Author: Canadian Press

Dorel shares surge with deal to sell sports segment for US$810 million

MONTREAL — Dorel Industries Inc. shares surged a day after it announced a US$810-million deal to sell its bicycle segment Dorel Sports that makes brands such as Cannondale, Mongoose and Schwinn to Dutch mobility group Pon Holdings B.V.

The Montreal-based company’s B shares gained $9.46 or 90.8 per cent at $19.88 in morning trading on the Toronto Stock Exchange.

Dorel says it will use the proceeds of the sale to reduce debt, return capital to shareholders and for general corporate purposes.

The transaction will consist of the sale of 100 per cent of the shares of Dorel’s wholly owned subsidiary companies comprising Dorel Sports which it has owned since 2004 as well as certain related assets.

Dorel says it plans to focus on growing its existing businesses of home and juvenile products. The company says those businesses are facing challenges related to inflation and supply chain pressures.

The sale has been approved by Dorel’s board of directors and is expected to close before the end of the first quarter of 2022.

This report by The Canadian Press was first published Oct. 12, 2021.

Companies in this story: (TSX:DII.B, DII.A)

The Canadian Press

CANADA: Travel company Transat AT ends takeover offer talks with Péladeau

MONTREAL — Transat AT Inc. says talks with Pierre Karl Péladeau regarding the potential acquisition of the travel company have ended without a deal. 

Péladeau had made a non-binding offer for Transat of $5 per share in cash if the purchase offer from Air Canada didn’t materialize.

“Considering the current share price, the price offered no longer provides a reasonable basis to envision receiving the level of shareholder approval required in order to allow the transaction to proceed,” Transat said in a news release. 

It added that Péladeau’s investment firm confirmed to the company that it was withdrawing from discussions.

Shares in the company closed at $7.21 on the Toronto Stock Exchange on Friday but plunged 8.9 per cent to $6.57 in afternoon trading after the announcement on Monday.

The Péladeau offer has been rejected by Transat’s largest shareholder, Letko Brosseau. In mid-May, Péladeau claimed to be no longer interested in this purchase, while Transat replied that it had not been formally notified of this lack of interest. 

The company announced that the work of its special committee to assess strategic options will end under the circumstances. 

Transat says it plans to focus its efforts on its strategic plan and on the restart of its operations and flights on July 30. 

The plan includes considering ways to optimize its financial structure, which could include the issuance of shares or bond financing on more favourable terms than was made available by the federal government.

Ottawa reached a deal with Transat that allowed it to borrow up to $700 million under the Large Employer Emergency Financing Facility (LEEFF). Almost half the money was to be used to refund travellers whose flights were cancelled as of February 20202 when the company grounded its fleet due to the COVID-19 pandemic.

Air Canada pulled the plug on its deal to buy Transat earlier this year over Europe’s unwillingness to approve the transaction. 

This report by The Canadian Press was first published June 21, 2021. 

Companies in this story: (TSX:TRZ) 

The Canadian Press

NDP demands federal wage-subsidy clawbacks, but critics question feasibility

OTTAWA — The NDP is calling on the federal government to claw back pandemic wage subsidies handed to companies that took advantage of the cash to boost executive compensation, but economists say other paths to worker support may mark a more feasible route.

In a May 13 letter to Finance Minister Chrystia Freeland, New Democrat Peter Julian said all publicly traded companies that received the Canada Emergency Wage Subsidy (CEWS) should repay any bumps in salaries and bonuses for senior management.

“The wage subsidy was clearly supposed to go to workers and toward protecting Canadians’ jobs — not bonuses for top corporate brass,” the letter states.

“In a case where there’s a clear violation of what the clearly stated goals of the program were, it is absolutely appropriate to ask for that money back,” Julian said in an interview.

Though Freeland has repeatedly said the subsidy can only be used to pay employees, nowhere does it bar beefier executive compensation as a condition of that support.

Julian also criticized Ottawa for failing to add caveats restricting share buybacks and higher dividends.

Last year, hundreds of chief executives and senior managers enjoyed millions in dividends paid out by publicly listed firms that also gobbled up hundreds of millions from the CEWS program, which provides a subsidy of up to 75 per cent for payroll expenses and is estimated to cost $110.6 billion.

The NDP finance critic slammed the government for its “aggressive” moves to crack down on abuse of the Canada Emergency Response Benefit, intended to help Canadians who lost work during the COVID-19 pandemic.

“They’ve been putting pressure on people who received CERB, even when they were the victims of fraudulent behaviour by other people. But they have not stepped up and given any indication at all on the wage subsidy. And that’s simply wrong,” he said.

Freeland’s spokeswoman, Katherine Cuplinskas, stressed that the program aims to protect jobs, saying it has helped more than 5.3 million workers stay on payroll or get rehired.

CEWS, which she noted received unanimous approval in the House last July, “applies to businesses of all sizes and across all sectors to ensure that no worker falls through the cracks,” she said in an email.

Smaller retailers and the entertainment, tourism and aviation sectors reeled amid lockdowns over the past 14 months, but big-box stores, tech companies and transport firms fared well as remote work and online delivery ramped up.

Many countries introduced bans on dividend payments and other rewards within months of the first wave. Spain demanded full reimbursement of job-retention funding for companies that paid any dividends. The Netherlands imposed a ban on dividend payments, share buybacks and bonuses for executives at companies that took advantage of wage relief in the same year.

Last month’s federal budget extended the wage subsidy through September, but with a new clawback system for jacked-up executive compensation at publicly traded companies — a step the NDP now wants applied retroactively.

David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives, says a tax rule effectively forcing reimbursement from companies that declared profits while receiving the subsidy might offer a simpler, if blunter, solution.

“The federal government can certainly change the tax rules. And they can do it retroactively if they want to,” he said.

Ottawa could also tighten the new clawback measures by including dividend boosts and share buybacks among the repay items. “There’s $25 billion that’s going to be paid out in this fiscal year, starting April 1. So there’s still time, the program’s not over.”

University of Toronto economist Michael Smart says a future program overhaul makes more sense than retroactive clawbacks, and suggests the federal government limit the subsidy to small businesses and battered sectors or apply it only to at-risk jobs.

“Any company that issues stock on the Toronto Stock Exchange does not need the government to step in,” he said. “We’ve got to get back to a focus on workers and Canadians who are experiencing income losses.”

Smart called it a “mistake” to zero in on clawbacks, highlighting potential loopholes.

“If the government were to pass a rule that CEWS gets clawed back from any company that increases dividends this year, then as the CFO of a company I would know exactly what to do: Don’t pay out a special dividend this year; pay out a special dividend next year,” he said.

“All it does is it takes the heat off of Ottawa.”

While Canadians may be “surprised or shocked” that emergency funds landed at companies that promptly lined the pockets of their C-suite staff, “that’s a tiny fraction of the overall issue of this program,” he added.

Starting in June, the revised CEWS program will raise the eligibility threshold to 10 per cent revenue loss relative to the same four-week period in 2019. A progressively lower subsidy rate as September approaches is also part of the plan.

“This money should be going to people who actually need it, businesses that actually need it, to try to stay afloat for hopefully what’s just the last few months of the pandemic,” Macdonald said.

This report by The Canadian Press was first published May 22, 2021.

Christopher Reynolds, The Canadian Press

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