Business

Alberta and Dr. Allard, a marriage obviously made in heaven

June 28 1976
Business

Alberta and Dr. Allard, a marriage obviously made in heaven

June 28 1976

Alberta and Dr. Allard, a marriage obviously made in heaven

Business

The 27-year-old Northgate building was once the skyscraper star of Edmonton’s Jasper Avenue. But now, Alberta has transformed itself into the province that has it all and the seven-storey office tower has shrunk into insignificance. No one but Dr. Charles Allard noticed that Allarco Developments Ltd. has just added it to its growing network of interests. He noticed because he owned the building once before. He built it, in fact, launching a business career that catapulted him to the presidency of a $ 100-million company which last year earned $3,307,000 from a variety of operations ranging from Puerta Vallerta real estate to Medicine Hat methanol.

“It seems to me it was just yesterday we built it,” he says of the tower that almost accidentally turned a surgeon into an entrepeneur. In 1949, he arrived back in Edmonton after 10 years of medical schooling. The city was reeling from the effects of two decades of depression and war and Allard could find no place to hang his shingle. He made his own space, on a Jasper Avenue lot acquired from his mother, who dabbled in real estate. His timing was superb. Alberta’s oil fields soon blew the province and Allard into prosperity.

That sense of timing runs through all of Allard’s enterprises. “Sometimes it’s better to be lucky than to think you’re smart,” he says. As luck would have it, Allard’s friends have, time and again, steered him in precisely the right direction. It was Zane Feldman, until recently Allarco vicechairman, who talked Allard into turning a

vacant lot into a used-car lot in 1955. Last year, Allarco’s automotive division, which now includes the largest Chrysler dealership in Canada, recorded sales of $29,665,000. Morris Klimove, an Allarco director now, got Allard interested in restaurants, a division that last year earned Allarco $1,121,000 profit on sales of $9,621,000. Allard’s luck hasn’t always held: International Jet Air has had nothing but turbulent flying since Allard bought it nine years ago, and his beloved Oilers, the World Hockey Association team in which he has a private 23% interest, have been losers at the bank and on the ice. (They were a Feldman suggestion too.) But it has worked often enough for him to put to-

gether an empire that satisfies his needs, as one of his executives puts it, “to be where it’s at.”

Allarco seems to have cornered the where-it’s-at market. As the provincial government bulldozes Alberta toward a secondary petrochemical industry, Allarco boasts of half interest (with Alberta Gas Trunk Line Company Ltd.) in Alberta Gas Chemicals Ltd., Canada’s partner in the province’s first methanol plant. The company is also involved, and generally making a profit, in Seaboard Life Insurance (a 65% interest), North West Trust (62%), television, printing, construction, aviation, restaurants, hotels, automotives, entertainment productions and real estate. Al-

larco’s development land is in lucrative spots such as Las Vegas, its restaurants have won mentions in Where To Eat In Canada, its nightclubs are the current In place for swingers. If you’re going to own a hotel, an excellent place to have it is in the oil sands town of Fort McMurray where businessmen often have to bunk on lobby floors. Allarco owns the biggest hotel in town. If you’re going to market an aircraft, the Yak-40, a Soviet-made medium range jet, has potential. Socan Aircraft, a joint venture between the Soviets and Allarco, has just acquired the rights.

The result last year was sales of $62,593,000 or $2.39 per share, up from $1.08 last year and an 600% increase over the 40 cents of eight years ago. But the sales figures are actually closer to $80 million because Allarco doesn’t include revenues from Seaboard Life, North West Trust and Alberta Gas Chemicals, although their $2.1 million profit is included in last year’s statement.

“The company is just everywhere and everything is pretty damn rosy,” says a Vancouver analyst. “Something new comes up every time you look. The last time I looked, I discovered they had land on Hamilton Mountain. It’s incredible.” He anticipates an even better year this year, with earnings in the $3.50 to four dollar bracket, a prediction supported by first quarter profits. But Allard, he says, is not well regarded by the Vancouver financial community. “We think he’s a little bit out for number one. But who gives a tinker’s cuss when a stock is only two or three times its projected earnings?” (Allarco stock is trading in the $12 range.)

The key to Allarco’s current buoyancy is the $20 million methanol plant sprawling over 320 acres on the northwest boundary of Medicine Hat. It went on stream early in 1975, producing a daily 600 tons of methanol, an important chemical building block of the plastics industry. A second $20 million plant is now in the start-up phase and Allarco has applied for permission to go ahead with two more $30-million plants. The yearly output of all four would represent 75% of total Canadian methanol production. But another western analyst says Allarco “got real lucky” with its first methanol plant. When construction began, methanol was selling at 10 cents a gallon “and there was no reason at all to build a plant except for the cheap feedstock there.” But prices skyrocketed by the time the plant went into production—methanol sells for as much as 48 cents a gallon now. “I wonder if adding another two plants is wise?” the analyst continues. “It could be premature; where is the market to absorb it all? Canada certainly hasn’t the growth rate so there’s no alternative but to export. Unless they’ve got a lot of U.S. markets sealed up, there’s danger in forging ahead.”

He is even more adamant about Alberta Gas Chemical’s plans to forge ahead into benzene, another basic chemical that turns

up in a wide array of plastics from telephones to tire rubber. “The whole business is stupid. There is no way we can use that amount of benzene in Canada.”

If the analysts don’t agree with Allarco’s long-range plans, no one faults current ones. Whatever the Arabs do about petrochemicals, they aren’t going to manage it this year and Allarco, with two methanol plants operating, has the inside track there. Allarco’s main loser last year, Edmonton’s CITV station, is expected to solve start-up problems this year. Analysts are also satisfied with plans for reducing operations of International Jet Air, which at one point in its corporate history had difficulty selling return tickets because passengers didn’t expect the airline to be around when they were coming back. SUZANNE ZWARUN

Shaky hands across the sea

The usual champagne and speeches will accompany the signing of the “framework agreement” between Canada and the European Community, currently awaiting only formal approval this month from the cabinet in Ottawa and a council of European ministers in Brussels. It is the culmination of four years’ negotiation in search of Pierre Trudeau’s “contractual link,” but Ottawa’s motive in seeking the agreement is essentially political. Although the European Community is one of the world’s largest trading blocs—with 260 million people, it’s bigger than the United States— it absorbed only 12% of Canada’s exports in 1975, despite the inclusion of Britain. Increasing exports to the EC, it was argued, would lessen our economic dependence on the United States, which accounted for 65% of our exports.

This idea—“the third option”—had been outlined in a 1972 position paper by the then external affairs minister Mitchell Sharp. During 1974-5, Trudeau himself visited all nine Common Market members (Belgium, Denmark, France, Ireland, Italy, Luxembourg, the Netherlands, the

United Kingdom, West Germany). Serious negotiation began on March 11 of this year, between a Canadian team headed by,Michel Dupuy and a European Community squad led by a British diplomat, Leslie Fielding. The agreement was finalized on June 2.

The framework agreement apparently consists of four sections. There is a confirmation that Canada will reciprocally lower tariffs with each EC country under GATT’s most-favored nation procedure. There are statements in favor of increased trade and of cooperation in the resource field, such as joint industrial ventures. And there is to be a Joint Cooperation Committee, meeting once a year, with subcommittees more frequently. (The community has already stationed a permanent representative in Ottawa, paralleling the Canadian mission in Brussels.) However, the Europeans regard the agreement as being virtually devoid of political content, because they are unwilling to jeopardize their own relations with the United States. It is in fact largely a product of pressures within the community, helped by the desire of the Brussels bureaucracy to strengthen symbolically its position in relation to the subject. Ottawa is also disappointed by the Europeans’ irrepressible propensity to regard Canada as a source of raw materials, quite contrary to another dearly held official policy. Already, EC delegations are here studying the forest products, ferrous metals and uranium situations.

Further, Ottawa has to reckon with economic reality, in the shape of processing and transportation costs, and the notorious reluctance of Canadian businessmen to be impressed by politicians’ enthusiasm. “We are not going to fundamentally alter our market structure,” Noranda Mines president Alf Powis told the Globe and Mail recently. “The United States will always be our best customer and we would probably be a lot better off if we concentrated more of our efforts there.”