Domtar Inc. agreed to buy Ottawabased E. B. Eddy Ltd. from George Weston Ltd. of Toronto for $803 million, making it the country’s largest producer of fine papers. Montreal-based Domtar said E. B. Eddy, which posted sales of close to $1 billion last year, will still operate as a separate company.
GODSOE SLAMS MERGERS
Bank of Nova Scotia chairman Peter Godsoe told Liberal MPs and senators that Canada’s banks have failed to prove the benefits of merging. A merger of Royal Bank with Bank of Montreal and TD Bank with CIBC would put 70 per cent of banking services in the hands of two companies, he said. Earlier, Godsoe said Scotiabank would consider merging with a U.S. bank.
ICAHN EYES PHILIP
U.S. financier Carl Icahn paid $80 million for nine per cent of Philip Services Corp., the troubled Hamilton-based metals recycler. Some investors interpreted Icahn’s interest as a sign of hope for Philip’s slumping shares.
Shares in Midland Walwyn Inc. shot up amid speculation that Bay Street’s last independent stockbroker is a takeover target. Potential suitors include New York investment powerhouses Merrill Lynch & Co. and Salomon Smith Barney. Bay Street players downplayed the rumors, blaming them on senior Midland executives anxious to boost the price of their stock.
Two top executives at Oshawa Group Ltd. stepped down amid criticism over the company’s poor performance. The Toronto-based food distributor announced the retirement of CEO Allister Graham and the resignation of president Jonathan Wolfe. Oshawa Group owns and franchises supermarkets such as IGA.
'CHAINSAW' GETS THE AXE
Sunbeam Corp. directors ousted chairman AI Dunlap, nicknamed “Chainsaw” for the thousands of jobs he has cut at several companies. The Delray Beach, Fla.-based maker of home appliances has been plagued by weak sales and a sliding stock price. Under his contract, Dunlap, 60, will receive $3 million a year until January, 2001.
Putting the brakes on GM
Two strikes by 9,200 workers at General Motors Corp. parts plants in Flint, Mich., paralyzed nearly 90 per cent of the auto giant’s North American production capacity and idled 99,300 work| ers, including 5,700 at GM plants in § Ontario. GM’s Canadian headquarters in d Oshawa, Ont., said it would curb produc| tion at several parts operations, shut down 3 its assembly plant in Ste-Thérèse, Que., and lay off another 4,500 workers if the U.S. labor unrest continued. Independent companies that supply GM also cut production and sent thousands of workers home.
Dealers watched uneasily as the battle escalated. Automotive News, a Detroit-based trade paper, reported that GM had an average 58-day supply of new vehicles as of June 1, but supplies of some popular models—such as GM’s highly profitable four-wheel-drive trucks—were far tighter. The unrest also threatens to disrupt the
planned September introduction of GM’s new full-size pickups, the automaker’s most important launch this decade.
Analysts said GM, which has fallen behind its competitors in productivity, is determined to wring concessions from its unions. The world’s largest automaker also feels threatened by industry consolidation and the recent devaluation of the Japanese yen, which will boost the profits of companies such as Toyota and Honda.
A big bet on the Net
More proof that the Internet is reshaping the telecommunications industry: Northern Telecom Ltd.’s $13.4-billion purchase of Bay Networks Inc., a California company that makes equipment for computer networks. The takeover is designed to boost Nortel’s presence in the data-communications market, but investors responded by pushing the Canadian company’s share price down 18 per cent. Nortel
will pay for the deal by issuing new shares, which will dilute the value of its existing stock.
Critics pointed to a potential culture clash between Nortel, with its roots in the traditional voice-communications market, and Bay Networks. But industry analyst Ian Angus said that in the long run, “the deal makes Nortel a lot stronger.” The company’s main rival in the computer network field will be San Jose, Calif.,based Cisco Systems Inc., which is three times larger than Bay Networks.
Canada’s annual inflation rate was 1.1 per cent in May, up from 0.8 per cent in April. It was the largest monthly increase so far this year, caused largely by a 14per-cent jump in hotel rates and an 8.5-per-cent increase in the price of fresh fruit. Most economists dismissed the increase as insignificant. But some inflation hawks sounded an alarm, suggesting it is time 2 for the Bank of Canada to raise interest rates. i
Signs of slowing growth, however, could keep the Q central bank on the sidelines. A decline in exports
due to Asia’s economic crisis pushed Canada’s trade surplus to $1.2 billion in April from $1.8 billion in March. Shipments by manufacturers in April dropped 0.6 per cent.
“There is little in this week’s economic reports to temper
Year-over-year change in the consumer price index
the Bank of Canada’s reluctance to increase short-term interest rates—although another sharp Canadian dollar sell-off could still force the bank’s hand. ”
“With the dollar continuing to falter, the Bank of Canada will be forced to act soon. ” —Nesbitt Burns
§ “The increase in annual I May inflation numbers ap'd pears to reflect isolated, I transitory price increases « rather than underlying ë price pressure. ”
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