This week saw an interesting development in a proposed takeover transaction. Back in December, shareholders in Aecon Group Inc. voted to approve a $1.5-billion takeover of the Canadian construction company by a Chinese state-owned CCCC International Holding Ltd. Aecon is a leader in Canadian construction, having built many of the country’s construction landmarks including the CN Tower, St Lawrence Seaway, Vancouver Sky Train and Halifax Shipyards.While the deal has received both shareholder and director approval, it is currently stuck in regulatory limbo. Due to the fact that Aecon’s proposed buyer is a state-owned enterprise the transaction has triggered a ‘national security review’ – and this review process has taken longer to complete than expected.This week, a new hiccup in the proposed takeover process came to light. If Aecon’s takeover by Chinese state-owned CCCC is approved, the new company would likely bebarred from bidding and working on the Gordie Howe International Bridge – a highway bridge that will connect Windsor to Detroit. Currently, Aecon is part of a consortium that is bidding to build and manage the $4.8-billion project which is slated to be a key crossing for both people and goods across the Canada-U.S. border. The company that ultimately builds and operates the Gordie Howe bridge will have significant insight in to the flow of goods and people (including military components and personal) between Canada and the United States. With the relationship between China and the United States decidedly terse, it seems unlikely that the current administration would be willing to select a Chinese state-owned enterprise as the bridge’s developer. This in turn throws the future of CCCC’s takeover of Aecon up in the air – the bridge is a lucrative project, and one that has been flagged as a priority by the federal government. It is possible that the federal government – currently the only barrier to the completion of the takeover transaction – might suggest that it is not worthwhile for the transaction to be completed.
Continuing on the China/U.S.A conversation – this week saw new developments in the ongoing trade war between the two nations. On Friday China warned that it was prepared to launch a ‘fierce counter strike’ of trade measures if U.S. President Donald Trump implements his proposed tariffs on US$100 billion in goods. Friday’s statement is merely the latest stage of the ongoing trade saga, which has been ‘tit-for-tat’ over the past few weeks. We first commented on the story back in March, when President Trump instructed U.S. Trade Representative Robert Lighthizer to levy at least US$50 billion in tariffs on Chinese Imports. China did not take the threat lying down, and the country’s Commerce Ministry announced plans to impose tariffs on US$3 billion of imports immediately following the United State’s announcement. This Thursday President Trump responded to China’s ‘unfair retaliation’ against earlier U.S. trade actions and ordered officials to identify additional room for tariffs, with the goal of increasing the tariff total to US$100 billion. The ongoing trade war between the two economic superpowers has had a significant impact on the global community at large. Financial markets have gone into chaos as investors worry about the trade wars impact on world trade and growth, and the value of the dollar.
This week saw a change in control at CanniMed Therapeutics as the company prepares for the completion of it’s takeover by Aurora Cannabis. On Monday CanniMed CEO and co-founder Brent Zettl resigned effective immediately. The CanniMed/Aurora transaction has dominated headlines since it’s announcement last year. The transaction started out as a hostile takeover bid, with Aurora entering into a lock-up agreement with four major CanniMed shareholders.CanniMed’s management retaliated by adopting a tactical shareholder rights plan, which was in turn challenged in court (and ultimately stuck down as an improper defensive tactic). Ultimately, corporate management was able to work together and reach a friendly merger agreement. With Zettl stepping down, Aurora’s senior vice president of business integration has been appointed as interim chief executive, and will likely continue in the role as the merger moves towards completion.
It look’s like Canada’s iconic coffee and donut chain has had a less than sweet week. According to NATIONAL Public Relations and Leger’s 2018 Corporate Reputation Study, Tim Horton’s dropped from 4th place to 50th in a ranking of the 100 companies Canadians most admire.What caused the drop? Analysts are blaming Tim Horton’s repetitional hit on a combination of the company’s difficult start to 2018, and the growing power of millennials. In January, protestors hit the streets chanting “hold the sugar, hold the cream, Tim Hortons don’t be mean”in response to cuts to the company’s employee benefit plans (albeit, the cuts were made in the wake of Ontario’s new minimum wage). Trouble sprung up again in March, when franchise’s across the country were forced to close after a computer virus interrupted the chain’s digital payment system. As for millennials, this was the first year that the millennial group added their views to the mix – and the younger generation made their presence known. Companies like Samsung, Netflix and Amazon used their reputation with millennials to move up through the ranks, while older classics (such as Tim Hortons) paid the price.
And finally, on Thursday, Statistics Canada reported that Canada posted a trade deficit of $2.7 billion in February, compared to $1.9 billion in January. Economists had expected a deficit of $2 billion for 2018’s second month, and are blaming the large deficit on an increase in energy imports which hit their highest level since November 2014 (the country saw imports in crude oil and refined petroleum products grow 15.4% and 24.1% respectively). Exports did manage to increase 0.4% when compared to January, largely driven by growth in the motor vehicle (5%) and aircraft/other transport sector (19.6%). March is expected to see some recovery, but trade does remain a major source of worry for the Canadian economyExports have struggled, and with global trade agreements like NAFTA left up in the air, the future is less than certain.