BlackRock cuts 3% of global workforce, citing dramatic industry shifts

Silla Brush, Bloomberg News

BlackRock headquarters in New York. , Bloomberg

BlackRock Inc. will dismiss about 600 employees, or roughly 3 per cent of its global workforce, as it seeks to reallocate resources amid rapid changes in asset management. 

“We see our industry changing faster than at any time since the founding of BlackRock,” Chief Executive Officer Larry Fink and President Rob Kapito wrote Tuesday in a memo to staff.

The executives said that ETFs have become the preferred vehicle for both index- and active-investment strategies, and that the firm is growing across the globe — including in Europe and Asia.

“And, perhaps most profound, new technologies are poised to transform our industry – and every other industry,” Fink and Kapito said in the memo.

The world’s largest asset manager said it still expects to have a larger staff by the end of the year, even with the cuts, as it expands certain parts of the business.

The asset-management industry has been buffeted over the past two years, first by declines in stock and bond markets in 2022 and then by investors who grew skittish over higher interest rates. 

BlackRock is among big money managers, including Wellington Management and T. Rowe Price Group Inc., that have recently cut jobs and redirected budgets in response. 

BlackRock increasingly seeks to position itself as a one-stop shop for investors offering equity, bond and money-market funds and strategies for private assets, as well providing tech, data, analytics and financial markets advice to clients. 

The company also aims to expand into the growing market for alternative investments, with the goal of doubling revenue from private markets over the next five years. 

PRIOR CUTS

BlackRock said last January that it would dismiss about 2.5 per cent, or 500 employees, and then announced further cuts in June, amounting to less than 1 per cent of staff. The firm, which had US$9.1 trillion of client assets as of Sept. 30, reports fourth-quarter earnings on Friday.

Shares of BlackRock dropped 1.8 per cent this year through Monday, after rising 15 per cent in 2023. Much of that gain came later in the year after investors began to wager that the Federal Reserve had stopped increasing interest rates and would begin cutting this year.

In October, BlackRock reported its first quarterly outflows since the onset of the pandemic in 2020. BlackRock clients pulled $13 billion from long-term investment funds, including from actively managed products that typically charge higher fees than index strategies. 

The firm said it took in more than $186 billion in new ETF assets and $16 billion in index mutual fund assets last year.

 

Amazon attacks EU privacy watchdog it claims was out to get it

AMAZON USES THE TRUMP TACTIC

Stephanie Bodoni, Bloomberg News

Amazon.com Inc. hit back at regulators who slapped it with a then-record European Union privacy fine of US$814 million, claiming their aim was punishment rather than protecting people’s data.

The e-commerce giant told a local court in Luxembourg —  where the firm has its regional hub — that watchdogs went on the attack rather than seek an amicable solution and fired off unfounded accusations that the firm trampled on the privacy rights of customers.

Amazon lawyer Thomas Berger said the Luxembourg regulator’s approach left the company “without a chance to change its practices” before issuing the penalty under the EU’s General Data Protection Regulation, or GDPR, in 2021.

The landmark privacy legislation had taken effect three years earlier, giving the EU’s previously toothless data authorities the powers to levy fines of as much as 4 per cent of a firm’s annual sales. It also made Luxembourg’s data watchdog the lead privacy regulator for Amazon, because of its base in the Grand-Duchy. Amazon’s fine was topped last year with a new record of €1.2 billion against Meta Platforms Inc. by Ireland’s Data Protection Commission, which is the lead regulator for several other big tech firms.

The Amazon dispute was triggered by a 2018 complaint from French privacy rights group La Quadrature du Net, which challenged Amazon for processing user data for its targeted adverts without seeking people’s consent first.

Vincent Wellens, a lawyer for the Luxembourg data commission, rejected claims that the regulator acted too fast, saying GDPR is clear and it was up to the firms concerned “to behave like big boys and not wait for the authority to provide guidance on what they need to do exactly.”

Amazon has drawn scrutiny over the years for the vast trove of data it has amassed on a range of customers and partners, including independent merchants who sell on its retail marketplace, users of its Alexa digital assistant, and shoppers whose browsing and purchase history inform what Amazon shows them on its website.

At the end of 2022 it settled an EU antitrust probe into how it allegedly abused rivals’ sales data to unfairly favor it own products and squeeze out other traders on its platform.

Canada Post selling third-party logistics business SCI Group to Metro Supply Chain

The Canadian Press

The Canada Post logo is seen on the outside the company's Pacific Processing Centre, in Richmond, B.C., on June 1, 2017. (THE CANADIAN PRESS/Darryl Dyck)

Canada Post Corp. has signed a deal to sell SCI Group Inc., its third-party logistics business, to Metro Supply Chain Inc. 

Financial terms of the agreement were not immediately available.

Montreal-based Metro Supply Chain calls the deal a transformational acquisition that will strengthen its position in strategic contract logistics services.

SCI has more than 75 locations and employs about 3,000 people.

The deal comes after a detailed review and assessment of Canada Post's long-term strategic plan. 

The transaction is expected to close in the first quarter of 2024, subject to customary closing conditions.

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

 

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

Christopher Reynolds, The Canadian Press

STANTEC INC (STN:CT)

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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

TILRAY BRANDS INC (TLRY:CT)

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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.