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.
Changes are coming for Ontario’s Hydro One, and it looks like shareholders might have a say in selecting the utility company’s next board of directors. On Wednesday Hydro One announced that it had reached an agreement with the Province’s newly elected Conservative government that will see the company’s current board resigned, and replaced, this coming August. The board is currently comprised of directors selected back in 2015 during the company’s initial privatization. The privatization of Hydro One was arguably one of Wynne’s more controversial moves during her tenure as Premier. In 2015 the province made an initial public offering of 81.1 million shares (approximately 13% of the company) on the Toronto Stock Exchange – representing the largest IPO Canada had seen in over a decade. Two additional sales were made, eventually diluting the Province’s ownership of the utility to approximately 47%. While investors have been calling for changes at Hydro One, it seems that a change in the board’s composition might not have been at the top of their list – share prices fell following the announcement. Experts are worried that the exit of the board in its entirety might have negative consequences for the company, as it has been left effectively leaderless.
One year after an OSC panel found that Sino-Forest and several of its former executives had “perpetrated one of the largest corporate frauds in Canadian history”, the Ontario Securities Commission has announced the sanctions that will be hitting the former company. On Wednesday the OSC ordered that ex-Sino-Forest chief executive Allen Chan, in addition to several other officers, would be permanently barred from buying or trading in any securities, or from becoming or acting as directors or officers of publicly traded companies. The commission went on to hit Chan with a $5-million administrative penalty, and demand that Chan disgorge nearly $60.3 million to the commission – a relatively high number many are saying shows that the OSC intends to take a tougher approach to sanctioning. Sino-Forest’s legal woes date back to 2011, when the company was first accused of fraud by the RCMP and OSC. The company had been operating since the 1990s, and claimed to be a leader in tree plantation management in mainland China. The company ultimately collapsed when it was determined that Sino-Forest’s assets and revenue were largely fictional (approximately 70%), a fact that lead Muddy Waters LLC (the group that first brought Sino-Forest onto the public’s radar) to dub the company a “Ponzi scheme”.
The greatest outdoor show on earth is in full swing, but it looks like the Calgary Stampede isn’t the only action happening out west! On Wednesday LNG Canada got together to talk about progress on their proposed Kitimat B.C liquified natural gas (LNG) facility.The project has been in talks for a while, and while a final investment decision isn’t expected until the end of the year – industry experts are placing bets that the $40-billion facility will be moving forward. So just what is ‘LNG Canada’? The group was formed back in 2011 by Shell, PetroChina, Malaysia’s Petroleum National Bhd., Korea’s KOGAS and Japan’s Mitsubishi Corporation, with the intent of building an LNG export terminal on the coast of British Columbia. The facility will convert Canadian natural gas into a liquid form, allowing it to be shipped via tanker to Asian markets. Finding a way to get Canada’s petroleum products to international markets has been a source of controversy in recent years, with arguments over proposed pipelines dominating headlines. If LNG Canada does move forward with the proposed Kitimat facility it will go a long way toward granting Canada access to the energy-starved Asian markets, and provide Canada’s energy sector with a much-needed boost.
Speaking of reaching Asian markets, this week another major Canadian company announced an expansion overseas, and while it might not be as necessary as energy – it’s decidedly more delicious. On Wednesday Tim Hortons announced a plan that will see the company peddle doughnuts through more than 1,500 Chinese storefronts. The expansion is the result of a partnership with NY-based private equity firm Cartesian Capital Group, who has worked with Restaurant Brands International (the Brazilian-based owner of Tim Hortons) to develop an Asian fast food footprint (do the names Popeyes and Burger King ring a bell) in the past. So why China? While the country’s booming economy makes it attractive to almost any industry, in recent years China’s young, white-collar generation has been looking to coffee to fuel their lifestyle. While the success of other coffee shops has definitely given Tims a confidence boost (Starbucks, for example, opens a new Chinese location every 15 hours), Canadian analysts remain unconvinced. Tims may be iconic in Canada, but the brand doesn’t carry the same cachet as Starbucks or McDonald’s McCafe overseas.
And finally, the past few weeks we’ve spent time commenting on shakeups in the entertainment industry. Cirque du Soleil is expanding, Disney and Comcast are in a bidding war for 21st Century Fox, and back in June AT&T closed on a deal to buy Time Warner….. or so we all thought. On Thursday the U.S. Justice Department filed an appeal of the AT&T-Time Warner deal, arguing that the $85.4 billion agreement was harmful to competition and consumers. Mergers between entertainment industry giants have become increasingly common as conventional providers struggle to stay relevant in our increasingly digital world. Companies that once dominated the small screen are fighting to stay relevant, as tech companies Netflix, Amazon and Hulu eat up consumer’s time – and spending power. The Justice Department’s filing is recent, and while as of press time the Department has yet to comment, the appeal sends a clear signal to other industry players about how mergers between entertainment giants will be treated moving forward.