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RBC mixed third quarter; Pembina acquires Kinder Morgan Canada

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RBC’s mixed results set a cautiously optimistic tone as third-quarter earning season begins for Canadian banks: Royal Bank of Canada leaned on its retail-banking and wealth-management divisions to boost third-quarter profit and overcome a weak spell in capital markets, setting a cautiously optimistic tone as earnings season for Canada’s big banks begins. Canada’s largest bank by assets is the first major lender to report fiscal third-quarter results, and its performance was mixed. Story (James Bradshaw)

CEO of RBC Capital Markets announces retirement, discusses outlook for division: On Doug McGregor’s 11-year watch as chief executive, RBC Capital Markets grew from a regional player into a leading global investment bank, navigating storms that swept away far larger institutions. Story (Andrew Willis)

Ontario Teachers’ Pension Plan first half results show move toward fixed income: Ontario Teachers’ Pension Plan made a strong shift to bonds in the first half of the year and benefited from robust returns in fixed income. The pension plan said it posted an overall 6.3 per cent return in the first half of 2019 and closed the quarter with a portfolio of $198.5-billion. Fixed income led the returns, Teachers said. Story (David Milstead)

Manulife tripled CannTrust holdings before licence scandal, SEC records show: Manulife Asset Management jacked up its holdings of CannTrust Holdings Inc. stock in the second quarter – just in time for the company’s surprise disclosure that it was growing cannabis without a licence. Story (David Milstead)

Toronto fintech Drop sees $44-million in latest funding round: Royal Bank of Canada is backing an upstart loyalty-management program geared at millennials called Drop Technologies Inc. as part of a US$44-million venture-capital financing. Story (Sean Silcoff)

DEALS NEWS: MERGERS, ACQUISITIONS, IPOs and FINANCINGS

Pembina to acquire Kinder Morgan Canada and other assets in $4.35-billion deal: Pembina Pipeline Corp. is buying Kinder Morgan Canada Ltd. and the U.S. portion of a key condensate pipeline for $4.35-billion, a deal that will bolster its position in the high-demand oil storage and transport business. For Houston-based Kinder Morgan Inc., the sale marks its exit from Canada after it sold its largest asset – the Trans Mountain oil pipeline – to Ottawa last year for $4.4-billion. It follows a formal process to seek buyers for the majority-owned Canadian operation that ended in the spring after failing to attract acceptable proposals. Story

Alibaba postpones up to $15-billion Hong Kong listing amid protests: sources: China’s biggest e-commerce company Alibaba Group Holding Ltd has delayed its up to $15-billion listing in Hong Kong amid growing political unrest in the Asian financial hub, two people with knowledge of the matter told Reuters. Story (Reuters)

IN CASE YOU MISSED IT

For Canadian bank stocks, ‘the risk/reward equation is not stacking up attractively’: Merrill Lynch bank analyst Ebrahim Poonawala has turned more cautious on Canadian banks ahead of upcoming profit reports. Story (Scott Barlow)

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Hudson’s Bay Company agrees to taken company private

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Hudson’s Bay Co. will go private in a deal valuing the Canadian retailer at $1.9 billion in a bid by a group of investors led by executive chairman Richard Baker to try their hand at reinvigorating the fading 349-year-old department-store chain.


Hudson Bay Company executive chairman Richard Baker

The board of Hudson’s Bay said it entered into an agreement with investors led by Baker after the group raised its offer price to $10.30 a share, up from $9.45 a share. It approved the offer after a recommendation by a committee of independent directors.

Hudson’s Bay shares rose 7 per cent to $10.11 at 9:35 a.m. in Toronto.

Attention will now turn to minority shareholders who came out against Baker’s earlier proposal. The company needs a majority of them to approve the new deal for it to go through.

Catalyst Capital Group and other investors had said Baker’s original offer undervalued a company that’s rich in real estate holdings. Representatives for Catalyst and for Jonathan Litt, an activist investor who’s also been critical of Baker, were not immediately available for comment.

“The special committee is confident that this transaction represents the best path forward for HBC and the minority shareholders,” David Leith, head of the special committee, said in a statement.

Baker and his investment group want full control of the retailer, which also owns Sak’s Fifth Avenue, to turn the business around outside the glare of public markets. While Saks has been the group’s bright star of late, the Canada-based Hudson’s Bay chain, the oldest company in North America, is removing 300 “unproductive” brands and bringing in another 100 in a turnaround effort.


Mannequins sit on display inside a Saks Fifth Avenue.

Daniel Acker/Bloomberg News

A number of traditional retailers are struggling and closing stores as consumer preferences change and shoppers increasingly migrate online to competitors like Amazon.com Inc.

Department stores in particular have struggled to attract new consumers and maintain sales.

Luxury focused chains haven’t been exempt from the fallout: Barneys New York Inc. filed for bankruptcy protection in August amid rising rent costs and a decline in visitors. A consortium led by Authentic Brands Group LLC has been selected as its initial bidder, with the group planning to open Barneys shops inside Saks Fifth Avenue stores owned by Hudson’s Bay, Bloomberg reported on Oct. 16, citing people with knowledge of the matter.

Hudson’s Bay has been trying everything to lower debt and stop its stock’s slide, most recently selling selling the operations of its Lord & Taylor department store chain to clothing rental subscription company Le Tote.

Chief executive Helena Foulkes, who was brought in last year, also sold flash-sale e-commerce site Gilt and cashed out of European operations.

The stock traded as high as $10.72 in August on expectations the bid would be raised. It was back at $9.45, the original offer price, at the end of last week. Over the last five years, the stock has lost about half of its value.

“It’s good to see that there’s a resolution with a good, formal take-private offer and a cash bid, and I think that should be a good resolution for a lot of people,” Greg Taylor, chief investment officer at Purpose Investments, said on BNN Bloomberg.

“Certainly a lot of people would have wanted a lot more from this but in the current dynamics around department stores in North America, I think this is probably as good as they could have hoped.”

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Energy regulator says crude-by-rail shipments fell to 310000 bpd

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The Canada Energy Regulator says exports of crude oil by rail from Canada fell slightly in August to 310,000 barrels per day from 313,000 bpd in July.

The August number is up 35 per cent from 230,000 bpd reported in August of 2018 but still well below the record high of 354,000 bpd set last December.

The small change in crude-by-rail shipments came despite a threat by Imperial Oil Ltd. CEO Rich Kruger to throttle back the company’s rail movements in August and September to protest the ongoing Alberta oil production curtailment program.

He says the program damages the economic case for crude-by-rail by artificially lowering the difference in oil prices between Alberta and the end market on the U.S. Gulf Coast.

Imperial reported moving 80,000 bpd by rail in June. It co-owns an oil shipping rail terminal at Edmonton with capacity to load 210,000 barrels of crude per day.

Alberta has gradually eased the curtailment program designed to better align production with tight pipeline capacity from an initial withholding of about 325,000 bpd last January to 125,000 bpd in September.

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Hudson Bay Company agrees to pay more to shareholders for takeover bid

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Hudson Bay Company

The board of Hudson Bay Co. has agreed to a sweetened offer by a shareholder group led by executive chairman Richard Baker.

The retailer says the group has agreed to pay $10.30 per share in cash to take HBC private. The bid is up from an earlier offer of $9.45 per share.

The agreement values HBC at about $1.9 billion.

HBC says the price offered represents a premium of 62 per cent compared with where its shares were trading before the shareholder group’s initial privatization proposal in the summer.

The Baker-led group holds a 57 per cent stake in the retailer and includes Rhone Capital, WeWork Property Advisors, Hanover Investments (Luxembourg) and Abrams Capital Management.

The deal is subject to the approval by a majority of the minority of HBC shareholders, excluding the shareholder group and its affiliates, and approval by a 75 per cent majority vote at a special meeting of shareholders.

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