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Maple Leaf expects higher pork demand from Asia after quarterly sales jumps 13%


Maple Leaf Foods Inc on Wednesday said it expects higher pork demand from Asia in the second quarter, while reporting a 12.8 per cent jump in first-quarter sales due to consumers stockpiling food during the coronavirus pandemic.

The company had a bump in sales in the quarter from restrictions on movement put in place to arrest the spread of the novel coronavirus, which prompted consumers to buy more essential supplies such as meat, tissues and disinfectant products.

The company’s first-quarter sales rose to $1.02 billion from $907.1 million, even as it reported a loss because of higher costs.

Sales in Maple Leaf’s meat protein group unit, which sells value-added fresh pork and poultry products, jumped 12.7 per cent to $981.4 million in the first quarter ended March 31.

The Schneiders- and Mina-branded meat producer said it would record more charges of up to $20 million in the current quarter due to increased labour, personal protective equipment, sanitation and other expenses related to the coronavirus pandemic.

It also projected weakness in the company’s food service business even as it expected more traction in its plant protein business.

Meanwhile, Tyson Foods Inc. has been forced to temporarily close its pork processing plants, including its largest in the United States, to contain the spread of the coronavirus, further tightening meat supplies after other major slaughterhouse shutdowns.

© Thomson Reuters 2020



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Amazon moves to stock more non-essential items — but it’s not business-as-usual


Amazon.com Inc. will slowly increase the assortment of products that can be shipped to its warehouses this week, easing restrictions instituted in March that prioritized essential goods such as medical supplies, groceries and pet food amid the pandemic.

It’s far from a return to normal operations for the online retailer, which was overwhelmed by demand from shoppers avoiding stores and had to abandon its quick delivery promises. Still, it’s a sign that Amazon is able to accommodate a larger assortment of goods after hiring 100,000 workers and announcing plans to hire 75,000 more. Further details about specific products being accepted and quantities will be shared with Amazon’s merchant partners in the coming days.

“Later this week, we will allow more products into our fulfillment centres,” Amazon said in an emailed statement. “Products will be limited by quantity to enable us to continue prioritizing products and protecting employees, while also ensuring most selling partners can ship goods into our facilities.”

The move was reported earlier by the Wall Street Journal.

In prioritizing toilet paper, bleach and sanitizing wipes over things like flat-screen televisions and toys, the company focused on delivering products people need right now, sacrificing sales from its deep inventory for the time being.

More than half of all products sold on Amazon come from independent merchants who pay Amazon commissions on each sale plus fees for storing, packing and delivering products. Merchants selling in-demand products saw a nice sales bump from swift changes in customer demand while those in the out-of-favour categories watched their sales tank.

While Amazon wasn’t accepting new shipments of goods it deemed non-essential, workers in warehouses around the country said they continued to shelve and ship non-essential items like kickballs, bedsheets and books as well as restock returned items. That generated tension because some workers said they felt Amazon could further restrict the products it sold to better protect warehouse workers. Dozens of employees have contracted the coronavirus, and protests have erupted in New York, Chicago and outside Detroit.

Groceries and household essentials as well as bread machines, home fitness equipment and computer monitors were among Amazon’s fastest-growing products in March, according to the online retail research firm Stackline. Luggage, cameras and party supplies were among the categories that saw the biggest sales drop last month.

Bloomberg.com



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A deal for the Bay is finally close, but is the retailer even worth saving?


The Financial Post takes a look at 11 people and companies we’ll be watching closely in the new year.

It is 4 p.m., precisely a week before Christmas at a Hudson’s Bay store at the corner of Yonge and Bloor in downtown Toronto. The area is one of the city’s biggest shopping destinations during the busiest season of the year. But the Bay is dreary.

Most of the fluorescent lights are burnt out in the men’s fragrances department. A level up, in women’s wear, the mannequins outnumber the humans. Dozens more lights are out, others are flickering and one is buzzing, while the ceiling panels are stained black by either dust or smoke, it’s difficult to tell.

The carpet, too, has curious stains. A splotch beside a rack of Adrianna Papell dresses looks like a lady dancing. And the renovation work on the hotel next door groans through the floor, thudding, thrashing, scratching.

This is the Bay on the edge of the so-called Mink Mile, a magnet for the city’s fanciest shoppers. This is also a little piece of what two warring factions of investors, bankers and Bay Street lawyers have been fighting for months to control.

Late Friday, Hudson’s Bay Co.’s chairman Richard Baker and his group of shareholders announced they were raising their bid for the department store chain by $75 million, to $11 a share or $1.18 billion in total. That increase was enough for the takeover bid’s loudest opponent and HBC’s largest minority shareholder, Catalyst Capital Group Inc., which pledged to support the deal when it’s put to a vote.

The Bay store at Yonge and Bloor streets in Toronto.

The Bay store at Yonge and Bloor streets in Toronto.

Peter J. Thompson/National Post files

And with that, the takeover battle for Canada’s oldest company — older than the country by 197 years — appears close to a conclusion, but amid all the talk around the fate of the historic Canadian retailer, a nagging question remains: Is the Bay actually worth saving?

Industry observers say it would take some combination of closing certain stores, shrinking others and making drastic improvements to the in-store experience — meaning improved service, cleaner stores and a better mix of brands — to make the Bay relevant again.

But even then, it might be too late.

“Do I think in its current state it can survive? No,” said Fred Waks, a former president of RioCan REIT who has spent decades developing shopping centres.

If you want to know why the Bay, unchanged, will die, Waks invites you to walk into one of the stores and look around.

“You look at the floors and you look at the ceilings and you look at the fixtures,” he said. “To find somebody to help you is extremely rare.”

Do I think in its current state it can survive? No

Fred Waks, a former president of RioCan REIT

Up till now, HBC has been frank about its survival prospects if shareholders reject Baker’s offer. Left on the public market, the argument goes, HBC would struggle to find support for the expensive, time-consuming work of overhauling the business, repurposing real estate and improving its e-commerce efforts.

Since Baker first announced the takeover bid this summer, Catalyst has been the main shareholder standing in his way. Arguing that Baker was undervaluing the company, Catalyst launched a competing bid of its own.

Baker and Catalyst then traded barbs in a seemingly endless stream of press releases until, last month, Catalyst succeeded in delaying a vote on the bid altogether by complaining to the Ontario Securities Commission.

HBC Chairman Richard Baker in 2015.

HBC Chairman Richard Baker in 2015.

Peter J. Thompson/National Post files

Baker’s new offer rescues what looked like a doomed deal since Catalyst, with a 17-per-cent stake, boasted enough allies to derail the old bid in a shareholder vote, which required support from a majority of minority shareholders.

For months, Baker’s group refused to budge, insisting $10.30 was their “best and final offer” and declining to entertain outside bids. But Friday’s revised bid — the third in a series of Baker group offers, starting at $9.45 in June — matched what Catalyst was itself willing to pay for HBC.

At $11 per share, Catalyst’s 32.3 million shares are worth $22.6 million more than they were at $10.30 per share. With Catalyst now onside, Baker’s group of shareholders — a handful of international investors, including the Emirate of Abu Dhabi and Boston-based Abrams Capital Management LP — have surpassed a major hurdle.

A special committee of HBC’s board of directors have endorsed Baker’s offer as the best, most plausible way forward. But there are still some barriers to the deal. In light of the new offer, the committee is seeking an updated valuation and fairness opinion on the company. HBC is allowed to terminate Baker’s $11-per-share deal if it’s below the new fairness opinion’s formal valuation range. The deal also needs to pass a shareholder vote.


A customer holds a shopping bag inside the Hudson’s Bay Co. flagship store in Toronto.

Cole Burston/Bloomberg files

But HBC’s challenges do not end if and when the deal closes.

“The retail environment is deteriorating,” special committee chair David Leith told shareholders in a November letter.

In the year and a half since Helena Foulkes took over as chief executive, HBC has rid itself of underperforming assets so it can focus on its core businesses — the Bay and Saks Fifth Avenue — while closing Home Outfitters and selling off Lord and Taylor, as well as the Gilt e-commerce business and HBC’s European operations.

But still, it wasn’t enough to stop HBC’s stock from tanking, Leith said in December. Over five years, the price fell about 64 per cent, to around $6 in June, before Baker’s take-private bid was announced. In a call with investors in December, Foulkes acknowledged the Bay’s biggest issues: hard-to-find staff and hard-to-navigate stores.

“We’re fixing the fundamentals of the store environment,” she said.

Foulkes is also in the middle of cutting down the Bay’s mix of brands, culling 600 older, more conservative ones, and replacing them with 75 designer labels. For those new brands, the Bay is focusing on getting them from places such as South Korea and Scandinavia, instead of the traditional fashion markets of London, Paris and Milan.

But fixing the business will take cutting more than brands, said Kathleen Wong, a retail analyst at Veritas Investment Research.

“It’s tough,” she said last month. “There are way too many stores.”

The Hudson's Bay flagship store in Toronto.

The Hudson’s Bay flagship store in Toronto.

Cole Burston/Bloomberg files

For years, Wong said, HBC seemed intent on expanding, adding new banners and pushing into new markets while its flagship brand, the Bay, floundered. The Bay currently has 89 department stores across Canada, but reducing that footprint is complicated.

“When you look at it, it’s a bit late now,” she said. “If HBC wants to get out now, who’s going to buy the real estate?”

One major problem is that the properties were built for department stores and, lately, department stores have not been strong tenants. In more suburban areas, the Bay tends to be an anchor tenant in shopping malls, and locked into hefty long-term leases. Again, it’s tough to move a footprint of that size.

“It’s not like you can just whip out a pad of paper and decide you’re going to move out of some of these locations,” said Michael LeBlanc, a former executive at HBC in the early 2000s who now runs M.E. LeBlanc & Co., a retail consultancy. “They’re decades-long leases and who’s gonna buy them?”

The other issue with maintaining such a vast cluster of sprawling department stores is that it takes a lot of money to run. You need the staff and the budget to, say, replace each light bulb when it goes out. If you don’t, the whole brand reputation suffers.

Signage inside a Hudson's Bay store in Toronto.

Signage inside a Hudson’s Bay store in Toronto.

Cole Burston/Bloomberg files

“If you’ve got a big fleet like that, and you want them all to maintain the brand standard, it takes a lot of investment,” LeBlanc said. “Maybe you don’t need them to be as big as they are.”

But shrinking stores causes a similar problem: “Who gets the rest?” he asked, pointing out that it takes time and investment to redevelop parts of stores for new tenants.

But regardless of the size, the stores just need to look and operate better, said Waks, the retail real estate developer, who now runs Trinity Development Group Inc.

“If you don’t put the capital in real estate,” he said, “you do not get the productivity.”

The best example of that, Waks said, is the Bay at Yonge and Bloor. It’s in a prime shopping location and yet it doesn’t appear to have been upgraded in years.

Why on Earth is anyone going to shop there based on the shopping experience?

Fred Waks

“Why on Earth is anyone going to shop there based on the shopping experience?” he said, also pointing out that a flagging department store is at risk of losing the best brands.

In a neighbourhood such as the Mink Mile, brands have other options. The luxury department store Holt Renfrew is down the street. And major brands such as Chanel and Versace have their own stores in nearby Yorkville.

“They don’t want to downplay their brand,” Waks said. “You have to show them that you’ve got the customer base and the sales and the ability to move their wares.”

If not, the brand pulls out, giving customers one less reason to shop in the store. As fewer customers come, more brands stay away, sending the store spiralling further and further, until it looks something like the Bay on Bloor: dowdy, dirty and empty.

“If you don’t invest,” Waks said, “you lose.”

Financial Post

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Hudson’s Bay Co take-private deal to go before OSC hearing


Catalyst Capital Group Inc. achieved a small victory in its campaign to block a takeover of Hudson’s Bay Co. on Wednesday, winning an opportunity to pursue its case in front of the Ontario Securities Commission.

After nearly three hours of arguments, the OSC granted Catalyst standing in the case, deciding it was in the public interest to go ahead with a hearing on Catalyst’s application to stop or delay a $10.30-per-share takeover offer from chairman Richard Baker’s group of shareholders.

In remarks Wednesday, Catalyst cast itself as a deep-pocketed defender of its fellow minority shareholders, railing against what it viewed to be flawed privatization process conducted by a “neutered” special committee of the board of directors.

“For at least six months, the investing public has been kept in the dark,” Catalyst lawyer Adam Chisholm told the OSC’s three-person panel. “Many minority shareholders will not have the sophistication or the resources to bring an application to the commission. I’m thinking about retail investors who own shares of this company.”

Commission vice-chair Grant Vingoe announced his decision in a short statement after the panel deliberated during a 20-minute recess.

The Baker group warned against granting Catalyst standing, arguing it would water down a provision that allows third parties to bring applications before the commission in matters of public interest. Typically, only commission staff bring matters before the commission.

“Staff is the protector of capital markets, not Catalyst,” Baker group lawyer Eliot Kolers told the OSC, pointing to Catalyst’s push to buy up shares after the takeover bid was announced.

“Part of the integrity of the capital markets is not having the commission be used by a self-interested applicant of this nature.”

But commission staff, represented by Charlie Pettypiece, agreed with giving Catalyst standing, arguing that the matter raised “fundamental securities law issues.”

Catalyst, HBC’s largest minority shareholder, has signalled it has enough support to block the deal in a shareholder vote scheduled for Dec. 17. It has also floated its own bid to buy HBC at $11 per share.

On Wednesday, HBC lawyer Seumas Woods questioned the timing of Catalyst’s application, so close to next week’s vote.

“They’ve left it very late in the day,” he said, calling Catalyst’s position “long on rhetoric … short on substance.”

Prominent proxy advisors have also weighed in on the saga, including Glass Lewis & Co., which recommended on Wednesday that shareholders vote in favour the Baker group offer. Institutional Shareholder Services, however, recommended that shareholders vote against the deal in a report on Friday.

Vingoe, the OSC vice-chair, challenged HBC’s criticisms of the last-minute nature of Catalyst’s request for a hearing. HBC complained Catalyst didn’t request a hearing for weeks following HBC’s release of a management circular on the deal. But Vingoe pointed to an HBC news release late on Friday night, which updated HBC’s official account on how the deal came together. The release gave additional information about how the special committee waived a standstill provision to allow shareholder Fabric Luxembourg Holdings S.a.r.l. to join the Baker group’s bid.

By updating its account of the deal, HBC was essentially restating its circular. So while it was released in mid-November, Vingoe said, “it’s only complete very recently.”

The hearing starts on Thursday with Catalyst’s cross-examination of David Leith, chair of the HBC special committee.

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OSC to proceed with hearing on HBC deal despite Baker group objections


The Ontario Securities Commission will hold a hearing on the merits of Catalyst Capital Group Inc.’s application to block or postpone a deal to take over Hudson’s Bay Co.

At a scheduling hearing on Thursday, OSC panel chair D. Grant Vingoe said he would consider the application on Dec. 11, despite objections from the shareholder group behind the takeover bid, led by chairman Richard Baker.

“The commission is being co-opted here,” Eliot Kolers, the Baker group’s lawyer, told the OSC. Both HBC and the Baker group argued that Catalyst was using the hearing as a tactic to squeeze information from the Baker group and derail the transaction at the 11th hour.

Catalyst, HBC’s largest and loudest minority shareholder, is asking the OSC to block the Baker group’s proposal to take the company private at $10.30 per share — or at least delay the Dec. 17 shareholder vote to approve the deal.

“They’re trying to jam this all in at the very end,” HBC’s lawyer, Ryan Morris, told the commission. “They don’t have standing…. There should be no date set here today.”

Morris argued that the commission should decide whether the application has any standing before setting a date for a hearing. Vingoe instead resolved to deal with the question of standing at the beginning of next week’s hearing.

Catalyst defended the timing of its application, arguing that it was in response to a mid-November management circular that included appraisals and specifics about the deal. With the hearing less than a week away, Catalyst pledged to file its evidentiary materials within two days. But HBC and the Baker group argued that wouldn’t give them enough time to formulate a proper response.

“It’s an unfortunate part of the timing of many M and A hearings,” Vingoe said. “They end up being accelerated.”



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