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Canadian mergers and acquisitions jumps 28% in third quarter, market volatility could slow deals

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Canadian mergers and acquisitions activity for the third quarter hit its highest since 2016 as historically low interest rates and strong equity markets helped companies to revive transactions that were put on hold due to the pandemic.

Dealmaking rose 27.7% to $76.6 billion in the third quarter of the year, but was significantly down from the record $120.3 billion recorded in the first three months of the year, according the Refinitiv data.

Bankers said while factors underpinning M&A exists and pipelines are strong, equity market volatility could slow the deal momentum.

“Higher deal flow in the third quarter was driven by a combination of factors including strong equity markets, historically low borrowing costs and market confidence in a gradual COVID-19 recovery,” said Jake Lawrence, Group Head and CEO, Global Banking and Markets, Scotiabank.

However, he said short term inflationary and supply chain concerns are unlikely to have a material impact on deal flow given investor focus on long-term strategic considerations.

Transportation and infrastructure-focused deals led activity in the third quarter, with $33.6 billion in M&A activity, including Brookfield Asset Management’s A$9.57 billion ($6.95 billion) bid for Australia’s AusNet Services, and Brookfield’s $3.4 billion planned takeover of Dexko Global Inc.

Higher inflation in Canada and the United States has stoked worries about central banks dialling back pandemic-era liquidity support and prospects of higher interest rates. That has increased stock market volatility.

“I guess the big threat that’s overhanging the M&A landscape is the threat of rising interest rates,” said Sarfraz Visram, head of Canadian and international mergers & acquisitions at Bank of Montreal.

“M&A is a lot easier to do when everybody is enjoying a strong equity market but I would say that valuation multiples were getting pretty high … it was hard to justify doing deals at peak multiples,” he added.

Of the deals announced in the first nine months of 2021, Bank of America Corp’s BofA Securities Inc, Bank of Montreal’s BMO Capital Markets and Toronto Dominion Bank’s TD Securities Inc took the top three spots in the advisory rankings.

Despite the strong stock markets, equity offerings fell for the second consecutive quarter, almost halving in the third quarter to C$6.8 billion ($5.42 billion) from the previous quarter, while IPOs dropped by nearly a tenth in the third quarter to C$332 million from the previous three months.

($1 = 1.2549 Canadian dollars)

 

(Reporting by Maiya Keidan; Editing by Marguerita Choy)

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Rogers family boardroom drama unlikely to impact deal to buy Shaw

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A boardroom tussle at Rogers Communications Inc is unlikely to hinder its C$20 billion ($16.16 billion) buy of Shaw Communications, analysts said, but the family drama is continuing at one of Canada’s biggest telecoms companies.

The board of Rogers on Thursday voted out Chairman Edward Rogers, son of the late founder Ted Rogers, after he tried to replace Chief Executive Officer Joe Natale with another executive.

Hours later, Edward Rogers said as chair of the Rogers Control Trust, the family-controlled entity that owns the majority of ownership shares in RCI, he would remove the five RCI board directors who acted against him.

Rogers’ move is the latest in a tumultuous period, during which he has been at odds with his sisters and mother, all of whom are also board directors and who backed Natale.

The company said on Friday that it had not received any documentation from its former chair with respect to the attempted removal of directors, and would consult with its lawyers about the legality of Edward Rogers’ move.

“The company is not aware of this mechanism ever having been utilized in respect of a public company in Canada,” Rogers Communications said in a statement.

J.P.Morgan analysts said they hoped the boardroom battle would not overshadow the timeline or approval process of the deal to buy smaller rival Shaw.

“We maintain our base case that Rogers will be able to close its transformative acquisition of Shaw in 1H22 following the divestiture of some or all of Shaw’s wireless business,” J.P.Morgan wrote in a note to investors.

While the company’s bid for Shaw would further boost its position in Canada’s highly concentrated telecoms market, it has attracted scrutiny from multiple government regulators over whether it will decrease competition.

Scotiabank analysts said they expect the deal to get regulatory approvals within the planned timeline of first half of next year.

The structure of the Rogers Control Trust is a unique feature among Canadian companies, said David Brown, a corporate governance consultant.

Normally each family member would control their individual shares, but Ted Rogers’ estate set up the trust to represent all the family members together, meaning the 97.5% of Class A ownership shares are controlled by the family trust vote as one.

The purpose seems to be to “avoid impasses (between family members) that would block any votes from getting through the organization,” Brown said, adding that the structure gives the chair of the trust “some pretty unprecedented powers.”

But, he said, Rogers is still accountable to the family.

“Edward is allowed to do what he’s doing until the rest of the family step in and stop him,” Brown said.

($1 = 1.2377 Canadian dollars)

 

(Reporting by Uday Sampath in Bengaluru; Editing by Sweta Singh and Arun Koyyur)

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Walmart recalling 3,900 bottles of room spray due to possible dangerous bacteria- U.S. CPSC

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Walmart Inc is recalling around 3,900 bottles of its Better Homes and Gardens-branded room spray due to the possible presence of a rare and dangerous bacteria, the U.S. Consumer Product Safety Commission (CPSC) said on Friday.

The U.S. Centers for  Disease Control and Prevention has been investigating a cluster of four confirmed cases of melioidosis including two deaths in the country, although the source of these four infections has not been confirmed, the CPSC said.

 

(Reporting by Praveen Paramasivam in Bengaluru; Editing by Aditya Soni)

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Evergrande Faces Make-or-Break Weekend for Bond Payment – Bloomberg Markets and Finance

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