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.
First off – congratulations are in order! This week, the one and only Apple Inc. set a new record and became the first US publicly listed company to reach a $1 trillion market capitalization. Apple first hit the stock market in 1980, and has seen relatively consistent growth ever since. The company’s stock has increased more than 50,000% over the past 40+ years, with share prices rising 9% since this Tuesday alone. Apple was founded by Steve Jobs back in 1976, and while many feared the company would collapse following his death in 2011, Jobs’ heir Tim Cook hasn’t let his predecessor down. Apple’s new record came on the heels of the company’s second-quarter results, which ended above expectations due to strong revenue growth across the company’s iPhone, Services and Wearables business units.
In case you missed it, last week Air Canada shocked the market and announced an offer to buy Aimia Inc.’s Aeroplan program for $2.25 billion We’ve written about it before, but to provide some background – earlier this summer Air Canada made headlines when it announced that it would be parting ways with its longtime loyalty program provider Aeroplan. Onlookers were concerned about the impact leaving Aeroplan would have on both companies, however no-one was expecting that the iconic airline would consider submitting a bid to buy the program. With that being said, don’t worry if Air Canada’s bid slipped your radar – on Thursday Aimia announced that negotiations between the two companies have collapsed, and that the company would be looking for alternative buyers or partners. Initial speculation pegged Oneworld airline alliance as Aeroplan’s new suitor, and while a partnership with the alliance could still be reached, today Aeroplan announced that it had reached a deal with Porter Airlines. The privately held Porter is significantly smaller than Air Canada, offering routes exclusively between major eastern cities (ex. Toronto, Montreal, Chicago and New York City). This may negatively impact western-based Aeroplan holders, however to their credit, Porter has indicated their hope that a partnership with Aeroplan will allow the company to continue to grow across the nation.
We’ve already spoken about two major Canadian airlines – why not talk about a third? WestJet Airlines Ltd. launched Swoop (an ultra low cost airline) this summer, and this week, the company unveiled plans to offer discounted flights to the United States – making Swoop the first ultra low cost carrier to provide flights between Canada, and the United States. Canadian airfare is notoriously expensive, and WestJet’s Swoop sparked celebration across the country when it was first announced in 2017. Swoop’s business model is based on similar airlines in the United States and Europe, which allow customers to pay lower ticket prices, in exchange for ancillary fees (think fees for carry on bags, premium seats and Wi-Fi). Swoop marked the first foray of a major Canadian airline into the realm of low cost service, and while the WestJet name has provided customers with a certain degree of trust and security (and granted the airline access to major routes and airports), Swoop is not the only low cost carrier operating in the great white north. Flair Airlines started service in 2005 and offers domestic flights between 10 Canadian cities (including Edmonton, Winnipeg and Abbortsford). Meanwhile, AirTransat flies exclusively to vacation destinations, offering flights from 19 Canadian cities to 63 distinct vacation destinations. Swoop began operations in June, and while WestJet closed out the second quarter of 2018 with less than stellar results, the company is optimistic that Swoop’s expanded offerings will improve corporate performance by the end of the year.
A new intoxicating beverage is coming to Canada – and no, it’s not alcoholic. This week Quebec-based cannabis company Hexo and Canadian icon Molson Coors announced a partnership that will see the two companies work together to create a non-alcoholic, cannabis-infused drink for sale in Canada. The two companies will be forming a standalone company, with Molson set to control 57.5% of the new venture. Marijuana is big business in Canada. Justin Trudeau used the legalization of cannabis as a major platform when he ran for federal election in 2015 and, as of October 2018, Canada will be the second country in the world (and the first G7 nation) to make the consumption of recreational marijuana legal. The legalization of cannabis has benefitted the Canadian economy, and the industry is currently valued at $31 billion. The sector is slated to continue to grow in the wake of legalization, and while much of the industry’s development has been spurred on by newcomers (Aphria Inc. and Canopy Growth Corp. both come to mind), other companies are eager to capitalize on the new market. Molson’s partnership with Hexo is in its early stages, and while the product still needs regulatory approval (the regulatory framework around edible and drinkable cannabis products likely won’t be in place until 2019), the new business venture represents an attempt by an old-school company to move into new territory.
And finally, Brookfield Infrastructure Partners announced their latest expansion into the world of energy on Wednesday. The infrastructure investment arm of Toronto’s Brookfield group has made a $4.3-billion friendly takeover offer for Enercare Inc., offering the equivalent of $29 per share in cash (53% over Enercare’s closing price Tuesday). Enercare provides electricity, water and gas for condominiums and apartments across Canada and the United States, in addition to operating a robust rentals business unit offering water heaters, furnaces and air conditioners. The takeover comes 4-years after the energy provider spurned a similar (albeit substantially lower in price at $13.50 per share) offer set forward by U.S. private-equity firm Augustus Advisors LLC. The acquisition is in line with Brookfield Infrastructure’s previous investments, which focus on wholesale energy, transport and communications infrastructures across the globe. As a matter of fact, Brookfield Infrastructure’s ties to consumer energy infrastructure go back to their founding – the company initially went public as the Consumers’ Waterheater Income Fund!