than 600 mainline and regional aircraft. It now has 440 aircraft on order, extending its aircraft order book into the next decade.

The airline’s order for the MAX 10, the largest variant of the MAX family, is also a boost for Boeing, which is grappling with a reputational crisis following a January accident in which a cabin panel tore off of an Alaska Airlines 737 MAX jet mid-flight.

“We deeply appreciate American Airlines’ trust in Boeing and its confidence in the 737 MAX family,” said Stan Deal, CEO of Boeing Commercial Airplanes.

Shares of Tesla (TSLA-Q) fell on Monday after its sales slumped in February in China, where it faced rising competition and a slowdown during the Lunar New Year holidays.

Tesla sold 60,365 China-made vehicles in February, down 19 per cent from a year earlier and the lowest since December 2022, according to data from China Passenger Car Association.

China’s Lunar New Year holidays fell in February, reducing car purchasing activities. Tesla is also battling rising competition from Chinese rivals such as BYD.

Tesla, which in January cut prices on some models in China, last week unveiled new incentives including insurance subsidies to woo consumers in the world’s largest auto market.

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 24/05/24 3:57pm EDT.

SymbolName% changeLast
American Airlines Gp
Apple Inc
Deckers Outdoor Corp
Frontier Lithium Inc
Jetblue Airways Cp
Lithium Americas Corp
Lithium Americas Argentina Corp
Mda Ltd
Spirit Airlines Inc
Super Micro Computer
Tesla Inc
TC Energy Corp
Whirlpool Corp
Zions Bancorp

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