Business Notes

December 20 1999

Business Notes

December 20 1999

Business Notes


Not so tip-top shape

Toronto-based Dylex Ltd., which operates Tip Top Tailors, BiWay, Thriftys, Fairweather, Braemar and Labels stores across Canada, put its 648 retail outlets up for sale. The firm revealed its intentions after Dylex shares hit a 52-week low of $1.73. (In 1997, Dylex traded in the $9 range). Dylex stock rallied as a result, closing the week at $2.05.

Ending Inco’s lockout

Employees at Inco Ltd.’s nickel mine in Thompson, Man., voted 66 per cent in favour of a three-year contract offer. The deal includes a five-per-cent wage increase, a $ 1,000 signing bonus and a 13-per-cent pension hike. Inco had locked out 1,100 workers for 12 weeks. Sudbury, Ont., miners at Inco and Falconbridge Ltd. are expected to use the deal as the basis for talks next summer.

Lots of fast food

Toronto-based Scott’s Restaurants Inc., owned by John Bitove Jr., and Tricon Global Restaurants Inc. of Louisville, Ky., struck a deal to merge their 639 Canadian outlets of KFC, Taco Bell and Pizza Hut. Bitove, who will head the new operation, becomes Canada’s largest fast-food operator.

Milk and money

Dairyworld Foods of Burnaby, B.C., plans to join the Canadian subsidiary of Italian food giant Parmalat Finanziara SpA to create Maxima Foods Ltd. The new company will account for almost half of Canada’s production of milk and have annual sales of more than $ 1 billion. Federal competition regulators are to review the deal. Dairyland sells milk under the Dairyland and Baxter labels, while Parmalat brands include Beatrice and Lactantia.

Just say no to monetary union

Canada is better off to maintain a flexible exchange rate against the U.S. dollar, says a C.D. Howe Institute study. Recent critics have called for a fixed rate as a prelude to establishing a North American monetary union. The study, however, says several countries with fixed rates have suffered recessions since 1997, while Canada’s economy continues to grow with low inflation.

A sell-off at TransCanada

In a move that stunned many in the investment community, TransCanada PipeLines Ltd. announced a $3-billion asset sell-off, and a sharp cut in its dividend. The Calgary-based energy giant also expects to shed 1,500 of 4,400 jobs as it dumps non-core assets to focus on natural gas transmission, power generation and marketing in Canada and the northern United States. The company plans to get out of the so-called midstream business of processing natural gas and gas liquids. Chief executive Doug Baldwin said he expects many employees with the divisions being sold to find work with the new owners. TransCanada will use the money it raises to repay debt and improve its balance sheet. TransCanada

has already cut 600 jobs and sold off $1 billion in assets as it restructures following its 1998 merger with rival Nova Corp. That $ 14-billion deal was one of the largest in Canadian history.

Investors reacted strongly to the latest move, especially to the announcement that the dividend will drop to 80 cents per share from $ 1.12. In heavy trading, TransCanada stock fell $3.40 cents to close the week at $ 12.10.

The CPP becomes a player in stocks

Federal Finance Minister Paul Martin and his provincial counterparts agreed to allow the Canada Pension Plan Investment Board to actively invest in the stock market. Previously, the CPP was restricted to investments in 20-year provincial bonds, which have had below-market returns. In 2000, the CPP is expected to invest about $5 billion in all, a figure which could climb to as high as $90 billion by 2007. The decision to invest in the stock market is aimed at increasing returns on the CPP to help pay for the flood of baby boomers who are expected to begin retiring in 2011.

Financial Outlook

With RRSP season just about to start, Canadians are planning to invest in record numbers. The Royal Bank’s ninth annual survey found

that 52 per cent will put money into their registered retirement savings plans—up from 44 per cent in the 1998 tax year. Ontario leads the way with 59 per cent planning to invest in plans, while the Atlantic provinces are projected to have the lowest contribution rate, at 41 per cent. Canadians will contribute $5,051 on average to their RRSPs—up nearly 20 per cent from last year—with baby boomers, university graduates and high-income earners leading the way. As for those who will not be contributing to the savings plans—40 per cent say they do not have enough money.