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.
The federal government has spoken and it appears that Canadian construction company Aecon Group Inc. will notbe sold to China’s CCCC International Holding Ltd. On Wednesday, Innovation Minister Navdeep Bains stated that after reviewing the proposed $1.5 billion transaction under the terms of the Investment Canada Act, the government had determined that the sale of Aecon to CCCI would be a threat to national security. The Investment Canada Act is the Canadian federal law that governs large foreign direct investment in Canada, and is typically invoked in situations where an investor acquires control of a Canadian business. In 2009 the Act was significantly amended by the Government, with the most notable amendment arguably being the decision to include a ‘national security’ override feature which allows government officials to block a transaction that is “injurious to national security”. The definition of ‘injurious to national security’ is intentionally vague, but the Government has historically used this power to review – and reject – proposed investments in Canada by state-owned enterprises. The review of the Aecon-CCCI transaction is an example of this law, and its application as a tool for preventing significant investments in Canada by SOEs, especially when the investment in question deals with a company intimately involved in Canada’s infrastructure development and management. Despite obtaining the approval of Aecon, courts, and Canada’s competition regulator, the acquisition of Aecon by the Chinese firm has failed, leaving investors, employees and onlookers alike questioning ‘what’s next’ for the infrastructure giant.
Kinder Morgan may still be tackling a seemingly endless list of challenges as it struggles to twin its Trans Mountain pipeline system, but the company was handed a victory this week. On Thursday, the Supreme Court of British Columbia threw out two legal challenges to the project which argued against the British Columbia government’s decision to issue an Environmental Assessment Certificate (EAC) for the multi-billion dollar project.The two challenges were put forward by the City of Vancouver and the Squamish Nation in two separate legal actions. The Squamish nation alleged that B.C. failed to fulfill its duty to consult when it decided to issue an Environmental Assessment Certificate for the project, while Vancouver argued that the decision process undertaking by B.C. in issuing the EAC lacked procedural fairness. The Court issued a single set of reasons for the two applications (Squamish Nation v British Columbia (Environment), 2018 BCSC 844), ultimately deciding that the decision-making process undertaken in issuing the EAC satisfied consultation requirements, and was reasonable. This week’s rulings were favourable for Kinder Morgan but the company’s battle is far from over. With costs mounting, additional legal challenges on the horizon and the company’s self-imposed May 31 ‘green light’ deadline rapidly approaching, the future of the hotly contested project remains to be seen.
When now-President Trump campaigned ahead of the 2016 United States federal election, one of the touchstones of his campaign was a promise to roll back some of the financial reforms put in place under Barack Obama. This week, President Trump made good on that promise when he signed Bill 258 into law, effectively rolling back many of the protections put in place under the iconic Dodd-Frank Act.TheDodd-Frank Wall Street Reform and Consumer Protection Actwas enacted in 2010 and aimed to prevent America’s banks from providing risky or predatory loans, or trading in securities. Bill 258 aims to ease regulations on America’s small and midsize banks. Under the new law, smaller institutions will receive a break fromDodd-Frank’s mortgage rules if they make fewer than 500 mortgages a year. Additionally, banks with less than $10 billion in assets will now be exempted from the Volcker Rule – the element ofDodd-Frankthat prevented financial institutions from trading for their own profit. With that being saidDodd-Frankis far from erased. The new legislation does not directly impact large consumer banks, and two of theAct’s more controversial powers – the ability to designate large firms as a risk to the financial system, and the structure and powers of the consumer bureau – remain intact.
Another Friday, another update on Canada’s rapidly expanding marijuana industry. The update in question? This week it was revealed that U.S. marijuana retailer MedMen Enterprises is expected to finalize a reverse takeover of Vancouver-based Ladera Ventures Corp. next week, with the newly formed company earning the status of ‘largest company by market capitalization on the CSE’ and most valuable U.S.-based cannabis company listed in Canada. MedMen is a California-based cannabis retailer that sells legal recreational and medicinal marijuana products out of 12 licensed stores in the United States. The company is best known for its upscale retail stores, which are similar in style to Apple’s sleek, modern storefronts. Under the terms of the reverse takeover Ladera will acquire all voting securities of MedMen Enterprises, and delist all common shares currently on the TSX Venture Exchange. The reason behind the delisting? A 2017 rule passed by the TMX Group banning all marijuana firms with assets in the United States from listing on its exchanges.
And finally, on Friday Doug Finnson, head of the Teamsters Canada Rail Conference, announced that the Canadian Pacific Railway Ltd.’s unionized locomotive engineers and conductors had overwhelmingly voted to reject a three-year contract offer presented by management.Teamsters Canada has been caught up in disputes with Canada’s two primary railways (CP Rail and the Canadian National Railway) over the past few months. While CN Rail was able to reach an agreement with the bargaining unit back in March, CP Rail and the Teamsters have struggled to find common ground – with the Teamsters citing concerns regarding workers’ wages and rest policies. In April, 94% of CP’s union members voted in favour of a strike. That number has grown, with 98.1% of voters opposing the company’s most recent offer. Canada’s farmers have been following the dispute closely. Western Canada has struggled with a transportation backlog, which has left millions of tonnes of grain, fertilizer and forestry products stranded in the Prairies. In an effort to reduce the backlog the federal government has introduced new legislation (the Transportation Modernization Actreceived royal assent this week) that will penalize railways that fail to deliver rail cars for grain shipments on time. With that being said, while financial penalties provide an incentive, a company cannot deliver rail cars if it does not have conductors to drive them.