A group of investors led by leveraged-buyout specialists Kohlberg Kravis Roberts and Co. of New York City bought the 824-store Shoppers Drug Mart chain, Canadas largest, for
$2.6 billion. The buyers also include Shoppers executives and the Ontario Teachers’ Pension Plan Board, which will own between 10 and 15 per cent of the chain. The group beat a bid by Longueuil, Que.-based Jean Coutu Group Inc., which has 545 drugstores in Canada and the United States.
The sale is the latest move in the breakup of Montreal-based Imasco Ltd., the conglomerate that owns Shoppers. In August, British American Tobacco PLC, which controls 41 per cent of Imasco, offered $10.3 billion to take the company private, but is interested in keeping only its cigarette unit, Imperial Tobacco. BAT has arranged to sell off CT Financial, parent of Canada Trust, to the Toronto Dominion Bank for $7.85 billion. Last week, the Shoppers deal prompted BAT to increase its bid for Imasco to $ 10.7 billion, but some analysts said BAT will have to hike its offer again if it hopes to win a shareholder vote in January.
Huge profits, big layoffs for banks
The Toronto Dominion Bank reported a fiscal 1999 profit of $2.98 billion, the largest annual earnings ever for a Canadian bank. The previous record, $1.82 billion, was set last year by the Royal Bank, which last week reported its profit down slightly to $1.76 billion. Both banks have announced plans to trim staff—4,900 jobs atTD, 6,000 at Royal. Saying he was pleased with the results, TD chairman Charles Baillie added:“We’re not going to succumb to complacency or hubris.”
The Bank of Canada raised its key lending rate by a quarter of a percentage point to five per cent, the first such increase in six months. Chartered
banks quickly followed suit, hiking prime rates to 6.5 per cent. Bank of Canada governor Gordon Thiessen said the increase was needed to keep inflation within the bank’s target range of one to three per cent. The announcement came a day after the U.S. Federal Reserve raised its trendsetting rate by a quarter-point to 5.5 per cent. Some analysts expect further increases in the first half of next year. Meanwhile, Statistics Canada said the annual inflation rate slowed to 2.3 per cent in October. Inflation had run at a rate of 2.6 per cent a year in September, but energy prices slowed their climb last month.
The biggest merger ever
Britain’s Vodafone AirTouch PLC, the world’s No. 1 mobile phone company, announced a hostile takeover bid for German engineering and telecommunications group Mannesmann AG worth $187 billion—the largest corporate union ever. If successful, the combined company will have more than 42 million customers. The offer surpasses MCI Worldcom’s $ 168billion purchase of Sprint last month.
The price of crude oil traded as high as $26.80 (U.S.) a barrel on the New York Mercantile Exchange, the highest it has been since January, 1991, when the Persian GulfWar drove up the cost. The hike is expected to lead to gasoline price increases, surcharges on plane tickets and higher costs for petroleumbased products. The price of a barrel of oil has more than doubled this year.
Eaton’s deal approved
Unsecured creditors and landlords voted in favour of a deal to restructure the bankrupt Eaton’s department store chain. Under the plan, landlords will recoup about 12 cents on the dollar, while suppliers get 50 cents. In total, Eatons creditors are owed more than $400 million. The restructuring is based on Sears Canada buying up to 16 Eatons stores for $80 million.
Secret talks for Canadian
Texas-based AMR Corp., which has veto control over Canadian Airlines, was reported to be in negotiations with Air Canada on merging the two Canadian carriers. Earlier, Air Canada made a formal $92-million offer for the Calgary-based airline. Meanwhile, investors called on Ottawa to force the airlines to sell their regional affiliates.
Seeking a deal on Microsoft
U.S. District Judge Thomas Penfield Jackson appointed Richard Posner, chief judge for the 7th U.S. Circuit Court of Appeals in Chicago, to try to negotiate a setdement in the government’s antitrust case against Microsoft. Penfield’s Nov. 5 ruling that Microsoft is a monopoly could lead to the company’s breakup unless a deal is struck.
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