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A look at North American equities heading in both directions

On the rise

Shares of Lundin Mining Corp. (LUN-T) jumped 6.9 per cent after saying late Monday it would buy a majority stake in Chile’s Caserones copper mine for about $950-million to expand the Canadian miner’s exposure to the red metal crucial for the green energy transition.

Lundin Mining signed an agreement with JX Nippon Mining & Metals Corp to acquire a 51-per-cent stake in Lumina Copper, which operates the Caserones copper-molybdenum mine in Chile. JX is a unit of Japanese oil and metals giant Eneos Holdings Inc .

Under the deal, Lundin Mining would make an upfront cash payment of $800-million and $150-million in installments over six years, Lundin Mining said in a statement.

The deal also allows Lundin the right to purchase an additional interest of up to 19 per cent in the Caserones mine for $350-million over five years, the company added.

Copper helps reduce carbon emissions and lowers the energy required to produce electricity.

“The initial controlling interest increases our exposure to what we believe is a growing top-tier copper mining district. We retain the option to further increase our ownership over the next few years at an attractive price,” Peter Rockandel, chief executive of Lundin Mining, said.

For JX, the stake sale, to be completed by June, is part of an asset portfolio review, the Japanese company said, adding that it is looking to focus on the advanced materials business while controlling volatility in its resource business.

“We are not exiting from copper mining,” a JX spokesperson said, adding the collaboration with Lundin is expected to generate synergy in productivity and cost competitiveness as the Canadian miner has several copper deposit projects near the Caserones.

The mine in the arid mountains of northern Chile has suffered a series of ramp-up delays and cost overruns, highlighting the challenges faced by miners in the country, as they shift through far-flung locations with accessible deposits largely being tapped out.

The mine’s annual output of copper concentrates has stabilized at around 100,000 tonnes in recent years.

Shoppers Drug Mart Inc. is moving away from its medical cannabis distribution business and preparing to transfer patients to a platform run by biopharmaceutical company Avicanna Inc. (AVCN-T)

Shares of both Toronto-based Avicanna and Shoppers’ parent Loblaw Companies Ltd. (L-T) rose with the announcement.

The pharmacy chain announced the shift Tuesday, but did not say what prompted the change or how much money Toronto-based Avicanna is paying for Shoppers to refer patients to its platform.

“We are grateful for the trust placed in us by our medical cannabis patients over the past few years, and are confident we’ve found the right partner in Avicanna to continue to support them,” said Jeff Leger, Shoppers’ president, in a statement.

His company will start to send customers to Avicanna’s platform in early May, with all of the patients set to be off-loaded from Shoppers’ medical pot service by the end of July. Customers will be able to place orders on Shoppers’ website through the transition period.

Avicanna said it will offer a similar range of products including various formats, brands and “competitive pricing.” Like Shoppers, its online medical portal will strive to educate customers around harm reduction and provide specialty services for distinct patient groups like veterans.

Shoppers first launched its medical cannabis business in Ontario in January 2019, months after recreational pot was legalized in Canada (medical pot was legalized in Canada in 2001) at a time when many predicted the weed sector would be booming in the coming years.

The sector has instead struggled with profitability and as high numbers of recreational cannabis shops cluster in several cities, many retailers and licensed producers have had to drop their prices to stay competitive.

However, Shoppers said it racked up tens of thousands of patients in its four years of existence, providing them with access to cannabis from more than 30 brands including Aphria Inc., Hexo Corp.’s Redecan and the Green Organic Dutchman.

Alibaba Group plans to split into six units and explore fundraisings or listings for most of them, it said on Tuesday, in a major revamp as Beijing vows to ease a sweeping regulatory crackdown and support its private enterprises.

Alibaba’s U.S.-listed shares (BABA-N) surged 14.3 per cent on the news. The Alibaba stock is down around 70 per cent since the regulatory crackdown started in late 2020.

The Chinese e-commerce conglomerate said that the biggest restructuring in its 24 year history would see it split into six units -- Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group

The revamp of the conglomerate comes a day after its founder Jack Ma returned home after a year-long stay abroad and as Beijing looks to spur private sector growth after a two-year-long regulatory crackdown on its showpiece private enterprises.

“The original intention and fundamental purpose of this reform is to make our organisation more agile, shorten decision making links and respond faster,” CEO Daniel Zhang said in a letter to staff seen by Reuters.

Each business group, he said, had to actively tackle the rapid changes in the market and each Alibaba employee had to “return to the mindset of an entrepreneur.”

Mr. Zhang will continue to serve as chairman and CEO of Alibaba Group, which will follow a holding company management model, and concurrently serve as CEO of Cloud Intelligence Group.

Each of the six business groups will be managed by its own CEO and board of directors and will retain the flexibility to raise outside capital and seek an initial public offering, it said.

The exception would be Taobao Tmall Commerce Group that handles its China commerce businesses and will remain an Alibaba Group wholly owned unit.

Occidental Petroleum Corp. (OXY-N) gained after Warren Buffett’s Berkshire Hathaway Inc. (BRK.A-N, BRK.B-N) boosted its ownership stake to about 23.6 per cent after buying nearly 3.7 million additional shares.

Berkshire disclosed the purchases, which cost about US$216-million and occurred on March 23 and 27, in a U.S. Securities and Exchange Commission filing on Monday night.

Mr. Buffett’s company began buying large quantities of Occidental stock just over one year ago, around when Russia invaded Ukraine, and has spent more than US$1-billion on the stock this month.

It now owns about 211.7 million Occidental shares worth US$12.6-billion based on the oil company’s closing price of US$59.65 on Monday.

In August, Berkshire won U.S. Federal Energy Regulatory Commission permission to buy up to 50 per cent of Occidental’s common stock.

It also owns US$10-billion of Occidental preferred stock with an 8-per-cent dividend, plus warrants to buy another US$5-billion of common shares at $59.62 each.

Berkshire is Occidental’s largest shareholder, and some analysts and investors have speculated that it might eventually buy the Houston-based company.

Buffett, 92, has longed to make another large acquisition for his Omaha, Nebraska-based conglomerate, whose dozens of businesses include Geico car insurance and the BNSF railroad.

Berkshire built a 22.6-per-cent stake in BNSF before paying US$26.5-billion for the remainder in 2010.

Walgreens Boots Alliance Inc.’s (WBA-Q) quarterly profit beat Wall Street expectations on Tuesday, driven by better-than-expected sales in its retail pharmacy business, sending its shares higher.

The company’s U.S. retail pharmacy, its core operations, recorded revenue of US$27.6-billion in the second quarter, surpassing analysts’ estimate of US$26.8-billion, as filling of non-COVID prescriptions offset a hit from falling demand for COVID vaccination.

Administration of COVID vaccines and testing had helped Walgreens offset low non-COVID prescription volumes initially in the pandemic, but the trend has now reversed, with demand for the shots waning in recent quarters, while prescription drug sales rise.

Comparable prescription filled, excluding vaccinations, increased 3.5 per cent, while same-store pharmacy sales rose 4.9 per cent from last year.

Walgreens, one of the largest U.S. pharmacies, has been looking to expand beyond its core business. It spent US$5.5-billion in 2021 to take a majority stakes in two smaller healthcare providers, VillageMD and CareCentrix, and also completed its US$9-billion acquisition of urgent care provider Summit Health in January.

The Walgreens Health segment saw a sharp increase in revenue to US$1.6-billion, driven by VillageMD and Summit Health.

Walgreens said it had incurred a one-time opioid-related charge of US$306-million in the quarter, and costs related to the acquisition of Summit Health.

Excluding one-off items, the company reported earnings of US$1.16 per share for the quarter ended February, higher than the average analyst estimate of US$1.10, according to Refinitiv IBES data.

Shares of AMC Entertainment Holdings Inc. (AMC-N) jumped 13.4 per cent, their biggest gain in a month, after a report that ecommerce giant Inc. (AMZN-Q) was looking to buy the theater chain.

Amazon founder Jeff Bezos has dispatched his investment advisers and top entertainment chiefs to explore acquisition plans for AMC, The Intersect reported, citing sources familiar with the discussions.

Amazon last year closed its US$8.5-billion deal for MGM, adding the company behind Rocky and James Bond in a bid to draw more customers to its Prime Video streaming service amid intensifying competition.

AMC’s shares, which posted a 12-fold jump in 2021 in a Reddit-fueled surge, have gained about 11% this year to Monday’s close.

Movie theaters are struggling to draw in crowds since pandemic-restrictions were lifted as rising costs have made people spend more on groceries, rent and gas, while reducing spending on out-of-home entertainment.

On the decline

Canada’s Brookfield Asset Management Ltd. (BAM-T) and partner EIG decided to go ahead with a US$10.2-billion plan to buy Australia’s Origin Energy Ltd despite escalating regulatory and government policy headwinds, senior management at the group said on Tuesday.

Brookfield shares were lower in Toronto on Tuesday.

Origin, Australia’s top energy retailer, on Monday agreed to the long-running takeover offer from the consortium, nearing the conclusion of one of the country’s biggest private equity-backed buyouts.

The group trimmed its offer by 1 per cent last month after a government move to cap gas prices hit valuations in the sector.

“It’s concerning any time you have governments intervening in markets. The history of that has not been great,” EIG Chief Executive Blair Thomas told Reuters in an interview.

“Those were headwinds we had to deal with,” he added.

Once the deal is completed, EIG’s MidOcean Energy will take control of Origin’s integrated gas business. With a 25-per-cent stake in Australia Pacific LNG (APLNG) and the Australian LNG stakes that MidOcean acquired last year from Tokyo Gas, the company will have around 3.25 million tons of LNG.

The deal will need to be approved by Origin’s shareholders as well as Australia’s Foreign Investment Review Board (FIRB) and the Australian Competition and Consumer Commission (ACCC).

Origin’s shares closed unchanged on Tuesday, holding below the implied offer price of A$8.91 a share as the deal is not expected to be finalized until early 2024 and there is currency risk, with payment in a mix of Australian and U.S. dollars.

“The lack of a reaction is likely the uncertainty of regulatory approvals, but I tend to think that it might take time but those will be forthcoming,” said Morgans analyst Max Vickerson.

“The FX (foreign exchange) exposure will probably shake loose some smaller shareholders who aren’t comfortable with that risk but at the downside of missing out on franking credits from the interim dividend and any potential final dividend,” he said.

Crescent Point Energy Corp. (CPG-T) dipped 0.6 per cent after it said on Tuesday it would acquire Spartan Delta Corp.’s (SDE-T) oil and gas assets in Alberta for $1.7-billion to expand in the Montney region.

The deal would immediately add to its excess cash flow per share by 20 per cent, the company said.

Calgary-headquartered Crescent said the newly acquired assets are adjacent to its Kaybob Duvernay assets which it bought over the past two years and would add 600 Montney locations in Alberta, or over 20 years of premium drilling inventory.

Crescent said the assets add production capacity worth 38,000 barrels of oil equivalent per day (boepd) to its portfolio.

The company said it is looking to reduce its net debt by about $1-billion over the next 12 months and is also pursuing the potential sale of one or more of its assets.

It also raised its production outlook to 160,000 to 166,000 boepd from the earlier forecast of 138,000 to 142,000 boepd.

The deal is expected to close during the second quarter of 2023.

Billionaire Richard Branson’s cash-strapped Virgin Orbit Holdings (VORB-Q) will extend an unpaid furlough for most of its employees as talks seeking new funding continue, the company’s chief executive said in an email to employees on Monday.

It shares tumbled over 30 per cent in response to the news.

“Our investment discussions have been very dynamic over the past few days, they are ongoing, and not yet at a stage where we can provide a fulsome update,” Virgin Orbit CEO Dan Hart wrote in the email seen by Reuters.

Reuters reported last week that Texas-based Matthew Brown had been in talks to invest US$200-million in the company. Those talks have collapsed, said two people familiar with the discussions who asked not to be identified. Mr. Brown declined to comment on Monday.

Virgin Orbit, teetering on bankruptcy after a January rocket failure and struggles to raise funds, furloughed nearly all its 750 employees on March 15 while it sought a financial lifeline that would allow it to focus on upgrading its launch business.

The rocket maker was spun out of Mr. Branson’s space tourism firm Virgin Galactic (SPCE-N) in 2017. Mr. Branson owns a controlling stake of Virgin Orbit of roughly 75 per cent.

A small group of employees were called back to work last week, while the others were to remain furloughed until at least Monday when Hart had been expected to provide an update in a company-wide virtual meeting.

“In order that we may provide you with meaningful details we have delayed the all-hands scheduled for today,” Hart said in the email, which employees received minutes before the expected meeting was to begin. Hart added he expects a new company-wide meeting will take place “no later than Thursday.”

Lyft Inc.’s (LYFT-Q) shares gave back early gains and lost 7.7 per cent after incoming Chief Executive Officer David Risher said the ride-hailing firm was not for sale.

The appointment of the new chief executive, who has run a non-profit for more than a decade, sparked some speculation that Lyft was preparing itself for sale. But Mr. Risher said “no” when asked in a Bloomberg interview if Lyft was for sale.

Wall Street initially cheered the management change at Lyft. The company has struggled to shake off a pandemic slump in its business and ceded market share to bigger rival Uber (UBER-N).

Lyft’s shares initially rose about 8 per cent in early trading as investors assessed the news of co-founders Logan Green and John Zimmer stepping down as CEO and president, respectively, handing the reins to Mr. Risher who has been a board member since 2021.

The step back by the co-founders increased the odds of a potential sale, some brokerages had noted, pointing to a nearly 90-per-cent decline in Lyft’s market value since it went public in 2019.

“We see the transition signaling a strategic shift toward more proactive competition with Uber,” Jefferies analyst John Colantuoni said, adding that Risher has an impressive track record of execution, albeit more than two decades in the past.

“The transition could cast additional uncertainty before we get greater visibility on the path forward.”

With files from staff and wires

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