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No hard feelings, Brad: BHP moves business to Saskatoon

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BHP to move business BHP Billiton Ltd. is running back to Saskatoon, after all.

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Having been spurned in its quest to acquire Potash Corp. of Saskatchewan , the province's jewel, BHP today named a new chief of its diamonds and specialty products unit, and announced it is moving the business from Vancouver to Saskatoon.

Tim Cutt takes over the job next month.

"This relocation will be phased over the coming months and reflects the company's commitment to establish a premier potash business managed from Saskatchewan, near its flagship potash development project," BHP said in a statement.

BHP laid it on a bit thick in its announcement. An attempt to show Premier Brad Wall there are no hard feelings after his aggressive campaign to keep BHP's hands off Potash Corp.? BHP still has, after all, its Saskatchewan Jansen project, which it had started before taking a run at its rival.

Or, who knows, maybe BHP hopes Potash Corp. will actually become available at some point down the road.

"While it has been a privilege to work in BHP Billiton Petroleum, I am looking forward to working with the Diamonds team at Yellowknife and EKATI and to playing my part in developing an industry leading potash business in Saskatchewan that creates value for shareholders, plays an active role in the community and creates new jobs and opportunities for the province," Mr. Cutt said in the statement.

Teachers buys more of MLSE The Ontario Teachers' Pension Plan has struck a deal to buy Toronto-Dominion Bank's stake in Maple Leaf Sports and Entertainment, The Globe and Mail's Tara Perkins reports.

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The decision will bring the pension plan's interest in the company close to 80 per cent.

The move is being made in an effort to streamline the sales process for MLSE, which continues.

"As previously stated, Teachers' is currently working with its advisors to explore strategic alternatives regarding its ownership of MLSE," the pension fund manager said in a statement. "The consolidated stake in MLSE is expected to streamline the process."

Teachers already held 66 per cent of the company, while TD has held 13.5 per cent.

CPP in for Skype windfall Microsoft Corp. has struck an $8.5-billion (U.S.) deal for Skype Technologies, meaning a windfall for the Canada Pension Plan Investment Board, one of its owners.

The purchase immediately gives Microsoft a powerful Web-based communications tool it can incorporate into a variety of its products, including Microsoft Office, Windows-based smart-phones and the Xbox gaming platform, Globe and Mail technology writer Omar El Akkad reports.

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Microsoft hopes the lure of free or reletively inexpensive calling features will add to the appeal of its software and hardware in various areas where it competes with tech powerhouses such as Google Inc. and Apple Inc. . However the deal is fraught with risks, as other companies have tried to integrate Skype's services with their own in recent years, and have largely failed.

The CPPIB was part of an investor group that bought a control stake in Skype from eBay for about $1.9-billion in cash in late 2009, a deal that valued Skype at $2.75-billion. EBay held onto the rest.

The pension fund manager originally took a 15-per-cent stake with its $300-million contribution. That stake has been diluted somewhat since the transaction was announced, but judging by the numbers in last year's filing for a Skype initial public offering, still remains about 13 per cent. (The offering, obviously, never happened).

That puts the value of CPPIB's take in a sale at about $1.1-billion, Streetwise columnists Tara Perkins, Boyd Erman and Tim Kiladze write.

Policy makers scramble European policy makers are wrangling over how to help Greece through its crisis without a debt restructuring, although that still appears to be the inevitable conclusion.

Two officials of the European Central Bank, one of the groups involved in the initial bailout, said today that a restructuring could be devastating to the euro zone, and analysts agree.

"You have to be aware that this would immediately have massive consequences for the Greek banking system and for the banking system overall," the ECB's Ewald Nowotny said in a radio interview, according to Reuters. "That would only heighten the crisis."

Mr. Nowotny said he would prefer allowing Greece an extension on repayment of the aid package instead of floating fresh loans to the embattled nation, which has time and time again missed its monthly targets.

A day after Standard & Poor's downgraded Greece again, some observers are taking a dim view of the prospects, not only for the troubled periphery nations but for the 17-member monetary union as a whole.

Carl Weinberg, the chief economist at High Frequency Economics, went so far as to label the potential outcome as a "Lehman-esque event," noting that steps so far have not lessened any risk.

"The total debt of the nation, €300-plus billion, is less than 4 per cent of the €7.83-trillion total debt of euro land governments at the end of last year," Mr. Weinberg said in a research note.

"Add €150-billion for Ireland and €160-billion for Portugal, and now you are talking real money, maybe 8 per cent of the total of euroland debt. The question is this: Why should we care if Greece or Portugal or Ireland - or Greece then Portugal then Ireland - default on their bonds? The answer is that the euroland banking system is fragile enough by all metrics on its own and is subject to systemic risks when confronted with incremental troubles like these."

The failure of one country, or several at once, would "break" enough banks to spark a far more serious credit crunch in the group, he said, adding that the region's banks also appear worried.

"We find it scary that none of the strategies being used to address the fiscal crises in Greece, Ireland and Portugal are in any way reducing the risk of a default," Mr. Weinberg warned.

"Extending bridge loans to countries that cannot repay the debt they already owe does not fix any of these problems ... Without a concrete plan to avert a restructuring, a default becomes inevitable. As far as we can see, there is no plan on the table that is any different from a permanent extension of short-term credits to borrowers."

The troubles are taking their toll on the euro, and leading analysts to wonder how the ECB will be further affected.

"It is now becoming increasingly apparent that any further ECB rate hikes could increase the pressure on increasingly fragile peripheral nations and bring forward the likelihood of Greece's problems spilling over into Ireland and Portugal," said CMC Markets analyst Michael Hewson.

China surplus surges China's delegation to Washington heads into its second day of strategic talks today against the backdrop of a fat Chinese trade surplus, increasing the pressure on the country to let its currency appreciate further against the U.S. dollar.

Trade data released today shows a surplus in April of $11.4-billion (U.S.), nearly four times greater than expected, Carolynne Wheeler reports from Beijing. Exports grew more strongly than expected, up 29.9 per cent, while imports were up less than anticipated, at 21.8 per cent.

"An unexpected slowing in import growth underpinned the result, on the back of soaring commodity prices and tightened domestic monetary conditions intended to curb inflation," said Scotia Capital economists Karen Cordes Woods and Derek Holt.

"Exports also reached a record level in the month, and some analysts are concerned that this report reflects a return to the trend of export-driven economic growth, as domestic demand conditions in China may be weakening."

Analysts upbeat on Canadian Tire Canadian Tire Corp. is looking up after its $770-million friendly deal for Forzani Group Ltd. , analysts say.

CIBC analyst Mark Petrie, for example, raised his price target on the retailer's shares to $72 from $71, and his rating to "sector outperform," while Desjardins analyst Keith Howlett bumped up his recommendation to "buy - average risk" from "hold." He held his price target at $69.

"The acquisition of Forzani provides a much needed growth vehicle for [Canadian Tire]" Mr. Petrie said.

"The core business continues to struggle to show organic growth in a tough market, but we expect a modest recovery in the balance of the year. [Canadian Tire]lacks growth, but margins remain healthy and cash flows robust."

As Globe and Mail retail writer Marina Strauss reports, chief executive officer Stephen Wetmore is putting his stamp on Canadian Tire with the $26.50-a-share offer for Canada's biggest sporting goods merchant, a takeover aimed at strengthening the company for a possible attack by foreign rivals.

"We are positive that Canadian Tire is making a well-priced acquisition to expand sporting goods, a core category in which it has authority with consumers," said Mr. Howlett.

"Sporting goods retailing in Canada is tied inextricably with seasons retailing. Seasonal products are a key bond between Canadian Tire and Canadian households. ... Canadian Tire has a strong balance sheet and increasing free cash flow. Forzani is also highly cash generative."

Analyst Jessy Hayem of TD Newcrest held both her "hold" recommendation and $66 12-month price target, but said the impact is positive.

"The deal should be accretive and would provide potential additional avenues for growth within Canadian Tire Retail (CTR) and earnings growth for [Canadian Tire]overall," she said.

"We view the acquisition as a good strategic move. [Canadian Tire] potentially forestalls the entry of a U.S. competitor and becomes a leading sports retailer in Canada with over 1,000 combined retail sports outlets."

Auto recovery on track Despite the headwinds of high oil prices and parts shortages from Japan, the sales rebound in the auto industry is expected to continue, Scotia Capital says in a new report.

Indeed, said analyst Carlos Gomes, sales should hit a record this year.

"Sales gains will continue to be led by emerging markets and strengthening replacement demand in the United States," he wrote. "However, the surge in oil prices has created an additional headwind, and a shift in the type of vehicles that households are buying - especially in North America."

Mr. Gomes projects sales this year of 15.14 million in North America, 1.59 million of them in Canada.

Despite a shift to smaller vehicles, he added, profitability in the industry continues to improve.

Exports projected to climb Canadian exports will post double-digit growth this year and finally reach pre-recession levels next year, a new national forecast predicts.

The country's export growth will swell 12 per cent this year and 7 per cent next year after expanding 10.4 per cent in 2010, Export Development Canada says in the projection, The Globe and Mail's Tavia Grant reports. It doubled this year's growth forecast from an original estimate of 6 per cent.

Walk a mile An IMF official's torn shoe is big news in Romania today.

Romania has been the recipient of aid from the International Monetary Fund. As The Associated Press reports today, IMF envoy Jeffrey Franks has raised some snickers by visiting President Traian Baescu with a hole in the sole of his shoe. This comes, of course, as the International Monetary Fund pushes the country to take further measures to cut its budget deficit, so you can imagine the response.

"The boy with a hole in his shoe from the IMF who comes to give us lessons about how to manage the economy has avoided speaking about the real problems that we'll face this year," the daily newspaper Jurnalul National said today.

Mr. Frank said he didn't want to talk about personal issues, but did say that "I changed my shoes today."

One commentator also noted that the IMF official had a cheap watch.

Maybe Mr. Frank is, after all, the right person to give lessons in frugality. (For a picture, click here.)

In International Business today

Facing delays from regulators and powerful opposition from trade unions, Wal-Mart Stores Inc. is launching a publicity campaign to promote the benefits of its controversial takeover of a major South African retail chain, Globe and Mail correspondent Geoffrey York writes from Johannesburg.

Saab, once the vehicle of choice for James Bond, has endured considerably less glamorous exposure of late. Naomi Powell reports from Stockholm.

In Economy Lab today

If there's one thing that we've learned from the latest crisis, it's that the case for a Canada-U.S. monetary union has been fatally weakened, Stephen Gordon writes.

The Canadian Real Estate Association has been adjusting its forecast for 2011 as economic circumstances warrant, and has taken another crack at the numbers. Steve Ladurantaye takes a deeper look.

In Personal Finance today

The head of TD Bank's mutual fund unit says he's committed to making the bargain-priced index funds more accessible, Rob Carrick reports.

A vegetable patch can cut your food bill. Home Cents blogger Dianne Nice offers a few tips for setting up a garden on a budget.

From today's Report on Business

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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