By Tegan Valentine
First up – an update on the proposed Kinder Morgan Trans Mountain pipeline expansion project. This Thursday, Canada’s Environment and Climate Change Minister Catherine McKenna published an open letter to B.C. Environment Minister George Heyman outlining the steps that Ottawa has taken to prepare for a potential spill involving the proposed pipeline, and offering scientific collaboration with the province to ensure its concerns are addressed. The letter, which goes on to call the development project “vital infrastructure”, was written in response to the filing of a B.C. reference case that will question whether the province has the power to regulate the flow of oil and gas across provincial borders. B.C. Premier John Horgan’s decision to send draft legislation to the B.C. Court of Appeal on Thursday is the latest legal hurdle facing Texas-based Kinder Morgan, whose proposed expansion project has attracted controversy since 2013.
Last week, we outlined labour woes impacting the Canadian Pacific Railway (as an update, unions at CP Rail agreed at the last minute to postpone a strike, however experts believe a strike is still ‘inevitable’). This week, yet another Canadian transportation company is facing a possible labour disruption – WestJet’s main pilots’ union is calling for a strike vote that could theoretically lead to a job action by the middle of May. The labour dispute is the first major test new CEO Ed Sims will face as head of the company. As a reminder, Sims stepped into the CEO job back in March, after long-term leader Gregg Saretsky suddenly walked away from the role. When Saretsky left, many wondered if the deterioration of the relationship between employees and management could be a factor behind his quick “retirement.” While the motivation behind Saretsky’s departure was never directly addressed, Sims did state earlier this month that management intended to reach a first agreement with unionized pilots within the year. One company seems to be happy about the impending strike: Air Canada announced this week that the company is prepared to adjust its schedules and capacity to “limit disruptions for the traveling public” and “ensure that customers get to their destinations in the event of a labour disruption”.
A power shakeup occurred at a major loyalty company this week. On Thursday, Aimia Inc. – best known for its Aeroplan loyalty program – announced that CEO David Johnston would be stepping down. The company’s board of directors announced that the decision was ‘mutually agreed upon’, but did not provide the public with any additional information. The announcement comes during a time of uncertainty for Aimia. The company has seen poor performance and a plummeting share price in recent years, and shareholders have been quick to point the finger at management. Indeed, 22NW Fund LP – a Seattle-based fund and shareholder in Aimia – has threatened to vote against the company’s existing board of directors at today’s annual meeting. The company’s fall from grace is largely tied to two major events. First, Aimia Inc.’s board and Air Canada – a significant source of Aeroplan business – failed to reach an agreement late-2017. This means that as of 2020, Aimia and Air Canada’s 30-plus year partnership will come to a close. Second, in early February Aimia chose to sell its British loyalty program ‘Nectar’ to Sainsbury’s grocery stores. Nectar was the largest part of Aimia’s international business unit, and its sale triggered a 17% drop in share price almost immediately.
On May 3, shareholders of Canada’s largest food retailer will be asked to vote on an important issue. At Loblaw Companies Ltd.’s annual meeting, shareholders will be asked to vote on a proposed rule which would require that the role company chairman is filled by an independent director. The proposal has been opposed by management. Currently, Galen G. Weston serves as both the Chief Executive and Chairman of the board for the massive retailer. Weston inherited the role of chairman from his father in October 2006. Throughout his tenure, Weston has undertaken a variety of successful projects including the acquisition of Shoppers Drug Mart for $12.4-billion in 2014. This success has been overshadowed as of late, as conversations about the company’s involvement in a bread price-fixing scheme and recent customer loyalty points theft have dominated the headlines. The new shareholder proposal, which has been put forth by the B.C. Government and Service Employees’ Union general fund, is being presented as a way to improve corporate governance and increase shareholder value. In light of recent company developments, shareholders may be persuaded on May 3.
And finally, another group of Canadian shareholders will be asked to make an important decision at an upcoming annual meeting. On Thursday the board of Montreal-based DavidsTea announced that the company’s co-founder Herschel Segal is attempting to gain control of the company through the election of seven individuals to the company’s board of directors. Segal was forced to resign from his role on the board of the company on March 5, and the current board has stated that Segal is “the architect” of many of DavidsTea’s financial and operational challenges. Currently Segal indirectly controls a sizeable portion of DavidsTea as president of Rainy Day Investments Ltd., which holds 46% of the company’s outstanding shares. DavidsTea’s board of directors is urging shareholders to vote against Segal’s proposed board members, and they are not alone. Porchlight Equity Management LLC, TDM Asset Management PTY Ltd. and Edgepoint Wealth Management Inc. – three companies who collectively own 36.5% of outstanding stock – have expressed concerns over the proposed director nominees and RDI’s announcements.