Friday News Finds – February 16, 2018

By Tegan Valentine

It’s been a rough few years for Canadian retailers. First we lost Zellers – an iconic Canadian department retailer. Then, Zellers’ successor, Target Canada, collapsed in what remains one of the biggest US expansion failings in Canadian history. These failures shocked shoppers, however it was the end of Sears Canada – once one of nation’s largest and most profitable department stores – that rocked shoppers and business owners alike. While the initial shock of the company’s 2017 liquidation announcement has worn off, the consequences of Sears Canada’s collapse continue to make themselves known. On Thursday, lawyers acting on behalf of the retailer’s pensioners made a motion to appoint a litigation trustee in the company’s bankruptcy process. The target of the pensioners complaint is approximately $2.9 billion in special dividends paid out to Sears Canada’s shareholders between 2005 and 2013 despite the company’s failing business. If appointed, a litigation trustee would review and consider any potential litigation issues that could be brought against the company to gain additional funds for pensioners.

Trade disputes with the United States have dominated Canadian headlines of late, but it looks like a new conflict will soon be popping up on your radar. On Tuesday, U.S. Commerce Secretary Wilbur Ross announced a new anti-dumping and countervailing duty probe into six countries – including Canada. In 2016, Canada shipped about $66 million worth of pipe product to the United States. According to U.S officials, pipe products from Canada, China, Greece, India, Korea and Turkey have been dumped into the U.S. market at artificially low prices, impacting domestic producers. The new probe comes mere days after President Trump complained about Canadian trade practices, stating “Canada does not treat us right in terms of the farming and the crossing the boarders, we cannot continue to be taken advantage of by other countries”. This latest announcement comes when trade tensions between Canada and the USA are at an all-time high, with the future of NAFTA up in the air, and arguments about the sale of softwood lumber and Bombardier ongoing.

On Wednesday the Canada Revenue Agency announced they had executed three search warrants as part of their Panama Papers criminal investigation. The investigation is the result of an April 2016 data leak, in which a global group of media outlets – including the CBC and Toronto Star – exposed the financial secrets of heads of state, athletes, billionaires and druglords. The 11.5 million documents indicated that these high net worth individuals had been establishing shell companies in Panama to avoid taxation. While offshore accounts themselves are not inherently illegal, the leaked records were significant for two reasons. First, the accounts were frequently used to mask illegal activities. Second, many of the accounts were held by prominent individuals with the intent of skirting taxation.

It’s officially that time of year – the time when analysts and investors jump to high alert as companies begin to release their financial results for the final quarter of 2017 and the previous fiscal year. It looks like many household names ended the year strong, beating the street’s expectations! Air Canada’s efforts to improve operating margins, expand low-cost carrier Rouge, and add additional flight routes paid off as the company saw operating revenue rise 11.5%. The company earned 22 cents per share for the final quarter of 2017 – beating analyst predictions of 14 cents per share. Pipeline operator Enbridge Inc. saw increases in the shipment of crude oil across its Mainland system, earning 61 cents per share – an average of 5 cents higher than analyst predictions. And finally, Canadian Tire’s strong sales during the critical holiday shopping season drove allowed the company to best expectations, with actual revenue totalling $3.96 billion (up from $3.64 billion the previous year). Not all Canadian companies faired so well. Barrick Gold (the largest gold producer in the world) reported a net loss of $314 million, compared to earning of $425 million one year previously.

And finally, the Weston family’s Choice Properties has officially begun its quest to acquire Canadian REIT. On Thursday, Choice Properties Real Estate Investment Trust – the real estate arm of Loblaws – agreed to buy Canadian Real Estate Investment Trust for $3.93 billion. The deal will create Canada’s largest REIT, with an enterprise value of approximately $16 billion, 752 properties, and 69 million square feet of leasable space. According to Loblaws, the acquisition was undertaken to add commercial property to Choice’s portfolio. Choice’s acquisition is on trend – REITs in Canada have focused on adding commercial property to their portfolios in recent years, as demand for warehouses and offices grows while interest in traditional property – such as shopping malls – declines in the era of online shopping.