MONOPOLY CAPITALI$M

Shaw jumps as minister's comments boost odds of Rogers deal

Derek Decloet and Randy Thanthong-Knight, Bloomberg News

SHAW COMMUNICATIONS INC-B (SJR/B:CT)

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Shaw Communications Inc. rose 7 per cent to the highest level since July after a government minister in Canada clarified the regulatory conditions on its deal with Rogers Communications Inc., improving the odds that the transaction will close.  

Shaw shares closed at $36.52, about 10 per cent below the Rogers takeover offer of $40.50. Rogers was up nearly 6 per cent.

Toronto-based Rogers agreed to pay $20 billion (US$14.8 billion) for its rival in March 2021, but the deal has been delayed by Canada’s antitrust regulator, which says it will weaken competition in the wireless sector. The two companies have agreed to sell most of Shaw’s wireless assets to a third Canadian communications firm, Quebecor Inc., to try to solve that problem. 

On Tuesday, Industry Minister Francois-Philippe Champagne said he’d approve the divestiture to Quebecor only if the company promises to keep the wireless licenses for at least 10 years and consumer prices improve in Ontario and Western Canada, where Shaw operates. Quebecor Chief Executive Officer Pierre Karl Peladeau said the company will accept those terms. 

That’s a sign the Rogers-Shaw deal has a path to the finish line, Desjardins analyst Jerome Dubreuil said. The government “is signaling that the deal would be acceptable if QBR competes in the long term,” Dubreuil said in a note, referring to Quebecor’s stock ticker. “Why would Mr. Champagne set conditions if he were about to say no?”

 

BUREAU IS ‘FIRM’

The deal still has to pass the antitrust hurdle. Rogers and Shaw are scheduled for mediation with the Competition Bureau this week. If the two sides can’t reach a settlement, the merger is destined for Canada’s Competition Tribunal, a merger court. 

“The odds now seem quite low that the Competition Bureau wouldn’t agree to a settlement” with Shaw and Rogers, said Aaron Glick, a merger arbitrage specialist at Cowen & Co. The base case is for settlement, with the deal closing next week, he said. 

“We remain firm in our decision to challenge this proposed merger to protect the public interest,” Jayme Albert, a spokesperson for the Competition Bureau, said in an emailed statement. Albert said the bureau was aware of Champagne’s statement but that it would be inappropriate to comment on it. 

Rogers-Shaw deal: Feds throw up new

roadblock

Ian Vandaelle, BNN Bloomberg

Now Showing

Rogers Communications Inc. is facing a fresh hurdle in its $20 billion pursuit of Shaw Communications Inc.

Minister of Innovation, Science and Industry François-Philippe Champagne said Tuesday he officially rejected the transfer of wireless spectrum licenses between the two companies, throwing a wrench in the largest takeover deal in Canadian telecom history
 
“Earlier this year, I stated that I would—under no circumstances—permit the wholesale transfer of wireless spectrum licences from Shaw to Rogers,” he said in a release.

“Today, I officially denied that request, which had been pending before me. My decision formally closes that chapter of the original proposed transaction.”
 
Rogers representatives declined to comment on Champagne's decision: “Given the ongoing proceedings, we will decline to comment at this time,” a company spokesperson said in an email.
 
Rogers and Shaw previously argued the acquisition will enhance telecom competition and overall coverage for Canadians through Shaw’s western footprint and Rogers’ beachhead in central Canada.
 
The two telecom operators also attempted to assuage concerns by announcing plans to divest Shaw’s Freedom Mobile unit to Quebecor Inc. for $2.85 billion in June, pending regulatory approval.
 
Quebecor's Chief Executive Officer Pierre Karl Péladeau said in a statement to BNN Bloomberg that the company was happy to abide by Ottawa’s new guidelines to secure the deal.
 
“We intend to accept the conditions stipulated by the Minister and incorporate them into the new version of the Rogers-Shaw/Quebecor-Freedom Mobile transaction, which has already been negotiated,” he said.
 
“They are in line with our business philosophy, which has proved highly successful in Quebec, where we have taken a significant market share in a very short span of time. We will work to deliver better prices for Canadians in the other provinces and to end the reign of the ‘Big Three’ by promoting competition, the public interest and the digital economy in Canada.”
 
Champagne said he will only allow the deal to move forward if Quebecor agrees to hold Freedom's wireless spectrum licenses for at least ten years after the deal is consummated.
 
The deal has faced numerous hurdles, notably the approval of three separate regulatory bodies, and Rogers and Shaw are due to enter mediation talks with the Competition Bureau later this week to address antitrust concerns over the deal.
 
The deal has already seen a stamp of approval among several analysts who follow the telecom sector. Scotiabank Analyst Maher Yaghi gives the deal a 90 per cent chance to close based on how approvals are shaping up.
 
“We don’t believe this condition is too onerous for Quebecor to keep. We believe the intent by Quebecor is to grow longer term outside the province of Quebec and since the beginning of the discussion about this deal, management has kept its focus and determination on the long term. We believe that QBR will likely enter the ON/AL/BC markets with 2 brands (Freedom/Fizz) attacking the middle and lower end,” he said in a report to clients Tuesday.
 
“In addition, with a potential ability for reselling internet they could work to also sell bundled products. We don’t see why QBR could not, long term, achieve a 15 per cent market share in wireless in those provinces given the company’s strong experience in customer service, discounting and marketing insights.”
 
Canada - home to some of the highest wireless rates in the developed world - has long been in search of a fourth national wireless carrier. Thanks in part to geographic and foreign ownership restrictions of telecom assets, Canadians face some of the highest cell phone bills in the G20.
 
Rogers has argued that the combination with Shaw – combined with the divestiture of Freedom – will help alleviate some of those price pressures, with the new entity better able to compete with the likes of BCE Inc. – which owns BNN Bloomberg through its Bell Media division – and Telus Corp., which have a network-sharing agreement in Western Canada. 

 

Meta’s US$677B rout boots it out of world’s top 20 stocks

Subrat Patnaik, Bloomberg News

(Bloomberg) -- Meta Platforms Inc. shareholders are paying dearly for its spending on the metaverse: The Facebook parent’s market value has collapsed by a whopping $676 billion this year, forcing it out from the ranks of the world’s 20 largest companies.

The punishment shows no signs of easing anytime soon. Meta’s stock tumbled 25%, its worst one-day drop since February, after it spooked investors with ballooning costs to fund its version of virtual reality and a decline in revenue.

Meta was the sixth biggest US company by market capitalization at the start of the year, flirting with a $1 trillion market value. Fast forward 10 months and the stock is now worth about $260 billion, ranking it 27th in the world. Its market value is now smaller than companies including Chevron Corp., Eli Lilly & Co. and Procter & Gamble Co.

Once a Wall Street darling, Meta is gradually losing favor with brokerages. At least three investment banks -- Morgan Stanley, Cowen and KeyBanc Capital Markets -- cut their rating on the stock after the company gave a disappointing quarterly revenue outlook.

“Meta remains too aggressive with its investments in long-term initiatives despite a sharp deceleration in expected revenue growth,” said Mandeep Singh, an analyst at Bloomberg Intelligence. “The company’s opex and capex view for 2023 is surprising, given the lack of traction so far with its metaverse efforts.” 

While Thursday’s slump was a big move, it pales in comparison to its record-setting rout in February when it plunged 26% on the back of woeful earnings results, and erased about $251 billion in market value. That was the biggest wipeout in market value for any US company ever. 

The decline in the stock this year has attracted value investors, who buy beaten-down stocks in anticipation of a turnaround. But there’s no sign of those bets paying off any time soon. 

Meta announced its shift to investing in virtual reality a year ago, along with a name change of the company from Facebook Inc. to Meta Platforms. The company said Wednesday it expects total expenses for this year to be $85 billion to $87 billion. 

For 2023, that number will grow to an expected $96 billion to $101 billion. That’s the big negative, since investors were hoping Meta would aggressively cut costs, said Neil Campling, an analyst at Mirabaud Securities. 

The company’s quarterly capital expenditure was more than all but what 16 of the S&P 500 companies spent last year, according to Bloomberg data. 

Campling likened a buillish trade in Meta to IBM in 2005, saying “like IBM symbolizes dinosaur tech 1.0… so Meta faces the risk of being the next-generation fossil.”

--With assistance from Tom Contiliano, Kit Rees and Matt Turner.

(Updates pricing throughout)

©2022

Anticipate unavoidable flight disruptions as labour shortages persist, say experts

Caitlin Yardley, The Canadian Press

The airline industry is warning that flight disruptions will be unavoidable this upcoming holiday travel season as an ongoing labour shortage drags on.

At a parliamentary committee hearing Wednesday, travel industry representatives said problems retaining certain workers, such as pilots and air traffic controllers, persist heading into the busy winter season.  

Air Line Pilots Association Canada president Tim Perry told MPs that airlines are not doing enough to retain pilots because they have resisted increasing their pay. 

Referring to the problem surround pilots in this country as a labour shortage is an "oversimplification," Perry said. 

He said airlines are relying on temporary foreign workers to fill the employment gap, which in some cases raises concerns around training and safety.  

Pilots from other jurisdictions are fundamentally disconnected from their union and can undermine the collective bargaining process as a whole, said Perry. 

New job vacancy numbers from Statistics Canada on Thursday show the country's tight labour market continuing in August as vacancies were little changed from July. 

The vacancy rate in the transportation warehousing industry was 5.9 per cent in August, down a full percentage point from the month prior, but it remains one of the sectors with the highest rate of job vacancies. 

Canadian Air Traffic Control Association president Nick von Schoenberg told the committee there is a desperate shortage of air traffic controllers that has put unacceptable demands on workers because there are no longer enough controllers to meet requirements. 

"Historical short-staffing has meant that the system has always relied on a high amount of overtime by controllers to function," said von Schoenberg. 

"This is resulting in unacceptable demands on workers as they are routinely expected to work long days with insufficient support." 

The air traffic controller shortage existed long before the pandemic and will not be addressed in time for next summer, said von Schoenberg, but may be mitigated with some creative solutions. 

Andrew Gibbons, vice-president of external affairs for WestJet, was also at the committee meeting and said the pandemic was the greatest crisis his company and the sector has ever faced.    

"We're not out of the woods," said Andrew Gibbons. "We're still facing the effects of this crisis."   

Von Schoenberg said that the pace and strength of the recovery by the aviation sector has contributed to the shortage of air traffic controllers, which in turn is contributing to delays. 

He called on NAV Canada for a reliable training system and said that the corporation must do whatever it takes to retain staff. 

Nav Canada spokesman Brian Boudreau confirmed that staffing levels have been an issue at some airports and may have impacted service as a result.  

The air navigation operator plans to hire 500 new employees this year and aims to train 500 prospects over the next two years, with another 250 already enrolled in Nav Canada's training program, said Boudreau. 

The National Airlines Council of Canada did not provide a comment on the matter of pilot staffing levels. 

Representatives from both the council and Nav Canada are scheduled to attend the next parliamentary meeting on labour shortages on Monday.  

Suncor to acquire Teck Resources' stake in Fort Hills oilsands project for $1B

Amanda Stephenson, The Canadian Press

SUNCOR ENERGY INC (SU:CT)

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Suncor Energy Inc. will buy out Teck Resources Ltd.'s 21.3 per cent stake in the Fort Hills oilsands project for approximately $1 billion, the two companies announced late Wednesday.

The 194,000 barrel-per-day capacity oilsands mine north of Fort McMurray, Alta., is currently co-owned by Suncor, Teck, and French company Total Energies EP Canada Ltd.

Upon closure of the deal, Calgary-based Suncor, which is the operator of Fort Hills, will see its stake in the oilsands project increase to 75.4 per cent. TotalEnergies will own the remaining 24.6 per cent.

"The acquisition of an additional interest in Fort Hills meets our return objectives, builds upon our strategy to optimize our portfolio around our core operated assets and underscores Suncor's confidence in the long-term value of the Fort Hills project," said Suncor interim president and CEO Kris Smith in a news release.

The Fort Hills oilsands mine began operation in 2018 but has been dogged by difficulties. 

The mine was unable to ramp up quickly to full capacity, in part because of the Alberta government's 2019 move to curtail oil production in the province to help address the widening price discount for Canadian oil caused by a shortage of pipeline export capacity.

Then in 2020, one of Fort Hills' two production trains was shut down due to low oil prices because of the COVID-19 pandemic.

The deal announced Wednesday is based on a current market value for Fort Hills, Suncor said, and as a result, Suncor will recognize a non-cash accounting impairment charge on its existing 54.1 per cent interest of approximately $2.6 billion in its third-quarter results, which will be announced Nov. 2. The company will also hold an investor presentation on Nov. 29.

Vancouver-based Teck said it expects to record a non-cash impairment charge of $950 million in the third quarter of 2023. Teck is slated to hold its third-quarter earnings call Thursday morning.

Teck has been saying for some time that it was interested in selling its stake in Fort Hills. The company is currently constructing a $5 billion copper mine in Chile. It has said it wants to concentrate on metals and minerals that are essential for a low-carbon world, including copper, zinc and steelmaking coal.

"This transaction advances our strategy of pursuing industry-leading copper growth and rebalancing our portfolio of high-quality assets to low-carbon metals," said Teck CEO Jonathan Price in a release Wednesday, adding the company will review the use of the proceeds from the sale early in 2023.

On Wednesday, Suncor said it has conducted an in-depth review of the Fort Hills project and has begun a multi-year "improvement initiative" aimed at boosting the mine's production and lowering operating costs.

"While the Fort Hills mine has faced challenges in the early years of the mine life, including challenges due to government-directed production shut-ins, I have full confidence in our current mine plan assembled with fresh external mining perspectives," Smith said.

Suncor said it will finance the transaction with cash from asset sale processes currently underway.

The transaction is subject to regulatory approval and is expected to close in the first quarter of 2023.

Indoor growing could feed Canadians — and others — year-round

Rosa Saba, The Canadian Press

Whether it was pandemic-driven supply chain delays, a war in Europe causing grain prices to spike or flooding in British Columbia disrupting rail lines and highways, the past two and a half years have shone a light on how vulnerable Canada's food system is to climate change and other global factors.

Amid rising food and energy costs and more frequent extreme weather events, experts and sector insiders say the indoor agriculture industry has the potential to feed Canadians more reliably and maybe more sustainably by using greenhouses, vertical farms and hydroponic technology to grow food even in the winter, in remote communities, urban centres and everywhere in between.

“The possibilities are endless,” said Sylvain Charlebois, director of the Agri-Foods Analytics Lab at Dalhousie University. 

Canada is highly self-sustaining when it comes to meat and dairy, but relies heavily on imports for produce, making the country vulnerable to shortages and price fluctuations, according to the findings of a 2021 review article published in scientific journal Agronomy by several University of Guelph researchers and a representative from Ontario Greenhouse Vegetable Growers.

Meanwhile, Statistics Canada data shows that Canada is growing more and more in greenhouses every year. In 2020, Canada exported more than half of the greenhouse vegetables it grew to the U.S. at a value of $1.4 billion. 

Greenhouses have a lot of potential to feed Canadians more than they already do, the researchers said, but face challenges including rising costs, labour shortages, and infectious plant pathogens. 

Still, they’re the largest and fastest growing area of Canadian horticulture, with demand for local food on the rise, and technology helping to automate and increase the scale of operations.

Charlebois said in order for year-round growing to be economically sustainable on a larger scale, Canada needs to not only feed itself, but also continue to export, especially to the U.S. as it struggles with climate change’s effect on its agricultural sector.  

“If we do this right, from a food autonomy perspective, I could certainly see Canada being a huge supplier of produce to Americans in maybe a decade or two.”

Over the past several years, Canada’s winter production has expanded, said food economist Mike von Massow.

“In fact, because cannabis hasn't been as much of a panacea as some people thought it might be, we're seeing some conversion of some greenhouses that were put up for cannabis,” he said.

Great Northern Hydroponics may have been among the first in Canada to start growing in the winter. President Guido van het Hof said they’ve been growing tomatoes year-round in the company’s hydroponic greenhouses for about a decade, and recently started growing strawberries, too. Hydroponic growing uses no soil, usually cultivating plants instead in a water solvent using a mix of nutrients.  

As the climate becomes more unpredictable, some U.S. berry growers, like Driscoll’s, are turning to Canadian growers to help fill their containers, noted Charlebois. 

This October, a team led by University of Waterloo biology professor Trevor Charles was awarded funding to study and develop year-round hydroponic strawberry production in Ontario. 

“This is an area that's moving really quickly,” said Charles, who is also the director of the Waterloo Centre for Microbial Research and CEO of Metagenom Bio Life Science. The goal is not only efficiency but also the best taste, he said.

That’s another benefit to local berries, said von Massow: they taste better.

“I don't know if you've eaten a winter strawberry, but they're relatively flavourless,” he said. 

The Agronomy authors said Canada should ramp up production of commodities it already grows in greenhouses, but also diversify its crops to further promote self-reliance in the Canadian food chain and reach more markets. 

“The rising demand for such commodities, such as okra and long beans, especially within Chinese, South Asian, and Afro-Caribbean communities, has been recognized in recent years as a significant market opportunity,” the researchers wrote.

Urban agriculture has been gaining traction, often using hydroponic technology to produce hyper-local food. 

Paul Shumlich, whose Calgary-based company Deepwater Farms grows a variety of greens, saw first-hand the role urban farms can play in the food system: his company’s sales spiked last fall when a flood in British Columbia closed some parts of Highway 1. 

And in remote areas of Canada, there is an increasing number of year-round growing projects in Indigenous communities. One example is a geothermal greenhouse in Potlotek First Nation on Cape Breton Island, funded as one of several pilot projects in Indigenous communities in Atlantic Canada.

Greenhouse manager John Lameman hopes the greenhouse, along with some outside growing space, bee hives and even a potential orchard, could one day reliably feed the community. 

In the short run, greens and berries grown year-round are more of a premium product, said von Massow. But he believes they will become more competitive.

“Both technology and climate change are extending the growing season in Canada,” he said. 

The capital cost of starting or expanding greenhouse or other alternative farming infrastructure is high, said von Massow, and variable costs, especially energy, are also high — and recent months have shown just how unpredictable those costs can be. 

Of course, energy is also a high variable cost for imported foods because of transportation, he said. 

Von Massow and Charles cautioned that year-round agriculture projects aren't always a more environmentally friendly alternative to imported produce because of the energy some of them consume.

But as technology improves, and more growers adopt wind, solar or even nuclear energy, von Massow thinks that will change. 

“I think without a doubt, we're going to get better and better at this.”