Stantec snaps up engineering firm Morrison Hershfield as expansion plans gather steam

Christopher Reynolds, The Canadian Press

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Stantec Inc. has snapped up engineering firm Morrison Hershfield, the latest in a string of acquisitions and broader growth that have boosted the company's presence in Canada and across the globe — as well as its stock.

The design consulting company's share price rose 1.82 per cent on Tuesday to $106.94, its highest-ever closing price. Over the past year, the stock has surged 62 per cent.

Stantec's purchase of the 1,150-employee outfit enhances its presence across North America, where Morrison Hershfield has 22 offices, plus one in India. Founded in 1946, the Markham, Ont.-based company works in transportation, buildings and environmental services, with a particularly large footprint in Canada.

The addition increases Stantec's headcount by 10 per cent, according to RBC Dominion Securities analyst Sabahat Khan. In Ontario, it will double Stantec's transportation footprint — key to highway, bridge and construction contracts, just as the province looks to build the 52-kilometre Highway 413 just north of Toronto, among other major road projects.

The deal marks Stantec's second hefty acquisition in two months, as the Edmonton-based firm launches a three-year strategic plan to increase net revenue by roughly 60 per cent.

In November, it announced the purchase of the 645-employee German infrastructure firm Zetcon Engineering. In June, it signed a deal to buy the 270-person Environmental Systems Design, headquartered in Chicago.

Stantec has snapped up 14 companies — including Morrison Hershfield — since September 2020, expanding from about 22,000 workers that year to some 28,000 currently. Many of the deals were for environmental consulting firms, from Texas to Australia and the Netherlands.

Desjardins analyst Benoit Poirier said he does "not expect these M&A announcements to slow down" anytime soon, calling the latest buy "a nice tuck-in to start the year."

The growth spirit is not unique to Stantec. A spate of acquisitions has consolidated the engineering consulting landscape in Canada, as companies such as WSP Global acquire firms left and right while even AtkinsRéalis — formerly SNC-Lavalin and recently in retreat — shifts to growth.

Montreal-based WSP picked up at least four companies last year, and its biggest ever — U.K.-based John Wood Group — in 2022. Asked whether the buying spree was a barrier to future purchases, CEO Alexandre L'Heureux told analysts in November: "Absolutely not."

Stantec's third quarter marked the best three-month period in its 70-year-old history, setting company records with profits of $103.9 million, revenue of $1.32 billion and earnings per share of $1.14.

More than half of Stantec's net revenue flows from the U.S., while roughly a quarter stems from Canada.

“We are thrilled to bring a firm of Morrison Hershfield’s stature into the Stantec fold,” CEO Gord Johnston said in a release Tuesday.

"Stantec and Morrison Hershfield have a similar history from our roots in the Canadian market, growing and diversifying services both by geography and service line. And, importantly, our values and culture are very well aligned.”

Financial terms of the deal were not disclosed. Analysts estimated a purchase price of between $250 million and $300 million.

Expected to close in the first quarter of this year, the acquisition is subject to court, regulatory and Morrison Hershfield shareholder approvals.

This report by The Canadian Press was first published Jan. 9, 2024.

STANTEC IS AN EMPLOYEE OWNED COMPANY

 

Restaurants Canada warns of widespread closures without loan extension

Jordan Fleguel, BNN Bloomberg

A restaurant industry group is pleading with Ottawa for a last-minute extension to the fast-approaching repayment deadline for pandemic small business loans.

Restaurants Canada, a national association representing the food service sector, warned Monday of “devastating consequences” for the industry if an extension is not granted to the Canada Emergency Business Account (CEBA) repayment deadline, which is less than two weeks away.

“Your favorite mom and pop restaurant and local gathering place is at risk,” Kelly Higginson, president and CEO of Restaurants Canada, said in a press release.

“If what the industry is telling us comes to fruition, Canadian communities will lose something very special, simply because of an arbitrary deadline.”

In an interview with BNNBloomberg.ca, Higginson said that according to Restaurant Canada data, 53 per cent of food service operators in Canada are either operating at a loss or barely breaking even.

Before the pandemic, that number was just 12 per cent, Higginson said.

"While the pandemic is behind us, the impact for the restaurant industry is far from over," she said.

WHAT ARE CEBA LOANS AND WHEN IS THE DEADLINE?

The CEBA program offered interest-free loans of up to $60,000 to small businesses and not-for-profits impacted by the COVID-19 pandemic. Nearly 900,000 organizations applied for and received a loan over the course of the program.

The repayment deadline, which was originally Dec. 31 2022, has been extended multiple times. The current repayment date is set for Jan. 18.

Up to one-third of a business’ loan can be forgiven if they are able to pay the remaining outstanding amount by that date.

Businesses that miss the deadline will lose out on the forgivable portion and see their debts converted to a three-year loan with interest of five per cent annually.

CALLS FOR EXTENSION

For months, businesses have been asking for another year-long extension of the loan-forgiveness deadline, but so far the government has not indicated that they’re considering it.

In their press release, Restaurants Canada said its members are facing “limited options to avoid bankruptcy” if the deadline isn’t pushed back.

“It’s not just food, not just wages, not just rent or insurance – every single aspect of running a restaurant has dramatically increased in cost and they haven't been able to pass that on to their to their guests,” Higginson said.

“It's been a very challenging three or four years and it's been constant headwinds.”

Restaurants across Canada were affected by shutdowns and other restrictions during the height of the COVID-19 pandemic as governments introduced measures to reduce the spread of the disease.

Higginson said these measures “disproportionately” affected the food service industry, which already operates with tight margins in the best of times.

“There wasn't a lot of wiggle room going into that challenging period,” she said.

Higginson said pandemic labour challenges have subsided slightly, “but the sales aren't there … and then when the sales are there, it's just not coming down to the bottom line.”

GOVERNMENT RESPONSE

The federal government announced this fall that businesses will have until the end of 2026 to pay off their principal CEBA loan amounts, if they do not meet the January deadline. In the meantime, they will only be required to make payments on the interest.

If a business with a CEBA loan still has not repaid it by the end of 2026, the loan will be referred back to the Canada Revenue Agency (CRA) and dealt with on a case-by-case basis.

“The bottom line is that, if you are a small business and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full,” Katherine Cuplinskas, senior communications advisor for Finance Minister Chrystia Freeland, said in a written statement.

“The additional flexibility that we announced (this fall) is significant support for small businesses who might still be struggling to make ends meet.”

‘KEEP UP THE FIGHT’

The Canadian Federation of Independent Business (CFIB) said in a December blog post that it would “keep up the fight” for an extension until the last minute

The CFIB said that as of Jan. 9, it had collected more than 57,000 petition signatures in support of an extension. Its calls have also garnered support from federal NDP, Bloc Quebecois and Green Party politicians, as well as all 13 of Canada’s premiers.

New Ontario cannabis retail rules: will they make a difference?

Daniel Johnson , BNN Bloomberg

Ontario’s move to raise the number of stores cannabis companies can operate has been welcomed by some in the industry, but an expert says the change may only help a select few operators in the over-saturated market.

This month, the Ontario government doubled the number of retail stores allowed per licensed cannabis operators, increasing the limit to 150 from the previous cap of 75.

Gennaro Santoro, senior director of strategy at EY-Parthenon, told BNNBloomberg.ca that most operators in Ontario’s saturated cannabis market weren’t able to hit the previous limit of 75 stores, so the increased retail store cap will only make a difference for a select few players.

“It may impact a very small portion of retailers that have enough stores,” said Santoro, who works with the EY Americas Cannabis Centre of Excellence.

“Besides giving the opportunity for some retailers, very few that have a presence that is even close to 75 (stores),” he said. “It's really just adding more competition to a market in Ontario which is already pretty saturated.”

INDUSTRY REACTION

One company praised the new regulations.

Raj Grover, founder and chief executive officer of cannabis company High Tide, said the policy change levels the playing field for Ontario retailers and could help companies compete with the illicit market.

It could also help his company grow, he added.

“An additional 100 locations will help meaningfully boost our revenues and power our growth trajectory over the next couple of years, further solidifying our leadership position as the largest non-franchised cannabis retailer in the country,” Grover said in a written statement  following the Ontario changes. 

Grover said High Tide is raising its long-term growth target to over 300 brick-and-mortar stores in Canada based on the Ontario policy change.

ASSET LIGHT

Many Ontario cannabis retailers have been struggling to reach profitability, according to Santoro, prompting many businesses to reduce spending in a bid to improve balance sheets in 2023. 

Within the broader industry, Santoro said companies are seeking lower expenses. 

“You've heard a lot of companies talking about (an) asset light model where they're trying to remove expenses, they're trying to get to a point where they don't overproduce cannabis anymore,” he said. “They're focused on the areas that are profitable,”

Firms that execute on this approach will see opportunities to improve market share by acquiring assets as companies go into receivership or credit protection, Santoro said.

In order to be successful in the current environment, Santoro said companies should pick areas to differentiate as they compete with other legal and black market cannabis operations. 

Tilray Brands, a Canadian cannabis company that has recently expanded into beer acquisitions, reported quarterly earnings Tuesday, with a net loss of US$46.2 million as revenue increased 34 per cent on an annual basis.

With files from the Canadian Press 

Cannabis company Tilray Brands reports US$46.2M Q2 loss, revenue up 34% from year ago

The Canadian Press

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Tilray Brands Inc. reported a net loss of US$46.2 million in its latest quarter as its revenue rose 34 per cent compared with a year ago.

The cannabis company, which keeps its books in U.S. dollars, says the loss amounted to seven cents per diluted share for the quarter ended Nov. 30.

The result compared with a loss of US$61.6 million or 11 cents per diluted share a year earlier.

Net revenue for what was Tilray's second quarter totalled US$193.8 million, up from US$144.1 million in the same quarter a year earlier.

Tilray chairman and chief executive Irwin Simon says the company grew revenue, enhanced its capital structure and realized operating synergies.

In September 2023, Tilray closed its acquisition of eight beer and beverage brands from Anheuser-Busch including Shock Top, Breckenridge Brewery, Blue Point Brewing Co., 10 Barrel Brewing Co., Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Co. and HiBall Energy.

This report by The Canadian Press was first published Jan. 9, 2024.

SEC hasn’t approved Bitcoin ETFs, says X account was compromised

Allyson Versprille, Bloomberg News

The U.S. Securities and Exchange Commission said it had not yet granted approval of spot-Bitcoin exchange traded funds, despite a post on X that appeared from the regulator’s official account.

The post, which included a fake comment purporting to be from SEC Chair Gary Gensler, briefly fueled a jump in the price of Bitcoin. Traders have been speculating for weeks that the agency could approve several of the products as soon as Wednesday. 

Gensler said from his X account that the post was a fake and that the agency hadn’t taken action. 

About a dozen companies have applied to list ETFs backed by Bitcoin in the US. The SEC has until Jan. 10 to take action on at least one of those applications, and crypto insiders have speculated the regulator will use that date to announce a slew of decisions at once. 

There are two technical requirements that must be fulfilled before a spot-backed Bitcoin ETF can start trading. First, the SEC must sign off on so-called 19b-4 filings by the exchanges that would list the ETFs. Second, the regulator must approve the relevant S-1 forms, which are the registration applications from the would-be issuers — a list that includes BlackRock and Fidelity.

The SEC is planning to vote on the exchanges’ filings, the 19b-4s, this week, Bloomberg News has reported. The regulator may or may not take action on the issuers’ applications, the S-1s, around the same time. If the SEC grants both sets of required approvals, the ETFs could start trading as soon as the next business day. 

 

Why a pending U.S. decision on Bitcoin ETFs matters

Ben Cousins, BNN Bloomberg

On the cusp of what could be a transformative moment for cryptocurrency, experts are split on what to expect from a pending U.S. securities decision that could expand options for Bitcoin investing.

On Wednesday, the U.S. Securities and Exchange Commission (SEC) is scheduled to release its decision on whether exchanges will be able to launch exchange-traded funds (ETF) backed by Bitcoin.

The change would allow investors to have exposure to the cryptocurrency, without actually buying it. It’s believed that the changes could go a long way toward normalizing crypto investments among traditional investors.

“This is a firm mark of approval and that should drive confidence to the industry overall,” Jess Houlgrave, COO of WalletConnect and former head of crypto for Checkout.com, told BNN Bloomberg in a television interview on Monday.

“I think we will now see a big push in terms of the narrative around ETFs, the narrative around investing in Bitcoin ETFs, which will see competition.”

Houlgrave, who has already seen increasing activity in crypto wallets in advance of the decision, believes it’s too close to the deadline for the SEC to reverse course and deny the applications.

“I think it’s highly unlikely we see the SEC pull something at the eleventh hour here,” she said. “We’re already now talking about pricing and fees, which is often really the last step when we see these ETFs. So to argue that something is going to come up at the last minute is unlikely.”

Several firms, including Grayscale, Fidelity and Invesco, have already released their fee structures for spot ETF trading, a sign that financial companies believe the regulations will be approved.

Markus Thielen, head of research and strategy at Matrixport, isn’t as confident the SEC will offer a swift approval.

“We have been massively bullish last year really predicting this market … but of course, a lot has been priced in and based on our assessments, we have looked at the ETFs and the whole filings, we think that there are actually three building blocks that some investors are maybe a little bit overestimating here,” he said in a television interview.

Thielen pointed to global surveillance regulations for the Bitcoin market that the SEC could want to see before approving, as most exchanges require global cooperation. 

Thielen predicted the SEC could push the deadline approval back a couple of months in order to further study the matter.

WHAT WILL HAPPEN TO BITCOIN PRICES?

Regardless, Wednesday’s announcement will impact the price of Bitcoin.

Thielen worries if the ruling comes down against spot Bitcoin ETFs, prices of the coins could fall as much as 20 per cent in January, while an approval will shoot prices higher, but risks a quick sell-off.

“The risk-reward might be better to just hedge yourself, or go a little bit short through the options and protect yourself,” he said.

On Monday, the price of Bitcoin climbed above $47,000 for the first time since April 2022 in advance of the ruling.

With files from Bloomberg News

Grayscale’s 1.5% fee is higher than spot

Bitcoin ETF competitors like Fidelity, Invesco

Katie Greifeld, Bloomberg News

As spot Bitcoin ETF hopefuls rush to file their final documents with U.S. regulators, a key difference is emerging among the applicants in their proposed fee structures. 

At the top end: The Grayscale Bitcoin Trust, which would carry a 1.5-per-cent fee if the U.S. Securities and Exchange Commission approves its conversion into an exchange-traded fund. While that would be lower than GBTC’s current two-per-cent fee, it comes well above its competitors.

The race-to-the-bottom on fees is a feature of the highly competitive US$8 trillion US ETF industry, where even a couple of basis points of difference can translate into millions of dollars worth of inflows. 

While GBTC has an enormous advantage in existing assets — it boasts $27 billion in assets as a trust since its 2013 inception — its competitors will charge a fraction of its proposed expense ratio. 

Bitwise and Ark / 21Shares are offering an initial sweetener of zero fees for the first six months or the first $1 billion in assets, whichever comes first. After that, their fees rise to 0.24 per cent and 0.25 per cent respectively. 

VanEck’s HODL product would charge 25 basis points. BlackRock intends to charge 0.2 per cent for the first year or until it reaches $5 billion in assets, with 0.3 per cent as its eventual fee.

“This fee war is best possible situation for end investors,” said Bloomberg Intelligence ETF analyst James Seyffart. 

Grayscale said they expect that GBTC would “continue to be a best-in-class offering for investors”, and cited their “liquidity, tight spreads, high trading volumes, and a decade-long track record of operational success”.

Crypto insiders are counting down to Wednesday, when the SEC faces one of its key deadlines to take action on pending spot Bitcoin ETF applications. 

With assistance from Emily Nicolle.

 

West Fraser to close one sawmill, curtail another due to high costs and soft markets

The Canadian Press

West Fraser Timber Co. says it's closing one U.S. sawmill and indefinitely curtailing another because of high fibre costs and soft lumber markets. 

The Vancouver-based company says it's closing its Maxville, Florida, sawmill and indefinitely curtailing operations at its Huttig, Arkansas, sawmill by the end of the month.

West Fraser says the closure of the Maxville sawmill will affect around 80 employees, while the curtailment of the Huttig sawmill will affect 140 employees. 

The company says it will mitigate the impact on employees by providing opportunities at its other operations. 

West Fraser says it anticipates restructuring and impairment charges of approximately $50 million in the fourth quarter of 2023 as a result. 

The decision will reduce West Fraser's U.S. lumber capacity by around 270 million feet.