By Tegan Valentine
Hello and welcome back to Top Five Friday Finds – the weekly series in which we share five of the business news stories that dominated the papers (and our conversations) this week.
Here’s the latest update on Toys ‘R’ Us. The company’s story starts back in September, when the iconic toy store chain was forced to file for bankruptcy in Canada and the United States. The goal of the filing was simple – scrounge up $3 billion in bankruptcy financing, restructure the company, and use the upcoming holiday season as a way to revamp the company’s finances. The plan was a failure, and in March the company announced it would be closing all of its American stores, and would be looking for a buyer to take on its Canadian, Asian and Central European operations. Last week we reported on a US$900 million bid for the company put forward by Isaac Larian – the billionaire CEO of MGA Entertainment Inc. This week the offer was rejected for failing to meet the minimum terms set out by the bankruptcy court – but more bidders have come out of the woodwork. This week Canadian investment firm Fairfax Financial Holdings Ltd. submitted a ‘stalking horse’ bid equal to US$236.8 million for the company’s Canadian division. A stalking horse bid sets out the minimum amount a company will accept in an auction of its assets, and is often used to trigger a ‘bidding war’ and help a bankrupt company receive a higher price. Under the terms of the deal, Fairfax will receive a break fee of about 3% if another bidder is chosen – allowing both groups to benefit from the stalking horse arrangement.
Canada’s railways have had a difficult spring – and for Canadian Pacific Railway it seems things might be about to get a whole lot worse. This week CP Rail was forced to begin shutting down operations ahead of a possible strike set to start Saturday by both the Teamsters Canada Rail Conference and the International Brotherhood of Electrical Workers. Both CP Rail and the Canadian National Railway Co. have been in tense negotiations with the unions, and while CN and the unions reached a tentative deal last month, CP Rail has refused to budge. The strike comes at a rough time for both the railway, and Canada’s farmers. This past year has seen a significant build up of grain, which has had a significant impact on the country’s farmers. CP has been working to alleviate the backlog, but the proposed strike would cut off many of Canada’s farmers – and industry organizations are concerned. The Alberta Wheat and Barley Commission has stated that a strike would ‘cause devastating consequences’, and Alberta Barley Chair Jason Lenz has called for immediate government intervention.
Conversations about free trade have dominated the news as of late, and while this week was no exception, this weeks focus was decidedly more insular. On Thursday the Supreme Court of Canada upheld a provincial restriction on how much alcohol people are able to bring across provincial borders.The case stems from the 2012 arrest of Gerard Comeau, who had brought fourteen cases of beer, two bottles of whisky and one bottle of liqueur from Quebec to New Brunswick. Comeau argued that s 121 of the Constitution Act allows for goods to freely flow across provincial boundaries, but the SCC ultimately determined that s 121 does not impose absolute free trade across Canada. The decision is disappointing for the Canadian wine industry, which has been hampered by existing interprovincial trade restrictions. Notably, in Canada, direct-to-consumer wine sales and subscription packages popular in the U.S. are unable to operate due to restrictions on the flow of alcohol across provincial borders. In the wake of Thursday’s ruling Miles Prodan, CEO of the British Columbia Wine Institute, stated that the group will continue to work with federal, provincial and territorial governments to have inter-provincial trade barriers lifted.
Flights in Canada are notoriously expensive. In fact, Canada is consistently ranked as one of the most expensive countries for flight costs – a product of our high taxes, geographic scale, and dispersed population. This week the country’s largest air carriers launched a new, lowered ‘basic economy’ fare option for prospective passengers.The new offering mirrors basic economy packages sold in similar markets such as the United States. With airline fares dropping around the world Canada’s airlines likely were forced to begin offering discounted rates, or risk angering (and losing) customers. The new rates are not without drawbacks. Basic economy passengers can’t request upgrades or change a reservation, and won’t be eligible to earn loyalty points such as Aeroplan miles and WestJet dollars. But for savings of $20+ dollars over regular economy fares, many will likely find the sacrifice worth it.
And finally, an update on NAFTA. This Thursday and Friday representatives from the United States, Canada and Mexico met to discuss the future of the hotly contested free trade agreement.Conversations about the future of the North American trade union have been both tense and tedious, throwing the continent’s markets into chaos. This week the countries are said to have concluded conversations surrounding telecommunications, and while progress is promising, more important issues (such as the future of the automobile sector) remain unresolved. The nations are certainly taking their time, and while it is frustrating for many, Canada’s Foreign Minister Chrystia Freeland said this week that the slow process will ultimately be beneficial for Canada as “we need to take the time it takes to get a good deal”.