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Tim Hortons in crosshairs of second U.S. hedge fund

These are stories Report on Business is following Tuesday, June 18, 2013.

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Scouting Tim Hortons
Pressure is likely to mount on Tim Hortons Inc. now that it's in the crosshairs of a second American hedge fund.

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Scout Capital Management says in a regulatory filing that it has boosted its Tim Hortons stake to 5.5 per cent, from 1.5 per cent earlier, and that it plans to raise certain issues with the Canadian coffee-and-doughnut chain.

Scout's interest follows a push just a couple of months ago by Highfields Capital, which urged Tims to hold back on U.S. expansion and drive up profitability via other means.

Yesterday, in documents filed with the Securities and Exchange Commission, Scout said it now holds 8.4 million shares of Tim Hortons and has been talking with the company's senior executive.

The hedge fund made all-encompassing, typical statements in the document, but the message appeared clear.

"The reporting persons have engaged and expect to continue to engage in discussions with senior management of the issuer with respect to the issuer's optimal capital structure, capital expenditures, timing and magnitude of share repurchases, management compensation metrics, and technology investments, among other matters," Scout said.

"Reporting persons may have engaged, or may in the future also engage, in discussions with management, the board of directors, other shareholders of the Issuer and other relevant parties concerning the business, management, operations, assets, financial condition, governance, strategy and future plans of the Issuer in addition to those more specific matters addressed in the previous sentence."

A Tim Hortons spokesman said the chain doesn't talk about meetings with individual stockholders, but added that "we are focused on continuing our track record of creating shareholder value, and welcome feedback from all of our shareholders."

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A spokesperson for Scout said the hedge fund is not commenting further.

Tim Hortons, which just last month appointed former Nestlé executive Marc Caira as its chief executive officer, cited "challenging" conditions when it posted first-quarter results in early May.

"In Canada, we believe consumer confidence and discretionary spending have been negatively impacted by rising unemployment, high consumer debt and the cooling housing market," it said at the time.

"U.S. consumers are also facing elevated unemployment relative to pre-recessionary levels, as well as concerns arising from changes to fiscal policy. In response to the low-growth environment, competitive activity in the consumer sector remains intense, impacting the performance of many participants in the sector."

But it also stressed that it's "taking important steps to continue to expand and enhance our system, improve the guest experience and build value for our shareholders."

HBC shuffles ranks
Hudson's Bay Co. shuffled its top ranks today, moving the well-known Bonnie Brooks to vice-chair from president, and Liz Rodbell to president from executive vice-president.

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HBC, which has turned around its Canadian Bay stores, though its Lord & Taylor unit in the United States lags, said the transition will be done by early next year.

"This new structure will continue to drive our long-term growth strategy, as we build upon the company's momentum toward revitalizing its banners and product offerings, and strengthening the customer experience," said chief executive officer Richard Baker.

Verizon eyes Canada
A top-ranking executive at Verizon Communications Inc. has confirmed the U.S. telecom giant is mulling an entry into Canada's $19-billion wireless market in the wake of a report this week by The Globe and Mail.

Chief financial officer Fran Shammo told The Wall Street Journal today that New York-based Verizon is in the preliminary stages of weighing a potential expansion into Canada.

"We're looking at the opportunity," Mr. Shammo said in an interview at the Journal's CFO Network conference in Washington. "This is just us dipping our toe in the water."

On Monday, The Globe reported that Verizon has held exploratory talks with investors in Wind Mobile in recent weeks, but those discussions are still at an early stage.

Exit, stage right?
Will 2013 mark the end of Ben Bernanke's reign at the world's most powerful central bank?

It's growing increasingly likely.

Observers certainly see it that way, the latest evidence coming from President Barack Obama, who said late yesterday that the Federal Reserve chairman has done "an outstanding job" in these troubled times but that has stayed in the post "a lot longer than he wanted or he was supposed to."

This is a crucial year for the Fed as it heads toward the expected pullback in stimulus but remains focused on unemployment, which the central bank has said must fall to 6.5 per cent before it raises interest rates again.

"Add this to the fact that Bernanke is taking a pass on one of the most important monetary policy events of the year at the Jackson Hole, Wyoming, [conference] sponsored by the Kansas City Federal Reserve, and it seems fairly likely that Bernanke will be stepping down as Fed chairman when his term expires on Jan. 31, 2014," said Derek Holt and Dov Zigler of Bank of Nova Scotia, referring to the president's comments.

G8 expected to unveil tax initiative
The G8 leaders are expected to announce greater co-operation on tax transparency as well as a move toward more disclosure of corporate ownership when their meeting ends today, The Globe and Mail's Paul Waldie reports from Enniskillend, Northern Ireland.

Both issues are seen as critical to developing countries, particularly in Africa, and leaders from Senegal, Liberia, Ethiopia and the African Union will attend the meetings at the Lough Erne Resort to press their case.

But there are stumbling blocks at the G8. Canada is believed to be resisting some of the measures, something that has surprised advocates.

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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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