Category: Uncategorized

The bankers running the sale process for Subway have given the private equity firms vying for the sandwich chain a US$5-billion acquisition financing plan, hoping to overcome a challenging environment for leveraged buyouts and fetch the company’s asking price of more than US$10-billion, people familiar with the matter said.

Interest rates have been rising and concerns about an economic slowdown have increased since Subway said in February it was exploring a sale, making debt more expensive and less available for buyout firms pursuing deals. This is weighing on how much the private equity firms are offering to buy companies.

So far, bids for Subway have ranged between US$8.5-billion and US$10-billion, one of the sources said. Subway’s financial adviser, JPMorgan Chase & Co., is now hoping a US$5-billion debt financing package it has put forward will show buyout firms they can borrow enough to structure an attractive deal even at a US$10-billion-plus valuation, the sources said.

The debt financing is based on a mix of loans and bonds and its size is equivalent to 6.75 times Subway’s 12-month earnings before interest, taxes, depreciation and amortization of about US$750-million, the sources added.

It is possible that this financing will serve only as a temporary solution. This is because a cheaper option for a private-equity buyer of Subway would likely be to finance the acquisition long-term through a so-called whole business securitization (WBS), the sources said. This would involve borrowing using the royalties of restaurant franchises as collateral.

WBS financing requires store-by-store due diligence by ratings agencies which can take more than a year. Bidders would have to rely on JPMorgan’s debt package or arrange their own financing to clinch a deal with Subway, and then refinance through a WBS scheme down the line, the sources said.

Barclays Plc, a major player in the market for WBS financing, is one of the banks in discussions about long-term financing, the sources said.

Milford, Conn.-based Subway has been revamping its operations to deal with outdated decor and US$5 deals on foot-long sandwiches that eroded franchisees’ profits. In 2021, the chain launched a menu overhaul and splashy marketing campaign as it embarked on a turnaround plan that has helped sales grow.

JPMorgan’s financing package also offers the option of a preferred equity component with a roughly 15-per-cent interest rate, the sources said. This is a more expensive route that private equity firms may not opt for, three of the sources added.

To be sure, Subway is allowing bidders to use any financing route they want, as long as they can show they can secure committed financing.

Second-round bids for Subway came in last week from more than 10 private-equity firms, one of the sources said, adding that Subway has dropped low bids and is whittling down the pool of final bidders. Bain Capital, TPG Inc., Advent International Corp., TDR Capital, Goldman Sachs Group Inc.’s buyout arm and Roark Capital are among the private-equity firms that are participating in the auction, according to the sources.

Subway will soon allow bidders to team up before submitting final offers, and Bain, TPG and Advent have already been in discussions about doing so, the sources added.

The sources requested anonymity because details of the sale process are confidential. Bain, TPG and Advent declined to comment. TDR and Roark did not immediately respond to comment requests. Subway, JPMorgan, Goldman Sachs and Barclays declined to comment.

Founded in 1965 by 17-year-old Fred DeLuca and family friend Peter Buck, the company has been owned by the founding families since its first restaurant opened as “Pete’s Super Submarines” in Bridgeport, Conn.

The chain, which has nearly 37,000 locations globally, is moving away from its traditional reliance on franchisees who own only one or two locations and is instead consolidating locations with fewer and larger, well-capitalized franchisees.

Subway reported earlier this month that global comparable sales were 12.1-per-cent higher in the first quarter and that guest visits rose, driven in part by restaurant renovations. It has been facing growing competition from rivals such as Jimmy John’s, Firehouse Subs, Jersey Mike’s Subs and Potbelly Corp.

TPG and Bain were part of a group that owned Burger King when John Chidsey, who is now Subway’s chief executive, headed that burger fast-food restaurant chain. Advent, for its part, has invested in restaurants including Bojangles and café operator First Watch. TDR operates grocery retailer ASDA and gas station conglomerate EG Group.

The Federal Deposit Insurance Corp. says JPMorgan Chase Bank JPM-N +0.87%increase will take over all deposits and most of the assets of troubled First Republic Bank.

The FDIC said early Monday that California regulators had closed First Republic FRC-N -43.30%decrease and appointed it as receiver. JPMorgan Chase will assume “all of the deposits and substantially all of the assets of First Republic Bank,” it said in a statement.

First Republic Bank’s 84 branches in eight states will reopen Monday as branches of JPMorgan Chase Bank.

Regulators had been working to find a way forward before U.S. stock markets opened Monday. San Francisco-based First Republic has struggled since the collapses of Silicon Valley Bank and Signature Bank in early March. They added to worries that the bank may not survive as an independent entity for much longer.

Regulators searched for a solution to First Republic Bank’s woes over the weekend, hoping to find a way forward before U.S. stock markets opened Monday.

San Francisco-based First Republic has struggled since the collapse of Silicon Valley Bank and Signature Bank in early March, as investors and depositors grew increasingly worried the bank may not survive as an independent entity. The bank’s stock closed at $3.51 on Friday, a fraction of the roughly $170 a share it traded for a year ago. It fell further in afterhours trading.

World markets have periodically been shaken by worries over turmoil in the banking industry since Silicon Valley Bank’s collapse. On Monday markets in many parts of the world were closed for May 1 holidays. The two markets in Asia that were open, in Tokyo and Sydney, rose on Monday while U.S. futures were little changed, with the contract for the S&P 500 up nearly 0.1%.

First Republic has been seen as the bank most likely to collapse next due to its high amount of uninsured deposits and exposure to low interest rate loans.

Gary Cohn, a former Goldman Sachs president who served as President Donald Trump’s top economic adviser, told CBS News’ “Face the Nation” on Sunday that the Federal Deposit Insurance Corporation “would prefer to sell the bank in its entirety than in pieces.”

“What will most likely happen is the FDIC will seize control and then simultaneously resell the asset to the successful bidder,” Cohn said.

Cohn said he believed it will be a “much faster process” than what happened with Silicon Valley Bank.

First Republic reported total assets of $233 billion as of March 31. At the end of last year, the Federal Reserve ranked First Republic 14th in size among U.S. commercial banks.

Before Silicon Valley Bank failed, First Republic had a banking franchise that was the envy of most of the industry. Its clients — mostly the rich and powerful — rarely defaulted on their loans. The 72-branch bank has made much of its money making low-cost loans to the rich, which reportedly included Meta Platforms CEO Mark Zuckerberg.

Flush with deposits from the well-heeled, First Republic saw total assets more than double from $102 billion at the end of 2019′s first quarter, when its full-time workforce was 4,600.

But the vast majority of First Republic’s deposits, like those in Silicon Valley and Signature Bank, were uninsured — that is, above the $250,000 limit set by the FDIC. And that made analysts and investors worried. If First Republic were to fail, its depositors might not get all their money back.

Those fears were crystalized in the bank’s recent quarterly results. The bank said depositors pulled more than $100 billion out of the bank during April’s crisis. San Francisco-based First Republic said that it was only able to stanch the bleeding after a group of large banks stepped in to save it with $30 billion in uninsured deposits.

Now First Republic is in need of a bigger fix.

“Getting the bank in the hands of a larger one is the best possible economic outcome,” said Steven Kelly, a researcher at the Yale School of Management’s Program on Financial Stability. “First Republic has lots of knowledge about its customers and has been a profitable bank for its entire history — but its business model is not stable. It needs a big bank balance sheet behind it.”

Kelly said that other options, such as government control or continuing to try to survive on its own, would see its value continue to disappear, along with credit and economic growth.

“A successful absorption into a big bank would provide a proper, stable home for the firm to continue to provide its value proposition to the economy,” Kelly said.

Since the crisis, First Republic has been looking for a way to quickly turn itself around. The bank planned to sell off unprofitable assets, including the low interest mortgages that it provided to wealthy clients. It also announced plans to lay off up to a quarter of its workforce, which totaled about 7,200 employees in late 2022.

But investors have remained skeptical. The bank’s executives have taken no questions from investors or analysts since the bank reported its results, causing the stock to sink further.

And it’s hard to profitably restructure a balance sheet when a firm has to sell off assets quickly and has fewer bankers to find opportunities for the bank to invest in. It took years for banks like Citigroup and Bank of America to return to profitability after the global financial crisis 15 years ago, and those banks had the benefit of a government-aided backstop to keep them going.

Monday May 1

China and Japan manufacturing PMI

(10 a.m. ET) U.S. ISM manufacturing PMI for April.

(10 a.m. ET) U.S. construction spending for March. The Street is estimating a month-over-month increase of 0.1 per cent.

Earnings include: Capital Power Corp.; Cargojet Inc.; Gibson Energy Inc.; Southern Copper Corp.; Stryker Corp.; Topaz Energy Corp.; Wajax Corp.

==

Tuesday May 2

Euro zone manufacturing PMI and CPI

Germany retail sales

(10 a.m. ET) U.S. factory orders for March. The consensus forecast is an increase of 1.3 per cent from February.

(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for March.

Also: Canadian and U.S. auto sales for April

Earnings include: Advanced Micro Devices Inc.; Ballard Power Systems Inc.; Colliers International Group Inc.; Dream Industrial REIT; EQB Inc.; First Capital Realty Inc.; Franco-Nevada Corp.; Pfizer Inc.; Restaurant Brands International Inc.; Starbucks Corp.; Thomson Reuters Corp.; Uber Technologies Inc.

==

Wednesday May 3

(8:15 a.m. ET) U.S. ADP National Employment Report for April. Consensus is an increase of 145,000 jobs month-over-month.

(10 a.m. ET) U.S. ISM services PMI for April.

(2 p.m. ET) U.S. Fed announcement with chair Jerome Powell’s press briefing to follow.

Earnings include: Barrick Gold Corp.; Bausch + Lomb Corp.; Brookfield Infrastructure Partners LP; Canfor Corp.; Capstone Copper Corp.; Centerra Gold Inc.; Ceridian HCM Holding Inc.; CVS Health Corp.; Estee Lauder Companies Inc.; Fortis Inc.; Gildan Activewear Inc.; IGM Financial Inc.; Killam Properties Inc.; Kinaxis Inc.; Loblaw Companies Ltd.; Parkland Fuel Corp.; Qualcomm Inc.; Sigma Lithium Resources Corp.; Spin Master Corp.; Stelco Holdings Inc.; Vermilion Energy Inc.

==

Thursday May 4

Euro zone services PMI and PPI

ECB monetary policy meeting (with press conference to follow)

(8:30 a.m. ET) Canada’s merchandise trade balance for March.

(8:30 a.m. ET) U.S. initial jobless claims for week of April 29.

(8:30 a.m. ET) U.S. productivity for Q1 (preliminary reading). Consensus is an annualized rate decline of 0.1 per cent with unit labour costs rising 4.0 per cent.

(8:30 a.m. ET) U.S. goods and services trade deficit for March.

(10 a.m. ET) Canada’s Ivey PMI for April.

(12:50 p.m. ET) Bank of Canada governor Tiff Macklem discusses the economic outlook in a fireside chat at the Toronto Region Board of Trade.

Earnings include: Altus Group Ltd.; Apple Inc.; Bausch Health Companies Inc.; Baytex Energy Corp.; BCE Inc.; Brookfield Renewable Corp.; Canadian Natural Resources Ltd.; Chartwell Retirement Residences; ConocoPhillips; Endeavour Mining Corp.; First Majestic Silver Corp.; Labrador Iron Ore Royalty Corp.; Open Text Corp.; Pembina Pipeline Corp.; Primo Water Corp.; Shopify Inc.; SSR Mining Inc.; Telus Corp.; Telus International Inc.; Uni-Select Inc.; Wheaton Precious Metals Corp.

==

Friday May 5

Euro zone retail sales

Germany factory orders

(8:30 a.m. ET) Canadian employment for April. The Street expects an increase of 0.1 per cent (or 20,000 jobs) with the unemployment rate rising 0.1 of a percentage point to 5.1 per cent.

(8:30 a.m. ET) U.S. nonfarm payrolls for April. Consensus is a rise of 180,000 jobs with the unemployment rate increasing 0.1 of a percentage point to 3.6 per cent.

(3 p.m. ET) U.S. consumer credit for March.

Earnings include: ARC Resources Ltd.; Aritzia Inc.; Brookfield Business Partners LP; Brookfield Renewable Partners LP; Cigna Corp.; Dominion Energy Inc.; Enbridge Inc.; Hydro One Ltd.; Magna International Inc.; TransAlta Corp.; TransAlta Renewables Inc.; Westshore Terminals Investment Corp.

Apr 17, 4:00PM CDTPartnership Content

Nutrien Ltd. (TSXandNYSE:NTR) has received notice of an unsolicited “mini-tender” offer made by TRC Capital Investment Corporation (“TRC Capital”) to purchase up to 1,000,000 Nutrien shares, or approximately 0.20% of Nutrien’s outstanding shares, at a price of C$93.89 per share. The offering price represents a discount of 4.49% and 4.40%, respectively, to the closing prices of Nutrien shares on the Toronto Stock Exchange and New York Stock Exchange on April 4, 2023, the last trading day before the mini-tender offer was commenced.

Nutrien does not endorse TRC Capital’s unsolicited offer, has no association with TRC Capital or its offer, and does not recommend or endorse this unsolicited mini-tender offer. Shareholders are cautioned that TRC Capital’s offer has been made at a price below the current market price for the shares.

TRC Capital has made similar unsolicited mini-tender offers for shares of several other public companies. Mini-tender offers are designed to avoid many of the investor protections like disclosure and procedural protections applicable to most take-over bids and tender offers under Canadian and U.S. securities laws. Canadian securities regulatory authorities have expressed concerns about mini-tender offers, including the possibility that investors might tender to such offers without understanding the offer price relative to the actual market price of their securities. Comments from the Canadian securities regulatory authorities (the “CSA”) on mini tenders can be found in its notice at: http://www.osc.gov.on.ca/en/SecuritiesLaw_csa_19991210_61-301.jsp. The U.S. Securities and Exchange Commission (the “SEC”) has noted that some bidders make these offers at below-market prices “hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price”. The SEC’s advisory to investors can be found at: http://www.sec.gov/investor/pubs/minitend.htm.

Nutrien urges shareholders to obtain current market quotations for their shares, consult with their broker or financial advisor and exercise caution with respect to TRC Capital’s offer. Shareholders who have already tendered their shares should consider taking actions to withdraw them including reviewing the withdrawal procedures in TRC Capital’s offering documents.

Nutrien strongly encourages brokers, dealers and other market participants to exercise caution and review the letter regarding broker-dealer mini-tender offer dissemination and disclosures on the SEC website at: Letter to SIA re: Broker-Dealer Mini-Tender Offer Dissemination and Disclosures (sec.gov) and the relevant provisions in the CSA’s notice referenced above. Nutrien requests that a copy of this news release be included with all distributions of materials relating to TRC Capital’s mini-tender offer related to Nutrien shares.

All financial figures are in Canadian dollars, unless noted otherwise

• Transaction includes the remaining 31.23% working interest in Fort Hills and 50% working interest in Surmont
• Adds 135,000 barrels per day of bitumen production capacity and 2.1 billion barrels of reserves
• Ensures sufficient long-term bitumen supply beyond Base Mine end of life to keep Base Plant upgraders full
• Immediately accretive to funds flow per share and the Board intends on increasing dividend by approximately 10% after closing

Calgary, Alberta–(Newsfile Corp. – April 27, 2023) – Suncor Energy (TSX: SU) (NYSE: SU) today announced that it has agreed to purchase TotalEnergies’ Canadian operations through the acquisition of TotalEnergies EP Canada Ltd., which holds a 31.23% working interest in the Fort Hills oil sands mining project (Fort Hills) and a 50% working interest in the Surmont in situ asset. This will add 135,000 barrels per day of net bitumen production capacity and 2.1 billion barrels of proved and probable reserves to Suncor’s oil sands portfolio. The acquisition is for cash consideration of $5.5 billion, with the potential for additional payments of up to an aggregate maximum of $600 million, conditional upon Western Canadian Select benchmark pricing and certain production targets. Subject to closing, the transaction will have an effective date of April 1, 2023.

“This transaction represents a major step in securing long-term bitumen supply to our Base Plant upgraders at a competitive supply cost,” said Rich Kruger, President and Chief Executive Officer. “These are valuable oil sands assets that are a strategic fit for us and add long-term shareholder value. The acquisition also introduces flexibility and optionality into our long-range capital plan, providing us with further discretion in respect of the timing and scope of future oil sands developments.”

With the transaction Suncor will have 100% ownership of Fort Hills, which along with the Firebag and MacKay River in situ assets, provides the company with sufficient long-life, physically-integrated bitumen supply in the Fort McMurray region to fully utilize the Base Plant upgraders post the end of the Base Mine life in the mid 2030s.

Surmont is a high-quality, producing asset which adds long-life production to Suncor’s oil sands portfolio that is competitive with the company’s organic development options. The asset also has the potential for growth through cost-competitive expansion. When the Base Mine life ends in the mid 2030s the bitumen production from the combination of the Fort Hills and Surmont interests will effectively replace half of the current Base Mine bitumen production. Replacement of the remaining Base Plant Mine bitumen production will involve economic decisions assessing the highest value use of capital in the future.

With Suncor’s strong balance sheet the acquisition will be funded by debt. As a result, it is expected that net debt levels will temporarily exceed the company’s $12-15 billion target range. The company will maintain the current allocation of funds flow after dividends, capital and non-operational benefits of 50% to debt reduction and 50% to share buybacks in line with the capital allocation framework. Suncor expects to return to within its target net debt range in 2024 based on current expected commodity prices. The acquisition is expected to strengthen the underlying business, result in increasing funds flow and be accretive to funds flow per share. Assuming the acquisition closes as contemplated, the Board currently intends to increase the quarterly dividend by approximately 10% following closing.

The Surmont in situ project is operated by ConocoPhillips Canada and upon closing, each of Suncor and ConocoPhillips Canada will hold a 50% working interest. Under the terms of the Surmont joint venture arrangements ConocoPhillips Canada has certain preemptive rights including a right of first refusal on the 50% Surmont working interest. Closing of the transaction is anticipated to occur in the third quarter of 2023 and is subject to waiver of the right of first refusal on the Surmont working interest and other customary closing conditions, including receipt of all required regulatory approvals.

The addition of these assets to Suncor’s portfolio will be subject to our net zero by 2050 emissions reduction objective.

Suncor engaged J.P. Morgan Securities Canada to act as its exclusive financial advisor and Blake Cassels and Graydon LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP as its legal advisors on the transaction.

Imperial Oil Ltd. is raising its quarterly dividend as it reported it earned $1.25 billion in its first quarter, up from $1.17 billion in the same quarter a year earlier.

The company says it will now pay a quarterly dividend of 50 cents per share, up from 44 cents per share.

The increased payment to shareholders comes as the company says its profit amounted to $2.13 per diluted share for the quarter ended March 31, up from $1.75 per diluted share a year earlier.

Total revenue and other income amounted to $12.12 billion, down from $12.69 billion in the first three months of 2022.

Production averaged 413,000 gross oil-equivalent barrels per day, up from 380,000 in the same quarter last year.

Meanwhile, refinery throughput averaged 417,000 barrels per day, up from 399,000 a year ago, as refinery capacity utilization rose to 96 per cent compared with 93 per cent a year earlier.

“Imperial’s strong financial results in the first quarter were underpinned by sustained high utilization rates across our refining network, as well as record first quarter production at Kearl that was supported by enhanced winter operating procedures,” said Brad Corson, Imperial’s chairman, president and chief executive.

“Our strong operating performance ensured Imperial was well positioned to maximize value capture from the current business environment.”

This report by The Canadian Press was first published April 28, 2023.

Published: 4/28/2023 3:17 PM ET

Crude oil prices rose sharply on Friday as traders weighed crude supply and near-term energy demand prospects.

Data from the Energy Information Administration showed crude production in the U.S. fell in February to 12.5 million barrels per day, the lowest level since December 2022.

The EIA report also said fuel demand surged to nearly 20 million barrels per day, the highest level since November 2022.

West Texas Intermediate Crude oil futures for June ended higher by $2.02 or about 2.7% at $76.78 a barrel.

WTI crude futures shed about 1.4% in the week, but gained nearly 1% in April.

Brent crude futures were up $2.06 or 2.63% at $80.28 a barrel a little while ago.

Edward Moya, Senior Market Analyst at OANDA, who said the oil market sell0ff got out of control, added “the pulse of the U.S. economy is not too bad if you ask the Atlanta Fed. If the U.S. economy comes anywhere close to growing at 1.7% in the second quarter, oil prices will probably be much higher.”

According to BakerHughes, the number of rigs drilling for oil in the U.S. was unchanged this week at 591.

A report from Commerce Department said the annual rate of consumer price growth in the U.S. slowed to 4.2% in March from a revised 5.1% in February.

Economists had expected the rate of growth to slow to 4.6% from the 5% originally reported for the previous month.

The annual rate of growth by core consumer prices, which exclude food and energy prices, also slipped to 4.6% in March from a revised 4.7% in February. Economists had expected the rate of growth to slow to 4.5% from the 4.6% originally reported for the previous month.

Traders now look ahead to the Federal Reserve’s monetary policy meeting scheduled for next week.

Ahead of the meeting, CME Group’s FedWatch Tool is indicating an 85.4% chance the Fed will raise rates by another 25 basis points.

Published: 4/28/2023 5:59 PM ET

The Canadian market ended on a firm note on Friday, extending gains from the previous session, thanks largely to strong buying in the energy sector as oil prices rose sharply.

The benchmark S&P/TSX Composite Index ended with a gain of 113.90 points or 0.55% at 20,636.54. The index shed about 0.27% in the week.

On the economic front, data released by Statistics Canada showed the Canadian economic activity likely edged down by 0.1% month-over-month in March 2023. In February, the GDP edged up by 0.1%, following a 0.6% expansion in January.

Gfl Environmental (GFL.TO) surged 7.5% after reporting adjusted net income from continuing operations of $28.7 million in the first quarter. Tfi International (TFII.TO) climbed 5.7%. Tourmaline Oil Corp (TOU.TO), Paramount Resources (POU.TO), Docebo Inc (DCBO.TO) and Suncor Energy (SU.TO) gained 2.7 to 4.3%.

TC Energy Corporation (TRP.TO) gained about 2.1%. The company reported first-quarter net income of $1.3 billion or $1.29 per common share compared to $0.4 billion or $0.36 per common share in first quarter 2022.

Imperial Oil (IMO.TO) reported first-quarter net income of $1,248 million, compared with net income of $1,173 million in the year-ago quarter. The stock ended 0.6% down.

Cameco Corporation (CCO.TO) shares surged nearly 3% after the company reported a net income of $119 million for the quarter ended March 31, 2023, compared with net income of $40 million a year ago.