A pedestrian is reflected in a Suncor Energy sign in Calgary, Feb. 1, 2010.Jeff McIntosh/The Canadian Press
DEAL OF THE DAY
Suncor criticizes Canadian Oil Sands' poison pill manoeuvre
Suncor Energy Inc. criticized the poison pill defence adopted by Canadian Oil Sands Ltd. as it seeks shareholder support for a $4.3-billion hostile takeover of the Syncrude partner.
Canadian Oil Sands (COS), the largest owner in the Syncrude Canada Ltd. oil sands project with a 37-per-cent stake, implemented a new shareholder rights plan on Wednesday in a move analysts said was designed to extract a higher bid from Suncor or draw a competing offer from another suitor. The plan calls for 120 days to consider bids, making Suncor's offer ineligible because it expires on Dec. 4. Full story
MERGERS AND ACQUISITIONS
SABMiller rejects AB InBev's offer
SABMiller PLC rejected a takeover proposal from Anheuser-Busch InBev NV on Wednesday that valued it as high as £68.24-billion ($104-billion), the latest salvo in what is quickly becoming a tense negotiation between the world's No. 1 and No. 2 brewers.
The tensions extend to SABMiller's two largest shareholders, U.S. tobacco company Altria Group Inc. and the Santo Domingo family of Colombia. Altria, which holds a stake of more than 25 per cent, would support a deal at or above AB InBev's proposed price. The Santo Domingos' BevCo Ltd. investment vehicle, with about 15 per cent, joined with the rest of the SABMiller board in rejecting the proposal. Full story
Brookfield planning $500-million dividend for services spinoff
Brookfield Asset Management Inc., Canada's largest asset manager, will spin off about 35 per cent of Brookfield Business Partners LP through a special dividend.
The payment is worth about 50 cents a share, or about $500-million, the Toronto-based company said Wednesday in a statement. The new unit will own and operate almost all of the business services and industrial operations previously held by Brookfield Asset Management's private equity platform. Full story
INITIAL PUBLIC OFFERINGS
CPI Card Group cuts IPO target on eve of public listing
What a difference a few weeks make. On Sept. 22, U.S. credit card maker CPI Card Group Inc. announced it was tripling its initial public offering target to $300-million (U.S.).
On Wednesday, barely two weeks later and on the eve of its IPO, the company announced it would seek to raise $200-million. The company, which is expected to start trading on the Toronto Stock Exchange and the Nasdaq Stock Market on Thursday, reduced its expected pricing range to $12 to $13 a share, from $16 to $18. BMO Nesbitt Burns Inc., Goldman Sachs & Co. and CIBC World Markets Inc. are leading the offering.
The reversal is a nasty sting for CPI's majority owner, Vancouver-based private equity firm Tricor Pacific Capital Inc. Tricor plans to sell down a partial stake in the IPO, but will pocket not nearly as much as it had hoped. The development also underlines the swift shift in sentiment that has fallen over the entire North American IPO market since Labour Day.
Earlier in the year, the environment was drastically different. When Canadian companies Shopify Inc. and Cara Operations went public in the spring, the mantra from investment bankers was upsize, up-price and sit back and watch the stock shoot up on Day One. No more.
Last week, Tricon Investment Partners Inc., a subsidiary of Toronto-based real estate management firm Tricon Capital Group Inc., pulled its planned $140-million IPO on the Toronto Stock Exchange, blaming "current adverse market conditions." In late Sept, Gibraltar Growth Corp., a special purpose acquisition corporation (SPAC) managed to close its $100-million IPO, but not without offering its would-be investors extra warrant privileges as a last-minute teaser. On Thursday, investors will closely monitor CPI's first-day performance as a publicly traded company for clues as to the future direction of the IPO market. Press release
Hootsuite hires CMO on path to IPO
Hootsuite Media Inc. has put in place another key piece of the puzzle as it prepares for an expected initial public offering within the next year. The Vancouver startup, which helps users manage their various social-media accounts from a central platform, said Wednesday that it has hired former Juniper Networks chief marketing officer Penny Wilson to serve in a similar role. Full story
FINANCINGS
Teck sells silver stream to Franco-Nevada to bolster finances
Teck Resources Ltd., Canada's largest diversified miner, sold future silver output from a mine in Peru to Franco-Nevada Corp. for an upfront payment of $610-million. Streaming, which provides financing in exchange for a portion of discounted metal from a mine, were once considered primarily of use for high-risk, early-stage projects. But as large miners have come under pressure to shore up their balance sheets, it has become a favoured option for them as well. Barrick Gold Corp. and Brazil's Vale SA are among majors to have sought the sales to increase cash. Full story
Superior Plus bumps up bought deal
Hours after it filed paperwork on Tuesday evening to launch a $100-million bought-deal financing, Superior Plus Corp. bumped up the offering by $25-million.
Superior Plus said it increased the deal size owing to "strong investor demand." The company will now sell $125-million in stock at $10.35 a share, a modest discount to the shares' closing price on Tuesday. With the stock trading higher on Wednesday, underwriters likely didn't have much trouble unloading the shares.
The funds are being raised in part to help pay down debt incurred from Superior's $324-million announced acquisition of Canexus Corp. for $324-million.
The bought deal is being co-led by National Bank Financial Inc. and J.P. Morgan Securities Canada Inc. Press release
BAY STREET MOVES
GMP remains committed to Houston office, shuffles research team
The energy slump hasn't changed GMP Capital Inc.'s mind about Houston. In early 2014, the independent investment bank opened a Houston office to expand its U.S. energy business. And rather than adding a few people at first to get its foot in the door, GMP ramped up quickly, hiring in investment banking, research and sales and trading.
Then the energy market collapsed.
Since oil and gas prices tumbled, there have been constant questions about GMP's commitment to the office, which employs roughly 30 people. Recent research hires prove that the dealer isn't cutting and running. Full story
INSIGHT
Goldman brings Moneyball approach to investment banking
Remember in the movie Moneyball when Billy Beane, the general manager of the Oakland A's (played by Brad Pitt), admonishes the team's head scout – basically telling him that he knows nothing? Baseball scouts historically evaluated talent using their intuition. A gut feeling that a player has what it takes to make it.
It turns out that investment bankers do a similar thing when advising clients in merger-and-acquisition scenarios – they use a mix of experience and intuition, but not a lot of math.
Tyler Brooke, an investment banker with Goldman Sachs & Co., spoke Tuesday during the Activist Investing in Canada conference in Toronto. He laid out the conversation that investment bankers typically have with clients, ahead of an M&A transaction.
"You have an equity capital markets desk, who's going to tell you …'Here's how your stock is likely to behave,'" Mr. Brooke said.
"Here's what your shareholders are likely to do. Here's who's likely to sell into this. Here are your buyers. Accessing the equity transaction from the perspective of shareholders."
But like the head baseball scout in Moneyball, the word of the investment banker is, at best, an educated guess.
Now Goldman is trying to take the guesswork out of M&A advisory work, with the establishment of a separate group of bankers who apply a much more analytical – one might say Moneyball-esque approach.
"What you want to be able to understand is how have the target shareholders behaved in prior transactions? Have they sold into M&A deals? What types of stock mix do they sell into versus cash mix? What kinds of premiums do they sell into? What type of synergies do you need in order to have them be satisfied?" Mr. Brooke said.
"So we built this database of thousands of M&A deals going back and you can start to extrapolate if you announce this premium, this mix, these synergies with this backdrop to the market, how is my stock price likely to behave on a relative basis? And so being able to start thinking of that analytically, as opposed to a banker putting his finger up in the air and saying 'Well this is what's likely to happen.'"
Thousands of M&A deals. Think about that. What Goldman is doing, is essentially what Peter Brand did in Moneyball. Goldman's methodology, if it works out, may take the human out of human error. In Moneyball – and in real life – the analytical approach proved to be a game changer, with the A's winning a record-breaking 20 games in a row in 2002. In subsequent years, other baseball teams adopted the model, fundamentally altering the business of picking baseball players.
Goldman's new approach to M&A investment banking is novel and unproven.
After Mr. Brooke came off stage on Tuesday, I talked to a different investment banker with another big Wall Street firm, and asked him what he thought of Goldman's approach to M&A advisory. He admitted that the novelty of the idea alone would probably win Goldman new business. He also pointed out that you can do all the analysis in the world, recommend a course of action and then have the market move against you unexpectedly on the day of the transaction.
Got any Bay Street buzz? If you have any story suggestions for the Daily Deal Roundup, e-mail us at deals@globeandmail.com or nmcgee@globeandmail.com Follow Niall McGee on Twitter: @niallcmcgee