Jim ShawLarry MacDougal
Today's top stories from Report on Business:
Shaw strikes $700-million CanWest deal
Shaw Communications Inc. today unveiled a $700-million deal for Goldman Sachs Group Inc.'s stake in CanWest Global Communications' specialty TV assets. The deal ends a heated dispute between Goldman and Shaw, which had already had struck an agreement to acquire CanWest's broadcasting assets from creditors for some $95-million.
Today's deal, notes Streetwise columnist Andrew Willis, will make Shaw a "deep-pocketed and fiercely competitive rival" to domestic television's major players. Shaw also struck a deal Monday to take out CanWest's creditors.
"The recent restructuring initiatives undertaken by CanWest have positioned it as a pure play Canadian broadcaster and we are excited about this transformative transaction for Shaw as we believe the combination of content with our cable and satellite distribution network, and soon to be wireless service, will position us to be one of the leading entertainment and communications companies in Canada," Shaw chief executive officer Jim Shaw said in a statement."
Desjardins Securities analyst Maher Yaghi questioned the price, saying that "investors may question Shaw's paying such a high multiple for CanWest given the company is now reinvesting its cash flows in media, which may not earn as high a return as its core cable business."
But rating agency DBRS was upbeat, saying that "in addition to bringing a number of benefits to the broadcasting system in Canada, DBRS believes this investment will give Shaw the indirect benefit of being a vertically integrated content and distribution company, with options for the future.
Read
Shaw buys Goldman's CanWest stake
U.S. manufacturing strengthens
The U.S. manufacturing sector continues to lead the U.S. economic rebound. The Institute of Supply Management's widely followed manufacturing index rose in April to 60.4, its highest in almost six years, with 17 of the 18 industries measured showing expansion, the ISM said today. "Production had another good gain, while new orders jumped, pointing to ongoing strength in the months ahead," said BMO Nesbitt Burns economist Benjamin Reitzes. "The employment index hit a 5-year high, hinting at a fourth consecutive monthly gain in manufacturing payrolls in April (that would be the longest streak in four years)." Read the story
Markets still wary of Greece
Markets remain wary despite a weekend scramble to put together a €110-billion ($150-billion Canadian) bailout package for Greece. The euro fell again today as investors questioned whether the bailout from the EU and the International Monetary Fund will ease Europe's debt troubles, which have spread beyond Greece to other debt-heavy countries such as Portugal and Spain. Greek government bonds performed only slightly better, with yields dropping to still-elevated levels, while Portuguese and Spanish bonds did not.
Among the concerns are whether the Greek government can push through another round of harsh austerity measures, largely on its public sector, whose main union called a two-strike beginning tomorrow.
"I have five children, I work all day and I make €1,020 net a month," one doctor who works in a state hospital told the Reuters news agency. "The measures are cruel and inhuman, people cannot stand it any more, they will revolt."
In Berlin, Chancellor Angela Merkel's cabinet approved Germany's portion of the bailout package, which she stressed won't help just Greece but the currency union as a whole. Markets have been watching Germany in particular given the strong opposition to a rescue package, which still must be approved by the country's parliament.
"It doesn't only mean that we help Greece, but that we stabilize the euro as a whole, which helps people in Germany," Ms. Merkel said.
You know it's bad when even Iceland, which until the problems in Athens came along had been the capital of the financial meltdown, thinks it's better off than Greece. Banks in Iceland collapsed, as did the country's currency, the krona. Yet Iceland's finance minister, Steingrimur Sigfusson, said in an interview with Bloomberg News that his country fared better than Greece partly because it has its own currency. The finance minister, perhaps too emphatically given Iceland's own troubles, told the news agency: "Oh my God, I wouldn't want to be in the position they're in. The position Greece is in is quite different from the position Iceland is or was in; Greece has the euro and we can debate whether or not that's good for them for the time being ... It won't be easy for Greece to get out of the trouble it's in."
Read
Greece swallows tough medicine in bailout
Investors skeptical on Greek bailout
Taking Stock: The Greek fire is out, but Europe still a tinderbox
UAL, Continental to merge
UAL Corp. this morning unveiled a blockbuster deal to create the world's biggest airline with the takeover of Continental Airlines Inc. for about $3.17-billion (U.S.). A marriage of UAL's United Airlines and Continental would have 10 hubs, about $30-billion in annual revenue, and some 90,000 employees. The merged airline would eclipse Delta Air Lines in size. Delta recently acquired Northwest Airlines, and is currently the world's biggest carrier.
"At least in the short term, fares are likely to rise, especially on routes with less competition," George Hobica, president of ticket researcher Airfarewatchdog.com, said in a statement, according to Bloomberg News. Competitors also find they can charge more as "a rising tide of mergers tends to lift all airlines," he said. Read the story
Apple iPad sales surge
Apple Inc. has a hit on its hands with the launch of the iPad. Apple said today it sold more than one million of the new computer tablets in its first 28 days on sale, with 12 million software applications downloaded as well. The iPad reached the one-million mark much faster than the iPhone's 74 days to hit one million, the technology giant said. Read the story
Mall operator favours Brookfield
General Growth Properties Inc., the large U.S. mall owner operating under bankruptcy protection, has chosen a revised bid from Brookfield Asset Management Inc. to restructure and emerge from Chapter 11 court proceedings, The Wall Street Journal reports.
The newspaper said some details still have to be hammered out today, but that General Growth, which owns more than 200 malls in the United States and sank under $27-billion (U.S.) in debt, chose Toronto-based Brookfield over a competing bid from its rival, Simon Property Group Inc. Brookfield and Simon have been tussling over which company gets to bring General Growth out of court protection and control the mall giant.
The Brookfield investors group, which also involves existing General Growth investors Pershing Square Capital Management LP and Fairholme Capital Management, would pay $10.50 for each share, a 50-cent-a-share improvement, and also acquire warrants.
Australia taxes mining profits
Mining stocks in Australia fell today after the government's decision to bring in a 40-per-cent tax on mining profits, which it said would help keep more of the country's resource wealth at home. The government of Prime Minister Kevin Rudd is heading into an election this year, and the tax is a major piece of its campaign. The reforms speak directly to the electorate as it includes a requirement for employers to boost their payments to pension funds.
Mining companies warned the move puts tens of billions of dollars worth of projects at risk, but, according to Reuters, on local radio Mr. Rudd pointed in particular to the earnings of Rio Tinto and BHP Billiton: "BHP is 40-per-cent foreign owned, Rio Tinto is more than 70-per-cent foreign owned. That means these massively increased profits ... built on Australian resources are mostly in fact going overseas."
Mining is Australia's lifeblood, and "there'll be a huge number of investors in Australian resource companies who will vomit into their cornflakes when they read this," one analyst told Reuters.
David Rosenberg's words of caution
Bay Street bear David Rosenberg, the chief economist at Gluskin Sheff + Associates, today cites 10 reasons, in no particular order, for "a dose" of market caution:
1. Markets were not impressed with the size of the Greek bailout package, an issue he believes is bigger than the collapse of Lehman Brothers. "A bailout of all Club Med countries would, according to estimates I've seen, approach $800-billion (U.S.).
2. China raised the reserve ratio requirement for banks for the third time this year, bringing it to 17 per cent. "A decisive slowing in China and the U.S.A. is a crimp in the near-term commodity price outlook."
3. Australia unveiled its new mining tax, which is weighing on material stocks.
4. A potential criminal probe related to Goldman Sachs Group Inc. means financial stocks are being re-rated given the possibility of new regulation for the sector. "There has never been a financial crisis that was not met afterwards with regulatory reform - it's how the SEC was created in the first place."
5. The ECRI leading economic index has slipped to a 38-week low. "With the restocking phase complete and fiscal stimulus waning, prospects of a second half slowdown loom large."
6. The attempted attack in Times Square is a reminder that "geopolitical risks have not gone away."
7. Treasury yields have dropped almost 35 basis points from recent highs and "are not consistent with the recent move by equities to price in peak earnings in 2011."
8. The U.S. gross domestic product price deflator slipped in the first quarter to its slowest pace in six decades in a sign that "this profits recovery is still being underpinned by cost cuts, tax relief and accounting shifts than by anything exciting on the pricing front."
9. The latest S&P/Case-Shiller house price index in the United States "confirmed that we are into a renewed leg down in home prices. Financials, retailers and home builders are not priced for this outcome."
10. U.S. initial jobless claims of about 450,000 "are not consistent with sustained employment growth ... A new peak in the unemployment rate and a new trough in home prices stand as the most pronounced downside surprises for the second half of the year."
Cat:e528746c-3414-401a-b14b-50247e3bdf01Forum:d0fa4e14-88d2-41f9-8a19-896bdff9544b
From today's Report on Business
Recovery takes hold at auto dealers
Recession-battered consumers play it safe