Competition Bureau asks Bayer to divest assets to win Monsanto deal approval

OTTAWA — The Competition Bureau is forcing Bayer AG to divest some of its Canadian canola, soybean and vegetable seed, traits and herbicide assets before it will allow the German pharmaceutical giant to purchase agricultural business Monsanto Company.


The watchdog says in a consent agreement filed Wednesday that if the assets aren’t divested the takeover would likely “substantially lessen” competition in Canada’s seeds and crop treatment sector.


Bayer previously said the assets would be sold to German chemical company BASF SE for 5.9 billion euros.


The bureau says it is reviewing the suitability of BASF as a buyer for the assets.


Bayer has canola seed facilities in Alberta, Saskatchewan and British Columbia and herbicide operations within the country.


Its consent agreement comes a day after Bayer won approval from the European Union and the U.S. for its US$66-billion takeover of Monsanto.


It took two years for it to get U.S. approval because of concerns around the impact the deal would have on farmers.


Bayer still needs approval from Mexico before it can close on the deal.

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Kinder Morgan Canada share target cut as growth hopes fall post pipeline deal

CALGARY — Analysts at CIBC have cut their target share price for Kinder Morgan Canada Ltd. and say its future is cloudy in the wake of its deal to sell its biggest current and growth asset — the Trans Mountain pipeline system — to the federal government.


They say in a research report the company will be left cash-rich but prospect-poor after it agreed to sell its existing 300,000-barrel-per-day pipeline and the delayed 590,000-bpd expansion project for $4.5 billion.


Kinder Morgan Canada stock fell again Thursday, continuing the post-deal trend that saw it close nearly three per cent lower at $16.10 on Wednesday. It dipped as low as $15.89 in late Thursday morning trading on the Toronto Stock Exchange.


CIBC slashed its 12-month price target to $17 from $22 because of its lower expectations of future growth in revenue and dividends for Kinder Morgan shareholders.


It says the company has a great deal of capital available, given Ottawa’s cash deal and the plan of its 70 per cent owner, Houston-based Kinder Morgan, Inc., to spend more than $15 billion in overall growth capital over the next five years.


But the note adds that it’s unlikely that an acquisition would allow it to offset the benefit from the $7.4-billion expansion of its Trans Mountain pipeline.


“While accretive options may be surfaced, we do not see a potential transaction as sufficient to offset the potential upside from the Trans Mountain expansion project,” the note says.


“Indeed, we question Kinder Morgan Inc.’s willingness to retain Kinder Morgan Canada longer term as it only contributes about two per cent of EBITDA (earnings before interest, taxes, depreciation and amortization) and has reduced growth prospects.”


Kinder Morgan Inc. created its Canadian subsidiary in a $1.7-billion initial public offering last year. But the deal means investors will no longer be able to share in the financial upside of the expansion project.


Kinder Morgan Canada estimates the pipeline deal is worth about $12 per restricted voting share, after capital gains tax — about three-quarters of its total share price.


The company will continue to hold an integrated network of crude tank storage and rail terminals in Alberta. It will also own a terminal in Vancouver and the Cochin Pipeline system which transports light condensate from the United States to Fort Saskatchewan, just northeast of Edmonton.


CIBC notes the retained assets were expected to contribute about half of the company’s 2018 EBITDA of about $400 million, excluding construction funds.


It expects after-tax proceeds for the approximately 30 per cent of Kinder Morgan Canada not owned by its Houston-based parent company to be about $1.25 billion. It didn’t specify how it would spend the proceeds of the sale but did say it plans to continue to invest in Canada.


Companies in this article: (TSX:KML)

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WestJet expecting delays after computer system outage, advise arriving early

CALGARY — WestJet Airlines Ltd. says it’s experiencing a computer system outage that is expected to cause delays in its operations.


The airline recommends travellers arrive early at the airport and check their flight status ahead of time.


Travellers have reported on Twitter that there are long lines and kiosks off-line at some airports, as well as issues with booking on the company’s website.


The incident comes after the airline said last October computer problems caused delays for dozens of flights.

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CP Rail train operators on strike; commuter trains unaffected

MONTREAL — Canadian Pacific Rail’s more than 3,000 train operators walked off the job late Tuesday night while a second group of workers reached a tentative contract settlement with the rail company.


The Teamsters Canada Rail Conference said its workers walked out at 10 p.m. as negotiations continued with the company with the assistance of federal mediators.


That announcement came just minutes after CP Rail announced a tentative deal had been reached with the International Brotherhood of Electrical Workers for 360 signalling workers who were also poised to walk off the job at 10 p.m.


The Teamsters said the strike by its members began despite “best efforts to reach a negotiated settlement,” adding it is “willing to remain at the bargaining table during the strike.”


It also said commuter train services in Montreal, Toronto and Vancouver are operated by Bombardier, not Canadian Pacific, and Teamster members who operate trains in those cities are Bombardier employees and will not go on strike.


As a result, said the Teamsters, commuter train services would not be affected by the strike.


Via, however, had already cancelled passenger rail service starting Tuesday morning in Ontario between Sudbury and White River.


CP Rail has said it will use qualified management staff to handle signalling and switching tasks so trains can continue to operate.


However, the strike could force the railroad to shut down its freight service at a particularly bad time for grain farmers. Shippers had said they expected talks would fail, resulting in the third CP Rail strike since 2012.


Prime Minister Justin Trudeau said earlier in the day that the federal government would not be rushed into introducing back-to-work legislation, preferring instead to employ various levers to motivate both sides to reach a settlement.


Trudeau also said his government would not do as the Conservatives did and favour employers.


“Quite frankly, we have companies that have gotten used to the fact that in certain industries, the government in the past was very quick to legislate against unions,” Trudeau said during a conference in Toronto.


“We are not going to do that.”


If eventually forced to intervene, said Trudeau, the Liberal government won’t be giving the advantage to employers.


Even before the strike began, the livelihoods of Canadian grain farmers were already threatened because shipping was severely disrupted over the past winter due to extreme cold.


“You always hope for a miracle but we’re pretty sure there’s going to be a stoppage,” said Wade Sobkowich, executive director of the Western Grain Elevator Association, which represents the country’s largest exporters.


He said there was little that could be done to prepare other than to notify farmers that deliveries will have to be rescheduled and tell overseas customers they could receive late shipments.


“We’re just coming off of a year where we had poor rail service even though we didn’t have a work stoppage and we are trying to maintain relationships with our customers,” he added.


The train operators voted 94 per cent in favour of strike action to back their contract demands in early April and voted 98 per cent to reject CP’s final offer last Friday.


Both unions gave the railway notice over the weekend that they plan to walk off the job to support contract demands.

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Fed looks to ease rule that limits risky bank trading

WASHINGTON — The Federal Reserve is preparing to ease a rule aimed at defusing the kind of risk-taking on Wall Street that helped trigger the 2008 financial meltdown.


The Volcker Rule, crafted by a bevy of regulators 4 1/2 years ago, changed the way the biggest U.S. banks do business. It bars banks’ risky trading bets for their own profit with depositors’ money. The rule is a key plank of the landmark Dodd-Frank financial regulation law aimed at reducing the likelihood of another crisis and taxpayer bailout of banks.


The move is the latest effort by the government to loosen such restraints on banks. President Donald Trump has blamed Dodd-Frank for constraining economic growth. The Fed is meeting Wednesday to propose changes to the Volcker Rule.

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US companies uneasy about Trump threat but hope for progress

BEIJING — American companies in China are uneasy about Washington’s threat of export and investment controls in a trade dispute with Beijing but see them as a possible way to achieve fairer operating conditions, the country’s biggest U.S. business group said Wednesday.


U.S. President Donald Trump’s earlier threats of tariff hikes resulted in very intense negotiations with Beijing “in a way that we haven’t seen for so many years,” said William Zarit, chairman of the American Chamber of Commerce in China.


Ahead of Commerce Secretary Wilbur Ross’s arrival Saturday for talks, Zarit said companies hope Beijing can be persuaded to “level the playing field” by easing curbs on foreign investment and business activity in its state-dominated economy.


The Trump administration on Tuesday renewed its threat of additional 25 per cent tariffs on $50 billion of Chinese goods in response to complaints Beijing steals or pressures foreign companies to hand over technology. The White House said it also would impose restrictions on Chinese investment and purchases of high-tech exports.


“I wouldn’t say we are in favour of, specifically, export controls, investment restrictions,” said Zarit. But he said American companies want equal treatment, “and this seems to be one of the ways to do that.”


American companies “would only be in favour of them to the extent that we can level the playing field,” he said at a news conference.


China’s Commerce Ministry criticized Tuesday’s announcement as “contrary to the consensus we reached” in talks in mid-May, when American officials postponed a tariff hike after Beijing promised to buy more U.S. goods. But the ministry gave no indication whether Beijing would go ahead with threats to retaliate by raising duties on a $50 billion list of U.S. goods.


“The Chinese side remains consistent: we don’t want to fight, but we are not afraid of it,” said the official Xinhua News Agency. “The Chinese side will determinedly protect the interests of our country and people at all costs.”


Trump has focused on pressing Beijing to narrow its multibillion-dollar trade surplus with the United States, but Zarit said American companies see other issues such as easing restrictions on their operations in the Chinese market as higher priorities.


The United States, Europe and other trading partners are pressing for reciprocal access as Chinese companies expand abroad while Beijing blocks or limits access to industries including banking, insurance, telecoms and health care.


“China’s success means that it can no longer credibly defend protectionist policies on the grounds that it is still a �developing country’,” the American chamber said in a report Wednesday.


The tariff threat is a “very powerful” negotiating tactic ahead of the weekend talks, said Lester Ross, a lawyer who is chairman of the American chamber’s policy committee. However, he said tariffs are a tax on American consumers and a blunt tool to address “very complex problems that hamper trade and investment relationships.”


Analysts in the United States suggested the newly confrontational stance also might be aimed at appeasing congressional critics of a deal the Trump administration made Friday that allowed Chinese telecom giant ZTE Corp. to stay in business.


Under that agreement, ZTE will remove its management team, hire American compliance officers and pay a fine. That would be on top of a $1 billion penalty ZTE paid for selling high-tech equipment to North Korea and Iran in violation of U.S. sanctions.


In return, the Commerce Department lifted a seven-year ban on ZTE’s purchase of U.S. components that it imposed earlier in May. Trump said last month the ban threatened too many Chinese jobs and he wanted to get the company back in business.


Chinese leaders have promised piecemeal trade-related changes including allowing full foreign ownership in their auto industry by 2022.


However, American companies have “major concerns” about unfair conditions, and the recent moves haven’t done enough to alleviate those concerns, said the American chamber’s Ross.


European companies also complain they are blocked from acquiring most assets in China while Chinese companies are on a global buying spree.


In a May 24 meeting with President Xi Jinping, German Chancellor Angela Merkel said market access and reciprocity will play a big role in trade relations.


Chinese authorities have announced tariff cuts and promised to end ownership limits in insurance and some other fields apart from auto manufacturing. Business groups say they need to see details to know whether such moves will create commercial opportunities.


——


American Chamber of Commerce in China: http://www.amchamchina.org

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Timeline: Key dates in the history of the Trans Mountain pipeline

VANCOUVER — Here are some key dates in the history of the Trans Mountain pipeline and Kinder Morgan Canada’s efforts to expand its capacity:


October 1953: The Trans Mountain pipeline begins shipping oil with an initial capacity of 150,000 barrels per day. The project features four pump stations along its 1,150-kilometre route and a marine dock that connects loading facilities on the east side of Edmonton with ocean tankers in Burnaby, B.C.


1957: Pipeline capacity is expanded via the construction of a 160-kilometre pipeline loop. The Westridge Marine Terminal is built and commissioned in Burnaby, B.C.


Jan. 14, 1985: Trans Mountain’s biggest spill occurs at a tank farm in the Edmonton area. Nearly 10,000 barrels of oil are released.


2006 – 2008: The Anchor Loop project adds 160 kilometres of new pipeline through Jasper National Park and Mount Robson Provincial Park between Hinton, Alta., and Hargreaves, B.C. The extension includes 13 new pump stations and modifications to existing stations, increasing capacity from 260,000 bpd to 300,000 bpd.


Feb. 21, 2012: Kinder Morgan says it wants to expand the Trans Mountain pipeline after receiving support from oil shippers and will begin public consultations.


Dec. 16, 2013: An application is made to the National Energy Board (NEB) to expand the Trans Mountain pipeline. Construction is proposed to begin in 2017, with the aim of having oil flow through the expansion by December 2019.


November 2014: More than 100 people are arrested after they camp out in a conservation area on Burnaby Mountain, east of Vancouver, to block crews from conducting drilling and survey work related to the pipeline expansion. Most of the charges are later dropped.


August 2015: The NEB postpones public hearings after striking from the record economic evidence prepared by a Kinder Morgan consultant who was to begin working for the regulator.


Jan. 12, 2016: Alberta Premier Rachel Notley says in a written submission to the NEB that the Trans Mountain pipeline expansion is in the best interests of both Alberta and Canada.


Jan. 27, 2016: The federal Liberal government says pipeline projects such as the Trans Mountain expansion will now be assessed in part on the greenhouse gas emissions produced in the extraction and processing of the oil they carry. Proponents will also be required to improve consultations with First Nations.


May 17, 2016: Ottawa appoints a three-member panel to conduct an environmental review of the Trans Mountain expansion project.


May 29, 2016: The NEB recommends approval of the pipeline, subject to 157 conditions, concluding that it is in the public interest.


Nov. 29, 2016: Prime Minister Justin Trudeau sanctions the Trans Mountain expansion, part of a sweeping announcement that also saw approval of Enbridge’s Line 3 pipeline replacement but the end of its Northern Gateway project.


Jan. 11, 2017: B.C. Premier Christy Clark announces her support for the project, saying Kinder Morgan has met five government conditions including a revenue-sharing agreement worth up to $1 billion.


May 15, 2017: The Federal Court of Appeal grants Notley’s government intervener status in a lawsuit filed by municipalities and First Nations against the project.


May 25, 2017: Kinder Morgan makes its final investment decision to proceed with the development, now estimated to cost $7.4 billion, subject to the successful public offering of Kinder Morgan Canada.


May 29, 2017: The B.C. NDP and Greens agree to form a coalition to topple the Liberal party, which won a minority government in an election earlier in the month. The parties agree to “immediately employ every tool available” to stop the project.


May 30, 2017: Kinder Morgan Canada debuts on the Toronto Stock Exchange after a $1.75-billion public offering.


June 29, 2017: The B.C. Liberals lose a no-confidence vote, clearing the way for NDP Leader John Horgan to become premier.


Aug. 10, 2017: The B.C. NDP government hires former judge Thomas Berger to provide legal advice as it seeks intervener status in the legal challenges against the project filed by municipalities and First Nations.


Oct. 26, 2017: Kinder Morgan Canada asks NEB to allow work to begin despite a failure to obtain municipal permits from the City of Burnaby.


Dec. 7, 2017: NEB allows Kinder Morgan Canada to bypass Burnaby bylaws.


Jan. 17, 2018: Kinder Morgan Canada warns the Trans Mountain expansion project could be a year behind schedule.


Jan. 18, 2018: NEB establishes a process to resolve permitting issues between Kinder Morgan Canada and provincial and municipal authorities.


Jan. 30, 2018: B.C. government moves to restrict any increase in diluted bitumen shipments until it conducts more spill response studies, a move that increases the uncertainty for Trans Mountain.


March 9, 2018: B.C. Supreme Court grants interim injunction aimed at preventing anti-pipeline activists from protesting construction at two terminals in Burnaby.


March 15, 2018: B.C. Supreme Court grants indefinite injunction preventing protesters from coming within five metres of two work sites for the project.


March 23, 2018: Green Party Leader Elizabeth May and New Democrat MP Kennedy Stewart arrested at a protest against the pipeline expansion; Federal Court of Appeal dismisses a B.C. government bid challenging a NEB ruling that allows Kinder Morgan Canada to bypass local bylaws.


March 27, 2018: City of Burnaby, B.C., says it will file an appeal to the Supreme Court in connection with the Federal Court of Appeal ruling.


April 8, 2018: Kinder Morgan Canada suspends non-essential spending on the Trans Mountain expansion project and sets a May 31 deadline to reach agreements with stakeholders.


May 29, 2018: Federal government announces deal to buy the Trans Mountain pipeline and expansion project from Kinder Morgan Canada for $4.5 billion.

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