Friday News Finds – May 4, 2018

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.

Troubles continued to brew this week for Restaurant Brands International (RBI) – the Brazil-based owner of Canada’s classic coffee company Tim Hortons. Last monthwe commented on a list of grievances filed by the Great White North Franchise Association (GWNFA). The GWNFA alleged that RBI had failed to maintain franchisee relationships, had altered the company’s rent and royalty structure, and had caused a drop in employment levels in the years following their 2014 takeover of the iconic coffee brand. Relations between GWNFA and RBI have continued to sour, and this week, the U.S. chapter of the GWNFA filed suit in Miami, Florida over a contract clause they say forces all litigation between franchisees and their parent company to be handled in a federal court in Florida.According to the franchisees’ lawyers, this particular lawsuit is simply a precursor to a broader franchisee lawsuit, which will allege that RBI has misused money from an advertising fund to offset overhead expenses, and has harmed franchisee profits by artificially inflating the price of goods that franchisees are required to buy from head office (for example, employee uniforms). GWNFA’s Miami lawsuit is eerily similar to a suit launched in Canada last year, which saw a group of Canadian franchisees file two class action lawsuits against their new parent company. These suits alleged that RBI had misused ad funds, and fostered a hostile, oppressive relationship with franchisees. To date, these Canadian actions have yet to receive court certification. GWNFA’s Miami lawsuit comes at a difficult time for RBI, and Tim Hortons in general. Sales have fallen throughout the new year, and the relationship between management, employees, and franchisees has steadily deteriorated.

Here’s another update on an ongoing story – this week Justice Minister Jody Wilson-Raybould announced that the federal government will intervene in British Columbia’s reference case regarding the proposed $7.5-billion Trans Mountain pipeline expansion project.The announcement comes on the heels of B.C. Premier John Horgan’s decision to send draft legislation to the B.C. Court of Appeal. Horgan’s filing would require the court to address whether the province has the power to regulate the flow of oil and gas across provincial borders. Ottawa has leant its support to the Trans Mountain project since 2016, and both Wilson-Raybould and Prime Minister Trudeau have vowed that the pipeline project will be built.

The future of the North American Free Trade Agreement is still up in the air, and the automobile sector is among the industries most impacted by the uncertainty. Without NAFTA, truck exports to the United States from Canada would face a steep 25% tax, and many experts and analysts predict that in a NAFTA-less would, manufacturers would be forced to a relocate production from Canada’s automobile heartland, south of the border.Uncertainty about the future of Canada’s automobile sector has had a significant impact on investment and growth in the sector recently, however it appears that at least one manufacturer is interested in betting on Canada. Toyota Motor Corp., a popular Japanese automaker best known for its Corolla and RAV4 brands, made an announcement Friday afternoon that set out plans for a $1.4 billion expansion of its Canadian operations. The expansion has the support of both the federal and provincial governments – both financially (the project is expected to have $110 million in both federal and provincial funding), and physically (both Prime Minister Justin Trudeau and Ontario Premier Kathleen Wynne were present for the automaker’s announcement). The new facility will be based in Cambridge, Ontario, and is expected to create 450 new jobs.

The consolidation trend continued this week in Canada’s cannabis sector! On Thursday, medical marijuana producer MedReleaf Corp. released a statement confirming that it had discussed ‘various merger alternatives’ with other marijuana producers.Among said producers? Aurora Cannabis Inc. – a massive cannabis producer who first made headlines back in 2017 after launching a hostile takeover bid for fellow marijuana producer CanniMed Therapeutics. The two companies have since entered into a friendly merger agreement, resulting in the creation of Canada’s largest cannabis company.MedReleaf’s announcement was triggered by the Investment Industry Regulatory Organization of Canada’s decision to halt trading of MedReleaf Corp. and Aurora Cannabis Inc.’s shares. Both companies had seen share price volatility after the Globe and Mail first reported that MedReleaf had been seeking a buyer. While both MedReleaf and Aurora have refused to confirm whether an acquisition is in the future, experts have expressed their belief that this transaction would be consistent with Aurora’s ‘growth by acquisition’ corporate strategy.

And finally, on Friday, Canada-based construction company Aecon Group Inc. announced that it will no longer be part of a private group bidding to build and operate the Gordie Howe International Bridge. The bridge, which will connect Canada and the United States, is a $4.8 billion crossing project with construction expected to start this fall. The decision to withdraw from the bidding conglomerate is likely tied to a proposed takeover transaction, which would see Aecon become a part of Chinese state-owned CCCC International Holding Ltd. CCCC’s proposed takeover of Aecon has been controversial since first being approved by shareholders back in 2017. The federal government announced it would be launching a full national security review of the Aecon deal back in February, and the federal government has been warned to proceed with caution when considering any significant transactions involving Chinese state-owned enterprisesCCCC’s acquisition of Aecon was especially controversial given the company’s potential involvement with the Gordie Howe Bridge Project. In early 2018 industry experts warned that U.S President Donald Trump would likely reject Aecon’s involvement in a major border crossing should it be taken over by a foreign state-run company – especially when the state in question is China.