May 24, 2018
The Daily Chase: Ottawa blocks Aecon takeover; bank earnings continue with RBC, TD
By Noah Zivitz
Aecon says it’s moving forward “from a position of strength” notwithstanding the government’s decision to block the $1.5-billion takeover by China Communications Construction Company on national security grounds. Despite the positive spin, it has to be pointed out that during the seven months that have come and gone since the deal was announced, Aecon CEO John Beck routinely argued CCCC’s financial heft would give Aecon the firepower it needs to compete against international players.
Some basic questions that will guide our coverage today:
-Was it the right decision for Canada?
-How will it affect Canada-China relations?
-Could another suitor, one that’s more palatable to the federal government, surface? Keep in mind, Aecon put itself up for sale outright in August, and left the door open to other “strategic options” in last night’s release.
-Will this decision hamper Aecon’s ability to land contracts?
BANK EARNINGS SEASON CONTINUES
RBC followed in CIBC's footsteps this morning, with a profit beat - albeit not to the magnitude of what Commerce delivered yesterday. Royal's net income rose nine per cent year-over-year to $3.1 billion - with growth across every segment except for Capital Markets - and the Canadian residential mortgage portfolio held steady at just under $258 billion. Over at TD, CEO Bharat Masrani is heralding his bank's "exceptional" performance after second-quarter adjusted profit topped $3 billion and easily exceeded estimates amid double-digit growth in the core Canadian and U.S. banking divisions. BNN Bloomberg's Amanda Lang will be speaking with Masrani this afternoon.
TRUMP TARGETS AUTOS AS NATIONAL SECURITY THREAT
First came steel and aluminum, now the U.S. is launching a formal investigation to determine whether automobiles and auto parts also threaten national security. Commerce Secretary Wilbur Ross made the Section 232 probe official late yesterday, stating "imports from abroad have eroded our domestic auto industry" for decades. We’ll consider whether this is another NAFTA tactic, considering Mexico and Canada are the top two auto exporters to the U.S. (https://www.trade.gov/td/otm/assets/auto/New_Passenger_Imports.pdf) and track market reaction as shares of major automakers like BMW, Volkswagen and Mazda drift lower.
CANADA INFRASTRUCTURE BANK NAMES CEO
Bloomberg was first to report Pierre Lavallée has been selected as the Canada Infrastructure Bank’s inaugural CEO. He arrives with an impressive background, having spent six years at the Canada Pension Plan Investment Board after earlier serving in senior positions at Reitmans and Bain & Co. Now it’s just a matter of how quickly the CIB will put its $35 billion in firepower to use and amplify that war chest with private money. Watch for our interview with Jim Leech, who helped the government get the CIB up and running, at 8:30 a.m. ET.
IN CONVERSATION WITH ALEX POURBAIX
Cenovus Chief Executive Officer Alex Pourbaix has arguably been the oil patch’s most vocal proponent of the Trans Mountain Expansion; today we sit down with him to explore the stakes for the industry and the country as the clock ticks down to Kinder Morgan’s deadline. Don’t miss that conversation on Commodities at 11:00 p.m. ET.
OTHER NOTABLE STORIES
-CN Rail announced today it's going to buy 1,000 grain hopper cars
-The National Energy Board has approved TransCanada’s $1.4-billion North Montney Mainline project that will allow natural gas from B.C. to be shipped into Alberta.
-Canopy Growth makes its debut on the NYSE today under the symbol CGC
-Saputo is buying St. Marys, Ont.-based specialty cheese and Icelandic-style yogurt maker Shepherd Gourmet Dairy for $100 million.
NOTABLE RELEASES/EVENTS
-Notable earnings: Royal Bank of Canada, Toronto-Dominion Bank, Best Buy, Gap
-Notable data: StatsCan EI report, U.S. existing home sales
-9:30 a.m. ET: Economic Development Minister Navdeep Bains participates in AI panel in Ottawa
-11:30 a.m. ET: Donald Trump holds signing ceremony on Dodd-Frank rollback
-12:00 p.m. ET: Prime Minister Justin Trudeau holds Q&A with regional media in La Malbaie, Quebec
-3:30 p.m. ET: Bains participates in town hall in Montreal
-St. Petersburg International Economic Forum begins (runs to May 26)
Every morning BNN's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
