Here are the top reads on deals and financial services over the last week. Enjoy your weekend.
Chinese takeover of mortgage insurer Genworth held up by Canada’s national security concerns: The federal government has national-security concerns about the Chinese acquisition of mortgage insurer Genworth Financial Inc., leaving Ottawa as the major holdout in a lengthy cross-border regulatory review. Story (Tim Kiladze, for subscribers)
HSBC Canada profit falls as CEO sounds cautious note on economic headwinds: HSBC Bank Canada profit fell nearly 9 per cent in the first quarter of 2019 despite growing revenues, as its chief executive sounded a note of caution over economic headwinds. The dip in profit at the Canadian arm of global bank HSBC Holdings PLC was partly because of a tough comparison with the first quarter last year, when the bank recovered funds set aside for expected credit losses, and recorded gains from disposing of financial investments. Story (James Bradshaw, for subscribers)
Manulife optimistic Japanese regulation won’t hamper its strong growth in Asia: Manulife Financial Corp. is optimistic that its strong growth in Asia will not be hurt by Japanese regulators reviewing certain life insurance policies that provide companies with increased tax benefits. The Toronto-based insurer operates in 12 Asian regions, including Japan. Profits from its Asian operations made up more than a third of Manulife’s overall earnings during the first quarter – and about 80 per cent more, in the aggregate, than the company’s Canadian profits. Story (Clare O’Hara, for subscribers)
Ontario Court of Appeal upholds dismissal of Catalyst lawsuit: Financier Newton Glassman’s Catalyst Capital Group Inc. has been denied an appeal of a loss it suffered in a lawsuit over the 2014 sale of wireless provider Wind Mobile to rival private equity fund West Face Capital. Catalyst sought leave to appeal the case – one of a number it filed against West Face and others over Catalyst’s failed bid for Wind – arguing that the judge erred in his decision that its arguments were virtually identical to those in another suit against West Face, which it had lost. Story (Jeffrey Jones, for subscribers)
Highway 407 investors, including CPPIB, may match OMERS bid for SNC stake: Spain’s largest construction company and Canada’s biggest pension plan are expected to increase their stakes in Ontario’s Highway 407 by trumping a $3.25-billion offer for SNC-Lavalin Group Inc.'s holding in the toll road – a move that demonstrates the value of infrastructure to institutional investors. Montreal-based SNC struck a deal in early April to sell 10 per cent of the 108-kilometre highway to the OMERS pension plan for $3-billion, with an additional $250-million of performance-based payments. Story (Andrew Willis, for subscribers)
Bombardier to sell Belfast, Morocco factories; suspends financial targets for 2020: Bombardier Inc. is moving to sell its aircraft component manufacturing factories in Morocco and Northern Ireland and suspending financial targets for 2020 as the Canadian plane and train maker tries to maintain investor confidence through year four of a five-year turnaround. Story (Nicolas Van Praet, for subscribers)
Another cannabis deal, another billionaire investor involved with both companies: One of the largest U.S. East Coast cannabis retailers, Curaleaf Holdings Inc., plans to acquire the leading West Coast cannabis-oil producer for $1.27-billion in a deal that features a billionaire investor on both sides of the table and minimal opportunities for independent scrutiny of the takeover. Curaleaf, which owns 44 stores in 12 states, made an all-stock offer on Wednesday for a private company named Cura Partners Inc. that sells oils under the Select brand and is the market-share leader in four states, including California. Story (Andrew Willis, for subscribers)
Cross-border cannabis deal between Canopy Growth and Acreage confuses investors: A seminal deal in the cannabis sector that is confusing shareholders has forced U.S. company Acreage Holdings Inc. to address investor questions about its potential acquisition by Canadian giant Canopy Growth Corp. Story (Tim Kiladze, for subscribers)
Oxford Properties is selling stakes in four marquee hotels in Western Canada: Oxford Properties is planning to sell half of its ownership in the Fairmont Banff Springs, Chateau Lake Louise and two other resorts in the Canadian mountains, in what will likely be one of the biggest hotel deals in recent years. Story (Rachelle Younglai, for subscribers)
Investment Management Corp. of Ontario hires CPPIB executive as new CFO: Investment Management Corp. of Ontario (IMCO), a money manager for small to mid-size pension plans, has hired a former finance executive from Canada Pension Plan Investment Board as its new chief financial officer. Kathy Jenkins assumed the role Wednesday, replacing the retiring Michel Paradis. Ms. Jenkins was a managing director at CPPIB for corporate finance for three years through 2018. Story (David Milstead, for subscribers)
CPPIB backs investor group in bid to end Bombardier’s dual-class share structure: Canada’s top pension manager is backing the idea of dissolving Bombardier Inc.’s dual class share structure, forcing the company onto the defensive as it hosts investors for its annual meeting Thursday. Canada Pension Plan Investment Board (CPPIB), which oversees assets worth about $368-billion and is one of Bombardier’s 25 biggest shareholders, says on its website it will vote in favour of a proposal by investor rights group Médac to end the two-class system. Story (Nicolas Van Praet, for subscribers)
Travel company Transat weighs multiple takeover offers: Montreal-based Transat A.T. Inc. is evaluating multiple takeover offers and has formed a special committee to weigh the merits of selling the company. The company, which sells vacation packages and operates a holiday travel airline, disclosed the takeover approaches on Tuesday morning. Transat currently employs about 5,000 people, and it had a market value of $222-million at the close of trading on Monday. Story (Tim Kiladze, for subscribers)
Executive shuffle at TD Asset Management: TD Asset Management has appointed Rob Vanderhooft as its chief investment officer while Bruce Cooper steps away from the role and remains CEO with a greater focus on international expansion. Canada’s second-largest bank by assets announced the management changes internally on Monday. Story (Clare O’Hara, for subscribers)
Macquarie Capital Markets Canada shuts sales, trading and research divisions: The Canadian capital markets arm of Australia’s Macquarie Group Ltd. is shutting its institutional equity sales, trading and research businesses across the country, according to people familiar with the matter. Staff from the three units were told of the decision Monday morning, and top leaders were informed late Friday. The majority of the cuts were made in Toronto, with some in Calgary. Story (Jeffrey Jones, Tim Kiladze, for subscribers)
Macquarie retreat signals streamlining of investment banking: After two years of finishing outside the top 20 Canadian dealers in equity league tables, a standard measure of market prowess, Macquarie pulled the plug Monday on its entire 50-plus employee Canadian institutional equity platform. The restructuring should be a wake up call to both small cap Canadian companies, which traditionally look to independent dealers for capital, and the entire investment banking community. In equity markets, fighting the last war means losing the current fight for business. Story (Andrew Willis, for subscribers)
BMO launching tech-focused banking group: Bank of Montreal will launch a new banking group focused on technology companies Tuesday, joining the growing ranks of financial-services companies servicing a sector they long deemed risky. The BMO group plans to provide services for all phases of the tech-firm life cycle, from early-stage startup needs to initial public offerings, while tying itself closely with the bank’s capital-markets and wealth-management divisions to service bigger companies and exiting shareholders. Story (Josh O’Kane, for subscribers)
Brace yourself: Volatility is set for a return in the big bank stocks: The slowing economy is making it more difficult for equity analysts to accurately predict bank profits, suggesting that investors may want to get used to the kind of volatility that follows earnings misses. Last quarter, four of the Big Six banks – Toronto Dominion, Nova Scotia, CIBC and National – fell short of earnings forecasts as higher credit losses stemming from slower growth took a toll on income statements. Story (Tim Shufelt, for subscribers)
IN CASE YOU MISSED IT: ROB MAGAZINE
Onex’s art of the deal: For Gerry Schwartz, bland is good for business. But is it enough in the face of new challenges? Onex and its brilliant founder have an astonishing 35-year track record. The challenge for investors is figuring out what’s happening from year to year. ROB Magazine (David Berman, for subscribers)
The Liberals’ CMHC mortgage madness is another subprime crisis waiting to happen: Are you a first-time home buyer who is feeling priced out of the market? Don’t worry about saving more money – go see Cammy the Mortgage Closer instead. You probably know the agency, officially known as the Canada Mortgage and Housing Corp. (CMHC), as the federal mortgage insurer. But starting in September, it will also offer home loans to help property newbies just like you. ROB Magazine (Rita Trichur, for subscribers)
Why RBC is becoming the New England Patriots of Bay Street: It’s time to acknowledge that when it comes to investment banking, RBC Capital Markets is playing in a different league than its Canadian rivals. The deal-making arm of Royal Bank of Canada churned out $8.4-billion in revenue last year, almost as much as its second- and third-ranked domestic competitors put together. In the same way it seems preordained that football’s New England Patriots will be Super Bowl favourites every year, it now appears certain that RBC Capital Markets will make far more money than any other Bay Street dealer. ROB Magazine (Andrew Willis, for subscribers)
The Top 1000: Report on Business magazine’s exclusive ranking of Canada’s largest companies Rankings (for subscribers)
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