Here are the top reads on deals and financial services over the last week. Have a great long weekend!
The data game: How information on flight patterns and parking lots can reveal valuable clues about where the market is heading: Last summer, a corporate jet owned by Encana Corp. embarked on a strange pattern of flights. Over the course of a couple of months, the Calgary company’s aircraft was tracked landing close to oil fields in Oklahoma, Utah and Montana. Encana had operations in none of those places. Houston-based Newfield Exploration Co., however, owned assets in all three locations. And it turns out that Newfield’s jet was also on the move around the same time. Its executives seemed to take a particular interest in flying to Denver, which happens to be home to Encana’s chief executive officer, Doug Suttles. The mutual visits hinted that something was in the works. And in early November, Encana struck the largest deal in its history when it agreed to buy Newfield for US$5.5-billion. An aggressive expansion into U.S. shale represented a dramatic change of course for the Canadian driller, and the deal caught the market by surprise. When trading started the next morning, Encana’s stock plummeted by 17 per cent. A select group of investors, however, may not have been quite so shocked. They had access to the movements of Encana’s jet, giving them strong clues about what the company’s executives were up to in the months before the acquisition. Story (Tim Schufelt, for subscribers)
CIBC’s Innovation Banking unit aims to change the game for startup funding: When Canadian Imperial Bank of Commerce acquired Wellington Financial early in 2018, the bank signalled its desire to tap into the expanding ecosystem of high-tech startups that many a banker had shunned as too risky. Story (James Bradshaw, for subscribers)
Independent dealers bet that e-sports will be the next big thing: Independent investment dealers such as Eight Capital Corp. and Canaccord Genuity Group Inc. are beginning to place bets on the nascent e-sports industry, amid signs that other hot sectors on which they relied for business are starting to cool. Story (Alexandra Posadzki, for subscribers)
Inside TD’s AI play: How Layer 6’s technology hopes to improve old-fashioned banking advice: With its acquisition of Toronto predictive-artificial intelligence (AI) company Layer 6 last year, TD is aiming to better foresee client needs and show up at the right time with the right products and services. What was a startling acquisition at the time – the price was not disclosed, but The Globe reported that TD paid more than US$100-million-plus for the barely year-old company with just 17 employees – is starting to pay off, the bank says. Story (Josh O’Kane, for subscribers)
Appeals filed for dismissed lawsuits against three Canadian life insurers: A pivotal court ruling that dismissed three lawsuits against Canadian life insurers has been formally appealed, extending a battle between the companies and three investment funds over the fine print of decades-old contracts. Story (Tim Kiladze, for subscribers)
Michael Grimaldi appointed new chair of OPTrust: Michael Grimaldi, a former chairman of the board of OPSEU Pension Trust, the pension plan for Ontario provincial government employees, has returned to the role after the abrupt departure of its previous chair. Mr. Grimaldi now appears on the pension’s website as chair, with a note that his appointment was effective April 1, also the date of previous chair Tim Hannah’s departure. Story (David Milstead, for subscribers)
Should Canadians adopt Merrill Lynch’s trade idea of selling utility stocks and buying financials?: Merrill Lynch quantitative strategist Savita Subramanian has a new trade idea – sell U.S. utility stocks and buy U.S. financial stocks – for a potential gain of 20 per cent in the next 12 months. Could this trade also work for Canadian stocks? Story (Scott Barlow, for subscribers)
Why Canadian banks aren’t the only game in town: Many Canadian investors hold a couple of truths to be self-evident. One is that big banks rule. The other is that only stocks with big dividend yields deserve to be considered as potential investments. Story (Ian McGugan, for subscribers)
Ontario to tighten rules for financial planner, adviser credentials: The government of Ontario is proposing stricter regulations for financial planners and financial advisers by cracking down on individuals who are not qualified to use those titles. In its recent budget, the province announced the Financial Professionals Title Protection Act, 2019, to improve oversight on qualifications. Story (Clare O’Hara, for subscribers)
Yes, Canada, open banking is working in Britain: Canada is considering a move toward open banking, a formalized system in which consumers are empowered to share their bank-held data with third-party providers to encourage competition and innovation. If the experience in Britain is a guide, this advance will transform the country’s economy and improve outcomes for consumers, businesses and financial institutions. Opinion
Stress test responsible for drop of as much as $15-billion in new mortgages, study finds: The federal government’s new mortgage stress test was responsible for a drop of as much as $15-billion in residential mortgage borrowing last year, according to a report to be released Tuesday. Story (Janet McFarland. for subscribers)
A drop in trading revenues at U.S. banks doesn’t bode well for their Canadian peers: Lower market volatility took a bite out of the equity trading revenues at some of the big U.S. investment banks and analysts say a similar theme could play out north of the border, as well. Story (Alexandra Posadzki, for subscribers)
CIBC shuffles executive ranks, names CEO’s brother as new head of Wood Gundy: Canadian Imperial Bank of Commerce is making significant leadership changes that span wealth management, capital markets and retail banking, including naming CEO Victor Dodig’s brother as head of retail brokerage Wood Gundy. Ed Dodig is moving from capital markets to become an executive vice-president responsible for private wealth and CIBC Wood Gundy, according to internal memos obtained by The Globe and Mail. The move is one of eight executive and management changes announced internally last week. Story (Clare O’Hara, Tim Kiladze and James Bradshaw, for subscribers)
Lundin Mining to buy Brazilian mine from Yamana in $1-billion deal: Lundin Mining Corp. is buying a copper gold mine from Yamana Gold Inc. worth US$1-billion, the latest big deal during a hectic period for mergers and acquisitions in the mining sector. Toronto-based Lundin is buying the Chapada mine in Brazil that produced just under 59,000 tonnes of copper last year and 121,000 ounces of gold. Story (Niall McGee, for subscribers)
Aritzia’s new take on share buybacks inspires First Capital Realty to help shareholder unload $1.2-billion stake: The new spring lines from fashion retailer Aritzia Inc. feature a floral-pattern Sunday Best Cropsey Romper that rivals may knock off, along with an innovative $437-million deal for a long-time backer that Bay Street bankers are already emulating. Aritzia offered a new take on an old-fashioned financing tool, a share buyback, to pave the way for a recent stock sale by private equity fund Berkshire Partners LLC. Within weeks, real estate company First Capital Realty Inc. used the same approach to help a long-time shareholder unload a $1.2-billion stake. Story (Andrew Willis, for subscribers)
Uber’s horrendous losses make its high equity valuation a fantasy: Uber Technologies Inc. needs to stop subsidizing fares if it’s ever going to make a profit and keep attracting investors. But judging from the company’s initial public offering (IPO) prospectus, published last week, that day isn’t coming any time soon – and may never come. Even Uber admits its operating expenses will “increase significantly in the foreseeable future, and we may not achieve profitability.” Opinion (Eric Reguly, for subscribers)
Gerri Sinclair of Kensington Capital: ‘When people tell me I can’t do something, I want to do it even more’: Gerri Sinclair is a managing director at Kensington Capital Partners and leader of its Vancouver office, where she’s in charge of directing the $100-million BC Tech Fund. She is also a digital strategy adviser at Vancity Credit Union. Interview (Brenda Bouw, for subscribers)
MORE FINANCIAL SERVICES NEWS AND MORE DEALS NEWS FROM FRIDAY
Merger talks of German banks Deutsche Bank and Commerzbank roil emotions: If the proposed merger between Deutsche Bank and Commerzbank were a film, it would already be racking up the rotten tomatoes. The powerful labour unions are against it. Regulators are wary and could impose onerous conditions. Shareholders are skeptical. There is some formidable political momentum behind it, but the government is split over the wisdom of morphing Germany’s two largest banks into one. Story
American Media selling National Enquirer to CEO of Hudson Media for $100-million: American Media Inc (AMI) said on Thursday it was selling its National Enquirer tabloid to James Cohen, whose family owns a magazine distributor and used to own the Hudson chain of airport newsstands. Story
American Express beats profit expectations as rewards program boosts spending: Credit card issuer American Express Co’s quarterly profit beat analysts’ estimates on Thursday, as it spent more on its rewards program boosting customer spending. Story (for subscribers)
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