02.07.2018

Air Transat and Air Canada Merge… and Not Everyone Is Happy About It*

*We regret to inform you this article is not as dramatic as this weekend’s Taylor Swift/Scooter Braun feud.
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Remember when Air Canada Rouge made its flight attendants wear fedoras? We do.

This week, Air Transat, a Canadian airline and tour operator, agreed to be purchased by Air Canada for $520 million, or approximately $13 per share.

Currently, Air Canada is the largest airline in Canada, while Air Transat is the third largest. Air Canada intends to keep the two brands and functions separate.

According to CBC, “while the merger of the two Montreal-based airlines has the blessing of both companies’ management teams, it is far from a done deal.”

Here’s the drama:

First, since announcing talks between the two airlines, other potential buyers have come forward, indicating that they are willing to pay a higher sales price, including Montreal-based Mach Group, at $14 per share, and FNC Capital, which estimates they would pay between $17 and $20 per share.

Two-thirds of shareholders must approve the deal offered by Air Canada, but with better offers potentially on the table, some shareholder groups are urging Air Transat to reject the deal.

Second, the deal needs approval from Canada’s Competition Bureau – the regulatory agency that ensures Canadian companies are not blocking out competitors unfairly or creating monopolies (when one company controls all access to a commodity or service).
The problem is, Air Canada and Air Transat own a combined 60% of the flight business between Canada and Europe, and a combined 40% between Canada and ‘sun destinations’. The Canadian air industry has such little competition already; it remains uncertain whether the deal will be approved.

 


Recent Tragedy Brings Canadian Mining Ethics to the Fore

Last week, in the Democratic Republic of the Congo (DRC), at least 43 informal (or artisanal) miners were killed in a collapse at a facility owned by Katanga Mining Ltd, a company listed on the Toronto Stock Exchange (TSX) controlled by Glencore, a larger international mining company.

Katanga was fined by Canadian regulators earlier this year for issuing false and misleading statements, according to the Financial Times.

Pushed by poverty and a booming global market for cobalt, a mineral essential to smartphones, thousands of untrained miners in the DRC have taken to digging on the peripheries of large mines to sustain their families. Informal miners then take the minerals into the city to trade depots operated by Chinese buyers.

The DRC government has responded to the increase in informal mining by deploying troops to mine sites across the country. However, informal miners, of which there are estimated to be 40 million around the world, are driven by poverty – some experts worry that restricting access will cause a revolt and deepen the regional conflict.

Some mining companies, including Canadian giants Barrick Gold and Kinross Gold Corporation, purposefully allow informal miners limited access to their operations, in order to avoid tensions. Human rights advocates argue that these conflicts, and associated compromises, point to a failure by the mining industry to positively impact the development of the often impoverished communities they operate in.

Glencore’s shares shrunk 4.9% after the news broke Thursday. Capital markets analysts predict the impact of the tragedy on Glencore’s shares will be short-term, though their ‘social license to operate’ may be poorly impacted.

Btchcoin will continue to follow stories related to Katanga and the mining industry’s efforts to prevent future deaths.

 


The Bank of Canada leads a new public-private partnership for financial sector resiliency

For those of us who grew up and entered the job market in the wake of the 2008 recession, it seems obvious that the Canadian economy is vulnerable to global financial shocks. In addition to the growing threat of cyberattacks and trade uncertainty, the resilience of our financial system seems more important than ever.

The Bank of Canada is working to improve Canada’s ability to withstand a range of attacks. On June 27, the Bank of Canada announced that it will be dismantling the Joint Operational Resilience Management Program in favour of a new public-private partnership to improve financial sector resiliency. The initiative is called the Canadian Financial Sector Resiliency Group (CFRG) and is made up of the federal Department of Finance, the Office of the Superintendent of Financial Institutions, large Canadian banks, and select financial market infrastructures such as clearing and settlement systems.

Starting in August 2019, the Group will be in charge of “coordinating a sector-wide response to systemic-level operational incidents.” It will also plan crisis simulations and benchmarking exercises to prepare possible responses to shocks in the financial sector.

A key focus of the CFRG is cyber-attacks on financial systems and avoiding a spread through the sector if one financial institution experiences a breach. Stephen Poloz, governor of the Bank of Canada, reinforced the need for a coordinated effort for cybersecurity: “We need strong controls within each institution. And we need partnerships between public agencies and the private sector to bridge any gaps in coordination, especially when it comes to cyber risks.”

In fact, the creation of the CFRG is part of the Bank of Canada’s larger cyber strategy that was updated earlier this year and outlines a plan to enhance resiliency to cyber threats in the Canadian financial sector over the next three years.

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