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Cineplex gets $1.24-billion in damages over botched Cineworld deal – The Globe and Mail

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Cineplex Inc. has been awarded nearly $1.24-billion in damages over a botched deal to sell Canada’s largest movie theatre chain to UK-based Cineworld Group plc last year.

The Toronto-based cinema owner announced on Tuesday that the Ontario Superior Court of Justice had ruled that Cineworld “wrongfully repudiated” the $2.18-billion deal, which fell apart during the pandemic. Both companies had accused the other of acting in “bad faith” and of breaching the terms of the deal; Cineworld filed a $54.8-million counterclaim, which the court has denied.

“We are pleased that the Court found Cineplex acted properly throughout this difficult period in our history,” Cineplex chief executive officer Ellis Jacob wrote in a statement on Tuesday. The company declined to answer further questions about the decision.

Cineworld said in a statement that it intends to appeal the decision.

The decision could set a significant precedent companies’ obligations in merger and acquisition deals that are derailed by disasters such as the COVID-19 global pandemic.

Cineworld first announced the agreement to buy the Canadian company in December of 2019, as COVID-19 was already beginning to spread around the world – and would soon force businesses around the world to close. Movie theatre box offices ground to a halt, and cinemas were faced with a fight for their survival. By June of 2020, the agreement with Cineplex had dissolved after Cineworld walked away.

Cineplex successfully argued to the court that it deserved significant compensation for the cancelled deal. The Canadian company asked for hundreds of millions of dollars in penalties, including $664-million in debt that Cineworld would have repaid or refinanced had the transaction closed, and other costs. Cineplex also asked the court to recoup the losses to its shareholders, amounting to the difference between the $34 a share that Cineworld had agreed to pay to buy the chain, and the diminished value of Cineplex’s shares, as determined by the court.

The court’s decision announced on Tuesday included $1.23-billion for lost synergies and $5.5-million for transaction costs, according to Cineworld’s statement.

At the time the deal was announced, the $34-a-share offer represented a 42-per-cent premium on the value of Cineplex’s stock. But like other cinema operators, Cineplex’s share price fell as the effects of the pandemic became clear, and took another slide when the deal fell apart. By late 2020, Cineplex’s shares were trading below $5, and closed at $11.11 on Tuesday.

A key point in the case was how both companies were obligated to respond to the unprecedented blow to the industry wrought by COVID-19. Like many contracts, the Cineworld-Cineplex agreement had a “material adverse effect” clause that laid out circumstances in which either party could terminate the deal. This deal specified that an “outbreak of illness” was not a justification to do so.

Cineworld pushed back against that detail, by arguing that it had walked away not in response to the pandemic, but because Cineplex had failed to meet another obligation in the contract to operate its business in the “ordinary course.” This raised a question as to what constituted “ordinary” business during a cataclysmic event. Cineworld said that the Canadian firm had violated that obligation by taking actions such as extending payment terms to suppliers and deferring lease payments, which it said damaged crucial business relationships. Cineplex denied this, and said that it had prudently managed capital at a time of uncertainty.

Cineplex argued, for its part, that Cineworld was acting out of “buyer’s remorse,” and did not meet its own obligations under the deal to pursue government approval under the Investment Canada Act in a timely manner – which Cineworld denied.

During the trial, Cineplex argued that Cineworld had intentionally delayed the closing of the deal, hoping that the Canadian firm would be unable to keep its debt below a $725-million ceiling required under the agreement. Cineworld countered that Cineplex had been in danger of tripping that ceiling even before its movie theatres were forced to close, and failed to disclose that to the buyer.

The transaction, which had received shareholder approval from both companies, had been expected to close by the end of June, 2020.

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Bank of Canada prepares for a long fight against inflation – The Globe and Mail

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Governor of the Bank of Canada Tiff Macklem at the Bank of Canada in Ottawa, on Dec. 15, 2021.Justin Tang/The Canadian Press

Canada is on the cusp of a series of rapid interest-rate hikes, with the central bank poised to start raising the cost of borrowing as early as next week, beginning a sustained push to bring high inflation back under control.

After nearly two years of extraordinarily low interest rates, the Bank of Canada has arrived at a pivot point. Consumer prices are rising at the fastest pace in three decades, straining the bank’s credibility as an inflation fighter. Meanwhile, there’s growing evidence that the economy is operating at or near full capacity and no longer needs emergency monetary-policy support.

The central bank’s governing council faces the biggest decision since Governor Tiff Macklem took charge in June, 2020: whether to pull the trigger next Wednesday and start the process of normalizing interest rates; or whether to hold off until March to provide additional stimulus through the Omicron wave of the pandemic.

Bank of Canada rate hikes are coming, but that doesn’t mean a recession will follow

Today’s inflation is a problem the Bank of Canada can’t tackle alone

The last time the central bank raised interest rates was in October, 2018. The coming rate-hike cycle, which will see the cost of borrowing rise steadily over the next two years, is needed to tamp down rising inflation expectations and to start building up an interest-rate buffer before the next downturn. But it will also test the strength of Canada’s economic recovery, as well as the vulnerability of heavily indebted households.

“Private-sector debt is something that the Bank of Canada has to keep an eye on, particularly because the rate hikes that we’ll do in the next two years could affect the rates that people pay in renewing mortgages in 2024 and 2025 that they may have taken out at very low interest rates,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in an interview.

“And while we’ve put households to a [stress] test to ensure that they will be able to pay those higher rates, it will still put a big squeeze on their spending power,” he said.

Bank of Canada officials said in December that they did not expect to raise the policy rate – which has been held at 0.25 per cent since early in the pandemic – until April at the earliest. Since then, however, they have received a string of data releases showing the strength of the labour-market recovery, a record jump in home prices and a sharp rise in expected inflation and wage growth.

A central-bank survey of businesses, released Monday, found that two-thirds of respondents expect inflation to remain above 3 per cent for the next two years – a potent signal for policy makers. Meanwhile, 80 per cent said they intend to raise wages faster next year compared with last year to attract scarce labour. On Wednesday, Statistics Canada reported that the consumer price index rose 4.8 per cent in December, the fastest annual pace of growth since 1991.

This data pushed a number of analysts to revise their interest-rate forecasts. Economists at Bank of Nova Scotia, National Bank and Laurentian Bank pencilled in a rate hike for Jan. 26. Other private-sector economists expect a March liftoff, although most say a rate hike next week is possible.

Market pricing for overnight index swaps suggests an 83-per-cent chance that the bank moves next week, according to Refinitiv data.

“The bank basically has a free option [to raise rates next week],” National Bank rates strategist Taylor Schleich said. “The economy is screaming that we need interest-rate normalization, and now the banks and the markets are kind of allowing them to do it. So you may as well take it.”

Mr. Macklem has not spoken publicly since mid-December. But he used his last speech to tee up a possible shift in January, noting that inflation was “well above our target, and we are not comfortable with where we are” – strong language for a central banker.

The bank’s latest projection shows the rate of inflation falling to close to 2 per cent by the end of 2022, and bank officials believe that many of the supply chain problems that have been pushing up consumer prices will normalize over the coming year.

At the same time, Mr. Macklem and his team expressed concern in December that higher wage growth and rising inflation expectations could feed into “second-round” price pressures and become baked into higher inflation.

The Bank of Canada is not alone in manoeuvring into place for rate hikes. After spending much of last year arguing that high inflation would be relatively short-lived, central bankers in many advanced economies changed their tune in the final months of 2021. The most significant turn came from the U.S. Federal Reserve, which is dealing with the highest inflation of any advanced economy and strong wage growth.

At its December meeting, the Federal Open Market Committee decided to accelerate the end of its massive asset purchase program. Minutes from the meeting released in early January showed Fed officials expected to raise rates “sooner or at a faster pace than participants had earlier anticipated,” setting up a possible March rate hike.

This change in the Fed’s narrative spurred a sharp repricing in global markets. Fixed-income securities sold off in expectation of rate hikes. Equity markets stumbled, with notable declines in growth stocks that greatly benefit from ultralow interest rates when calculating future cash flows.

“The BoC probably does not look to the Fed for validation and they make decisions based on their policy frameworks and analysis,” Jason Daw, Royal Bank of Canada’s head of North America Rates Strategy, said in an e-mail. “But one area that a hawkish Fed makes it slightly easier for the BoC to raise rates is less appreciation pressure on the Canadian dollar than otherwise.”

It’s taken a long time for the Bank of Canada to get to the point where rate hikes are a possibility. It began shrinking its government bond-buying program, known as quantitative easing, in the fall of 2020, and ended the program in October. It is now in what it calls the “reinvestment” phase, where it’s only buying government bonds to replace maturing assets it already owns.

The central bank’s next move depends largely on whether it wants to wait until after the current COVID-19 lockdowns in Ontario and Quebec are lifted, said Mr. Shenfeld of CIBC. He added that the trajectory of rate hikes over the next few years matters more than whether the bank starts hiking in January or March.

“The exact timing of these rate hikes is important to people doing high-frequency trading. But not of that much importance to where the economy ends up a year or two down the road, which is what the Bank of Canada is really targeting,” he said.

Derek Burleton deputy chief economist at Toronto-Dominion Bank, said he expects the bank to bring its policy rate back up to around 2 per cent over the coming years, although policy makers could move haltingly.

“There may be a bit of probing, they may have to hike a few times, see how it plays out on the economy,” Mr. Burleton said.

“I think one of the questions, and this is more directed at central-bank tightening globally, is whether we go through periods of financial-market turbulence, and that could be a factor that could delay a steady tightening.”

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Evive Nutrition recalling smoothie product because of cyanide poisoning risk – CP24 Toronto's Breaking News

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OTTAWA — Evive Nutrition Inc. is recalling its Immunity Super Functional Smoothie because it contains raw elderberries that may cause cyanide poisoning.

The Canadian Food Inspection Agency says the recall of the product sold online was triggered by consumer complaints, noting there have been reported illnesses associated with the product.

The agency says raw elderberries naturally contain cyanogenic glycosdies, which can release cyanide after being eaten.

It says that while the body can process small amounts of cyanide, larger amounts can result in poisoning and could lead to death.

Symptoms of cyanide poisoning include weakness and confusion, anxiety, restlessness, headache, nausea, difficulty breathing and shortness of breath, loss of consciousness, seizures and cardiac arrest.

The agency says it is conducting a food safety investigation that may lead to the recall of other products.

This report by The Canadian Press was first published Jan. 22, 2022.

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COVID-19 antiviral treatment arrives in Nova Scotia – CBC.ca

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Nova Scotia says 900 treatment packages of the COVID-19 antiviral drug have landed in the province, but plans for prescribing Paxlovid are still being finalized.

The Health and Wellness Department said it is working to make the supply available “as soon as possible,” and details about the distribution of Pfizer’s Paxlovid are still being worked out with stakeholders including Nova Scotia Health.

Earlier this week, Health Canada approved the oral antiviral treatment designed to help the body fight off the virus, reduce symptoms from an infection and shorten the period of illness.

Dr. Lisa Barrett, who treats COVID-19 patients and will prescribe the therapeutic once it starts rolling out, said a plan for distribution could take another few weeks.

But she said the first 900 treatment packages will help 900 people. The drug is taken twice a day for five days. 

Dr. Lisa Barrett is an infectious disease specialist based out of Dalhousie University in Halifax. (CBC)

It will be made available to the most vulnerable, including those who are not fully vaccinated for one reason or another and people over the age of 50 who have a risk factor such as being a transplant or cancer patient. 

“We’re hoping that it’s going to make a difference for the most vulnerable people,” said Barrett in an interview on Thursday.

“This is for people at the highest risk of disease and we don’t want them to have to shield anymore at home.”

Barrett noted the medication is designed to reduce hospitalization and death. The hope is that it will help alleviate pressures on the health-care system, she said.

Recognizing the limitations

She also said the fact that the drug is only trickling into the province at this point does not concern her because it was studied on unvaccinated people who were at high risk with the Delta variant. 

“It’s not clear yet if there is as much of a benefit to preventing hospitalization and death in people who are partly vaccinated, but not fully, against Omicron,” said Barrett.

“I want people to be aware we’re not completely devastated that we don’t have hundreds of thousands of doses of this because we think it’s helpful but not for the whole population.

“It’s good to recognize the limitations of the data and where we sit right now.”

Barrett said those in the vulnerable population group should be tested as soon as possible if they have symptoms and report any positive results to Public Health and their doctor.

Doctors will be able to refer their patients to receive the drug. Those referrals will be reviewed and the patient will be contacted about how to receive the treatment.

She said outbreaks in hospitals and long-term care homes will also be monitored as a way of identifying people at risk who may need the treatment. 

Recent approval of drug ‘great news’

On Monday, Canada’s Chief Public Health Officer Dr. Theresa Tam said Health Canada’s approval was “great news” because Paxlovid could drive down severe outcomes in the current wave and beyond.

Paxlovid combines a new drug developed by Pfizer called nirmatrelvir with an existing antiretroviral drug named ritonavir, a low-dose HIV drug that helps nirmatrelvir remain active in the body longer.

After months of clinical trials, Pfizer reported in November that Paxlovid reduced the risk of hospitalization or death by 89 per cent compared to a placebo in non-hospitalized high-risk adults with COVID-19.

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