Enbridge to buy three Dominion utilities in deal valued at US$14B

ENBRIDGE INC (ENB:CT)

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Canadian pipeline operator Enbridge Inc. agreed to buy three utilities from Dominion Energy Inc. in a US$9.4 billion deal to create North America’s largest natural gas provider.

The acquisition of the East Ohio Gas Co., Questar Gas Co. and Public Service Co. of North Carolina will double the Calgary-based company’s gas utility business, Enbridge said in a statement Tuesday.

The deal is a massive bet that gas will remain a transition fuel for the foreseeable future even as much of the world tries to phase out fossil fuels to fight climate change. While there’s a strong push to deploy more renewable energy, there’s also a growing recognition that the green transition will take time, ensuring gas will be in demand for years.

“The assets we are acquiring have long useful lives and natural gas utilities are ‘must-have’ infrastructure for providing safe, reliable and affordable energy,” Enbridge Chief Executive Officer Greg Ebel said in the statement.

The move comes as Enbridge, North America’s largest pipeline company, is pushing to position itself for the transition toward cleaner energy. The three companies it’s buying serve customers in Ohio, Utah, Wyoming and North Carolina, where revenue from utility bills is forecast to grow faster than the national average.

“They’re going for that very fixed cash flow,” Bloomberg Intelligence analyst Talon Custer said in an interview.

The transaction is valued at $14 billion including debt. It will be Enbridge’s largest since its acquisition of Spectra Energy Corp. for about $28 billion in 2017, according to data compiled by Bloomberg.

Enbridge shares fell 6.2 per cent as of 9:09 p.m. in after-hours trading in New York while Dominion was 0.3 per cent lower. To help finance the transaction, Enbridge said separately that it plans to raise C$4 billion (US$2.9 billion) in a share sale underwritten by a group of institutions led by RBC Capital Markets and Morgan Stanley.

The deal to buy the companies, which serve seven million homes and businesses across multiple states, will require approvals from regulators, including the Federal Trade Commission to ensure it doesn’t violate antitrust laws. Enbridge said it would start pushing forward to secure the approvals immediately. It expects the deal to close in 2024.

The transaction is also the latest to arise from Dominion’s corporate review launched by CEO Bob Blue late last year to reverse a slumping stock price. Dominion executives said they wanted to focus on the company’s growing electric utility business and pay down debt.

The deal with Enbridge comes nearly two months after the Richmond, Virginia-based Dominion agreed to sell a US$3.3 billion stake in a Maryland liquefied natural gas export project to Berkshire Hathaway Energy.

Dominion said Tuesday the sale of its gas distribution utilities would help it improve the company’s funds from operations to debt ratio by 3.4 per cent. Blue said the company will provide an update on its review during the fourth quarter.

Morgan Stanley and RBC were Enbridge’s financial advisers on the deal while Sullivan & Cromwell LLP and McCarthy Tétrault LLP were its legal advisers. Dominion’s financial advisers were Citigroup Inc. and Goldman Sachs Group Inc., and its legal adviser was McGuireWoods LLP.

The group of underwriters for the equity sale also includes BMO Capital Markets, CIBC Capital Markets, National Bank Financial Markets, Scotiabank, and TD Securities.

With assistance from Ruth Liao.

Health agency probing Air Canada vomit incident that echoes broader customer woes

Christopher Reynolds, The Canadian Press

The outrage sparked by a passenger incident involving a vomit-smeared airplane seat reflects a broader frustration with flight operations in Canada, travel experts say — as the country's public health agency says it's investigating the recent episode.

On Tuesday, Air Canada said it apologized to two passengers who were escorted off the plane by security after protesting that their seats were soiled — and still damp — ahead of an Aug. 26 flight from Las Vegas to Montreal.

"They clearly did not receive the standard of care to which they were entitled," the airline said in a statement emailed to The Canadian Press. "Our operating procedures were not followed correctly in this instance."

The Public Health Agency of Canada said it is in contact with Air Canada. It cited its mandate to ensure that anything brought into the country on conveyances ranging from planes to trains does not risk transmission of illnesses that can be spread via contact with body fluids.

"Blood, vomit and diarrhea may contain microorganisms that can cause disease. These fluids, and the surfaces that come in contact with them, should always be considered as contaminated," the agency said in a statement.

In a Facebook post that has since gone viral, Susan Benson of New Brunswick said she was in the row behind the two women when she detected "a bit of a foul smell but we didn’t know at first what the problem was."

The cabin crew had "placed coffee grinds in the seat pouch and sprayed perfume to mask" the odour, she said in the Aug. 29 post, which had garnered a combined 8,100 reposts and comments as of Wednesday evening.

"When the clearly upset passengers tried to explain to the flight attendant that the seat and seatbelt were wet and there was still visible vomit residue in their area, the flight attendant was very apologetic but explained that the flight was full and there was nothing they could do," Benson wrote.

After a "back-and-forth" argument with cabin crew, the pair asked for blankets and wipes to clean the area themselves before a pilot told them they could either leave the plane voluntarily or be escorted off by security and placed on a no-fly list due to rude behaviour — a characterization Benson rejected.

"They were upset and firm, but not rude."

John Gradek, who teaches aviation management at McGill University, says the aircraft never should have been dispatched, given the "biological hazard" on board.

"What the heck are you doing?" he asked of the carrier. "Totally out to lunch."

The outcry on social media sparked by the incident speaks to a degraded level of service perceived by Canadians after a year marred by frequent flight delays and lost luggage, said former Air Canada chief operating officer Duncan Dee.

"People’s patience is likely wearing thin," he said.

"I think travellers can relate to those two travellers' experience out of Las Vegas, because they feel they’ve had their travels disrupted to a much greater degree than prior to (the pandemic).”

While photos of snaking lines and posts of passenger frustrations at Toronto's Pearson airport popped up on social media over the summer, the chaos of overflowing terminals and luggage-clogged arrival areas that marked the 2022 travel season did not come to pass, due in part to more prepared players and fully staffed agencies and security contractors.

Nonetheless, Air Canada ranked last in on-time performance among the 10 largest airlines in North America in July, a report found. Canada's biggest carrier landed 51 per cent of its flights on time that month, according to figures from aviation data firm Cirium.

"Last summer you had the three (largest) Canadian airports top the global charts for cancellations. This summer saw significant delays due to air traffic control," Dee said. "The system simply has let travellers down."

Of the latest incident, he added: "These seat cushions are removable."

Most airlines contract third-party "groomers" that clean the seats and aisles between flights and have access to spare cushions to replace soiled ones "in relatively short order," Dee said.

"You've got toddlers, infants, even adults who have certain accidents ... It doesn't happen every flight, but it certainly happens every day."

But experts said that tight-packed schedules and flight delays squeezing turnaround times can put more pressure on crews to get back in the air as soon as possible.

"You'd be extending the ground time on the airplane to do the clean-up," Gradek said, noting that crews have strict rules on their shift time, or "duty period."

Last month's incident wasn't the first of the summer to involve seats and bodily fluids.

On June 30, a passenger on an Air France flight from Paris to Toronto said he sat amid the uncleaned remnants of a previous passenger’s hemorrhage, prompting a probe by the public health agency.

Of the latest incident, the agency said that if a complaint is determined to relate to a communicable disease "and the operator has not met the requirements of the Quarantine Act," it could conduct an inspection and ultimately issue a fine to the operator.

Rogers hits back at ex-CEO Natale, saying he breached contract

Layan Odeh, Bloomberg News

Rogers Communications Inc. denied that it owes money to its former chief executive officer and accused him of breaking his contract. 

Joe Natale breached his fiduciary duty to the telecommunications firm and “improperly received” more than $15 million (US$11 million) after negotiating a richer severance package that he wasn’t entitled to, the company said in a court filing.  

In a lawsuit last month, Natale alleged that the Toronto-based company, which dismissed him as CEO in 2021, still owes him more than $24 million.

Natale, on learning that September that he was about to be ousted, “sought support to significantly enhance his own employment arrangements” and force out Chief Financial Officer Tony Staffieri, who was in line to replace him, Rogers said in a statement of defense and countersuit. 

Natale also sweetened the pay agreements of three senior Rogers executives without authority and hid the decision from key board members, the company alleges. Those three executives later renounced any entitlements under the revised deals, the filing said. 

Bill Walker, an outside spokesperson representing Natale, said by email: “Mr. Natale denies all of the allegations in RCI’s counterclaim, which is completely without merit. He is confident that the courts will see this tactic for what it is: a transparent attempt to avoid contractual liability and to further disparage Mr. Natale’s excellent reputation.”

The legal spat stems from a dispute that erupted among members of the Rogers clan, which controls Canada’s largest wireless and cable provider. It exposed fissures within one of the country’s wealthiest families, which also owns television and radio stations, Canada’s only Major League Baseball team and a major stake in Toronto’s pro hockey and basketball clubs. 

Natale was in charge when Rogers made a $20 billion offer to acquire rival Shaw Communications Inc. in March 2021, but months later Chairman Edward Rogers soured on the CEO and made a play to get rid of him. Edward’s mother, Loretta Rogers, and two of his sisters, Melinda Rogers-Hixon and Martha Rogers, fought back on Natale’s behalf, in alliance with several other board members. 

Edward Rogers sued to establish control over the board, drop five independent directors and replace them with his allies. 

As part of Tuesday’s legal filing, the company alleges that Natale stalled a request by Edward Rogers for a copy of the shareholder list, which he wanted in preparation for his legal battle to replace board members. “There was no justification for the 16-day delay, other than Natale’s desire to unlawfully enhance his compensation before allowing their release,” the company claims.

Edward Rogers prevailed in court in November 2021 and Natale was gone less than two weeks later, replaced by Staffieri.

Rogers selling $3 billion in bonds to refinance debt

Esteban Duarte, Bloomberg News

ROGERS COMMUNICATIONS INC-B (RCI/B:CT)

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Rogers Communications Inc. priced the largest corporate bond issuance so far this year as the telecom company refinances debt after it completed the acquisition of a smaller rival.

The Toronto-based wireless company sold $3 billion (US$2.2 billion) of investment-grade rated notes in four parts, according to data compiled by Bloomberg. The longest portion of the offering, a 10-year tranche, was priced at the tight end of a range between 232 basis points and 235 basis points over the Canadian government curve, said the person, who asked not to be identified as the details are private.

Rogers agreed to a $6 billion bank facility to help fund its $20 billion deal to acquire Shaw Communications Inc., which was first announced in 2021 and gained approval in March after a legal fight with Canada’s antitrust body. 

The transaction garnered investor orders for around three times the size of the bond tranches, according to people familiar with the matter. Demand varied between 48 buyers for the three-year bonds and 77 investors for the 10-year portion. 

Read More: Rogers Hires Banks to Refinance Debt After Shaw Acquisition

RBC Capital Markets, Toronto Dominion and Bank of Nova Scotia managed the bond sale, according to Bloomberg-compiled data. 

A press officer for Rogers didn’t reply to a request for c

Bipartisan, multi-jurisdictional approach needed on housing: Lisa Raitt

Ben Cousins, BNN Bloomberg

In the midst of a growing housing affordability crisis in Canada, a former federal cabinet minister is calling for different political parties and levels of government to work together on the issue.

Lisa Raitt, who served various ministerial roles under former Conservative prime minister Stephen Harper, said finger-pointing between parties and jurisdictions must end if a solution to Canada’s housing problem is to be found. 

“The only entity that can put the pressure on different political parties to do that is the voter and the taxpayer,” she told BNN Bloomberg in a television interview Tuesday. 

“Once you step back, you’ve got to come up with solutions and Canadians are hurting and they’re terrified of their next time of renegotiating their mortgage.” 

Raitt, who is now vice chair of Global Investment Banking at CIBC, highlighted to two main factors she sees as driving Canada’s housing shortage: record immigration levels and housing demand. 

“We are on a bit of a burning platform right now and a little bit of it has to do with the higher rates of immigration and a lot of it has to do with the fact that there’s a great demand,” she said. 

A 2022 report from the Canada Mortgage Housing Corporation found Canada needs to build 5.8 million new homes by 2030 to reach affordability. Meanwhile, housing starts declined by 10 per cent in July to 255,000.

Amid the housing crunch, Canada is boosting immigration levels to new heights to supplement the needs of the country’s aging workforce. With the government expected to announce new immigration targets on Nov. 1, Immigration Minister Marc Miller told Bloomberg last month he doesn’t think Canada is “in any position” to lower its goals. 

In an interview with BNN Bloomberg last month, former Liberal deputy prime minister Sheila Copps blamed the affordability crisis on decades of poor policy that began when provinces took over much of Canada’s housing policy in the 1980s.

Raitt admitted during her time in federal politics, housing was considered a provincial issue and did not have a national strategy. Now, she said, the problem has escalated. 

“We did give large sums that would be transferred to the provinces to deal with it, but it’s such a ubiquitous problem that everyone expects everyone to work together on it,” she said. 

With files from Bloomberg

 

​Rate hold could push indebted homeowners into rental market: Experts

Iva Poshnjari, BNN Bloomberg\

The Bank of Canada’s decision to hold interest rates at elevated levels could push over-leveraged homeowners into the rental market – driving prices higher in turn, experts say. 
 
The central bank decided to keep its overnight lending rate at five per cent on Wednesday, holding borrowing costs and mortgage rates at high levels after its steep hiking cycle began early last year.
 
For some Canadians homeowners who are already struggling to keep up with their mortgage payments, a period of elevated interest rates will be enough to force them into selling their properties, John Pasalis, president of Realosophy Realty, told BNNBloomberg.ca on Wednesday. 
 
“We’re likely still going to see pressure in the rental market because even though rates may be on hold, there is a lot of over leveraged homeowners who will be forced to sell and enter into the rental market, at least for the short term,” he said. 
 
Pasalis explained that in this environment, it is not uncommon to see landlords downscale their homes in an effort to clear some debt, or offload investment properties, which would displace current renters into a higher-priced market. 
 
“While we are seeing more inventory come online and pricing cooling just a bit, I think the pressures in the rental market will persist so long as rates remain high,” Pasalis cautioned 
 
A hold on rates will bring relief for some landlords, but every month there’s an investment property owner who simply can’t afford to keep up with the costs, said Davelle Morrison, broker at Bosley Real Estate Ltd.
 
“With each month that passes you will have some people that will be forced to sell in this environment, and ultimately renters end up playing musical chairs because there is little supply for them to choose from,” she told BNNBloomberg.ca on Wednesday. 
 
As a result, Morrison believes that most renters will stay in their units for as long as possible. 
 
“Rents are just so high. I would think that for a lot of renters they would stay put and not move in the heightened rate environment,” she said.