Financial News

An Ontario court will hear on April 14 a complaint by Biovail Corp. founder Eugene Melnyk over alleged comments by the drugmaker's chief executive on his efforts to install a new board of directors.

Melnyk, who is also the company's largest individual shareholder, claims Biovail CEO Douglas Squires made comments contrary to the Canada Business Corporations Act on March 13 while he spoke to reporters and analysts after Biovail reported a big quarterly loss.

Melnyk claims that Squires broke the federal law by commenting on Melnyk's proposal to replace the current board of directors at the company's annual meeting slated for June 25, without the company first filing a formal management circular with regulators that would have revealed the move.

Biovail has said it hasn't broken any laws.

Melnyk owns nearly 11.7 per cent of Biovail, as well as the Ottawa Senators hockey team. He stepped aside as CEO in 2004 but remained actively involved in the company as executive chairman until he resigned that position last year.

He has been very vocal about his dissatisfaction with the direction and financial performance of the company, whose most recent results were dragged down by $104.4 million in litigation charges and compensation charges as well as competition from generic drug makers.

In reporting the results, Squires said Biovail had been "trying to resolve a whole series of investigations .. fast cash advance. (which) upset the company. (They) are based on events that occurred during Mr. Melnyk's tenure as chairman and CEO."

He also described the company's own board of directors as “exceptional."

Biovail agreed Monday to pay a US$10 million fine to settle a U.S. regulator's charges of civil accounting fraud and deceiving investors and analysts.

The company is also facing allegations by the Ontario Securities Commission that it filed inaccurate financial statements and misled investors in recent years with the involvement of Melnyk and other executives.

Melnyk has said he "categorically" denies allegations against him that he misled Biovail investors and has promised to fight the “absolutely false allegations" of that the OSC and U.S. Securities and Exchange Commission announced this week.

On the TSX Friday, Biovail shares were trading at $11.12, down three cents.

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OTTAWA–Canadian consumers and homeowners spent more at motor vehicle dealerships and in home-and-garden stores in 2006, driving retail operating profits to their highest level in four years.

Statistics Canada reports retailers recorded operating profits of $21.8 billion in 2006, a 9.5 per cent increase from the previous year and the highest level since 2002.

Retailers, both store and non-store, reported operating revenues of $427.2 billion in 2006, up 5.7 per cent – well above the previous five years' annual average growth rate of 4.7 per cent.

Chain stores reported operating revenues of $190.3 billion in 2006, up 7.3 per cent, while revenues for non-chain stores rose 4.6 per cent to $223.5 billion.

Sales for non-store retailers – operators of e-commerce, mail-order, and vending machines – rose 1.3 per cent to $13.4 billion.

Chain stores continued to chip away at the dominance of non-chain stores: On average, their revenue share increases one per cent a year and 2006 was no different as chain stores accounted for 46 per cent of store-based revenues, up from 45 in 2005.

Virtually all revenue generated in department stores, as well as beer, wine and liquor stores, are from retail chains.

In addition, clothing chain retailers accounted for just over three-quarters of clothing retail revenue (78 per cent) quick payday loan. In contrast, most new car dealers were not part of a retail chain, with only four per cent of sales generated by retail chains.

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WASHINGTON–The U.S. justice department approved Sirius Satellite Radio’s $5 billion (U.S.) buyout of rival XM Satellite Radio yesterday, saying the deal was unlikely to hurt competition or consumers.

The deal was approved despite opposition from consumer groups and an intense lobbying campaign by the land-based radio industry.

The buyout received shareholder approval in November. The companies said the merger will save hundreds of millions of dollars in operating costs.

The justice department, in a release explaining its decision, said the two firms compete not just with each other, but also with other forms of radio and entertainment.

"The likely evolution of technology in the future, including the expected introduction in the next several years of mobile broadband Internet devices, made it even more unlikely that the transaction would harm consumers in the longer term," the justice department said http://fcrwizard.com. The two companies’ Canadian partners are continuing to operate separately from each other.

XM Canada is affiliated with XM Satellite Radio Holdings and Canadian Satellite Radio Holdings Inc., a publicly traded company based in Toronto.

Sirius Canada Inc. is a partnership of the government-owned CBC, privately held Standard Radio and U.S.-based Sirius Satellite Radio. Associated Press

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For some of Canada’s biggest banks, the colour of money is increasingly pink.

At a time when banking on diversity is all the rage on Bay Street, financial institutions are hastening their pursuit of gay, lesbian, bisexual and transgendered clients. That community is a market the industry estimates to be worth at least $75 billion across the country.

The Bank of Montreal is among those vying for a bigger share and is stepping up its game in Toronto’s gay village with a second branch, just in time for Pride Week in June.

A bronze statue of Alexander Wood, one of this city’s most celebrated gay pioneers, flanks the new $1.1 million location at Church and Alexander streets. Perhaps in keeping with Wood’s entrepreneurial legacy, it will also become the first BMO branch in Ontario to operate seven days a week.

That convenience factor is key to getting so-called "pink dollars" in the door, particularly those earmarked for wealth management, said Lily Capriotti, vice-president of BMO’s GTA central district.

When it comes to the gay and lesbian community, the business case for diversity is undeniable, Capriotti said in an interview.

"Clearly when we look at the demographics of this group – they have higher education, higher income levels with more disposable income – we think that is an attractive market for us.

"In addition, we know that they are heavily involved in philanthropic activities and giving, which again, aligns with our corporate strategy at the bank."

The most recent demographic data are from a 2004 study by Ipsos-Reid for the Xtra media group, which publishes a chain of newspapers serving various gay and lesbian communities in Canada. The survey polled 933 readers and is reliable within a margin of plus or minus 3.2 per cent, 19 times out of 20.

The average household income of Xtra readers is about $72,800, the study found – about $25,200 more than the average Canadian household. Nearly 30 per cent of those surveyed had household investible assets of more than $100,000.

"A whopping 60 per cent of Xtra’s readers are between the ages of 35 and 54, a demographic where financial planning is crucial if retirement goals are to be met," the report said.

Wealth management is a fiercely competitive industry in Canada. At the end of December, mutual funds assets totalled $697 billion, according to a new report by PricewaterhouseCoopers.

Together, the Big Six banks held a 37 per cent market share at the end of 2007. Royal Bank of Canada was the front-runner with 12 per cent of Canadian mutual fund assets, the study said. In contrast BMO took a fourth place ranking with about 5 per cent.

The stakes have grown this year. In late February, RBC announced a $1.36 billion takeover of Phillips, Hager & North Investment Management Ltd. That followed Bank of Nova Scotia’s deal to buy 18 per cent of DundeeWealth Inc get a free credit report. last fall.

Gay, lesbian, bisexual and transgendered investors represent only part of the total wealth management picture, but experts say they are a key demographic given their relatively high levels of disposable income.

When it comes to raising its own brand awareness in that community, BMO is leveraging the expertise of its employee-led gay and lesbian affinity group for advice on corporate strategy, key contacts and participation in various charity events.

With a financial planner slated to be on site at its new Church Street location, BMO is hoping to entice new clients with the promise of free financial and retirement plans.

BMO is not the only bank keen for this business. TD Bank, which began its gay and lesbian initiatives in 2004, is also trying to carve a bigger slice of the wealth management pie.

Toward that end, TD Waterhouse is hosting an event in April for "high net worth members of the GLBT community" that will feature Glenn Dixon of the TV show Take This House and Sell It! and Lee Pomeroy from TD Mutual Funds. And like BMO, TD is heavily involved in gay and lesbian philanthropy.

Ed Clark, president and CEO, has spoken candidly about ensuring those customers have a "comfortable experience" at TD.

"We want to be a place where employees and customers alike feel comfortable and supported in all their diversity – whether they are men, women, people with disabilities, gays, lesbians, or visible minorities," Clark told shareholders last year.

The Canadian Imperial Bank of Commerce has also established an employee-led affinity group and supports gay and lesbian community programs.

According to the PricewaterhouseCoopers’ report, TD and CIBC have the second and third largest shares of Canadian mutual fund assets, with shares of 8 per cent and 7 per cent, respectively.

The gay and lesbian financial planning trend has also caught on outside of Toronto.

Hamilton-based Reeves Financial Services has long catered to the specific wealth management and estate planning needs of same-sex couples. The Assiniboine Credit Union does the same in Winnipeg.

For the most part, however, big-name Canadian financial institutions have lagged behind the trail-blazing progress of U.S. peers, such as American Express and Mellon Private Asset Management, which adopted gay and lesbian business strategies in the 1990s.

Bank of America, JPMorgan Chase and Merrill Lynch & Co. are listed among the top 10 companies for gay, lesbian, bisexual and transgendered employees by DiversityInc magazine. And it is no wonder. One estimate pegged the American gay and lesbian market at $660 billion (U.S.) last year.

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OTTAWA–Canada’s inflation rate tumbled to its lowest level in six months in February as the strong dollar continued to give consumers a break on everything from the automobiles they drive to the food they eat.

Consumer prices last month were 1.8 per cent higher than a year ago, down significantly from January’s 2.2 per cent rate.

The core index, which the Bank of Canada uses to gauge underlying inflationary pressures, rose for the first time since June, to 1.5 per cent from 1.4 per cent in January.

The uptick in core prices, excluding volatile fuel and food costs, was unexpected, but yesterday’s Statistics Canada report was seen as leaving the Bank of Canada room to keep cutting interest rates to boost economic activity without stoking inflation.

"There may be less urgency to cut rates than stateside, but the bank still has plenty of leeway to do what they see fit in the months ahead," BMO deputy chief economist Douglas Porter said.

The dollar rose yesterday 0.61 of a cent (U.S.) to 100.68 cents.

The easing inflationary trend in Canada was widespread, but especially acute among items sensitive to currency fluctuations.

The cost of automobiles slid by 6.8 per cent from last year, the steepest drop since February 1956, as a result of markdowns and discounts from car makers.

Food was also cheaper in February, especially imported fresh produce payday loans. Fresh vegetables fell 16.9 per cent from a year earlier and fresh fruit dropped 14.5 per cent, with oranges 36.2 per cent cheaper.

As well, prices for computer equipment and supplies crashed 15.4 per cent in February, and women’s clothes slipped 3 per cent.

Fuel remained the key upward propellant of inflationary pressure. Gasoline prices rose 17.1 per cent last month compared with a year earlier, while the cost of heating oil and other fuels jumped 23.9 per cent from last year.

Mortgage interest costs also continued to climb, as did costs of home maintenance.

Travel costs, which had retreated by 0.2 per cent in January partly because of the cut in the goods and services tax, were up 0.4 on a month-over-month basis in February, amid "strong upward pressure exerted by higher tour package costs," Statistics Canada said.

RBC economist Dawn Desjardins said she expects both all-items inflation and the core rate will remain at the lower end of the Bank of Canada’s target band of 1 per cent to 3 per cent.

Ontario experienced the largest dip in inflation with a year-over-year consumer price increase of 1.5 per cent, off from 2.1 per cent in January.

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WASHINGTON–The third recall of a Mega Brands magnetic toy has dealt the struggling toymaker an especially painful blow as it marks the first time that the product’s faulty design can’t be blamed on the previous owners.

The Montreal-based company recalled two Chinese-made pre-school magnetic toys today after receiving a series of complaints about tiny magnets dislodging from their plastic casings.

The move sent its battered shares (TSX:MB) close to a 52-week low as they lost nearly 14 per cent, or 71 cents to close at $4.40 on the Toronto Stock Exchange. Over the past year, shares have fallen from $26.87 to a low of $4.21.

The “voluntary” recall of 2.4 million units covers MagnaMan action figures and Magtastik and Magnetix Jr. pre-school toys. Unlike the two recalls in 2006 and 2007 of Magnetix construction sets, the Magtastik and Magnetix Jr. pre-school toys were designed by Mega Brands.

The company said magnets in small flexible parts can detach and, if swallowed, can attract each other and cause intestinal perforations or blockages.

“They are flexible. If you bend it enough the magnet can pop out,” Mega Brands spokesman Harold Chizick said in an interview.

Mega Brands said it and the U.S. Consumer Product Safety Commission are aware of 44 reports in the United States of magnets coming loose, including one case of a three-year-old boy receiving medical treatment to remove a magnet from his nose and a report of an 18-month-old found with a magnet in his mouth but not swallowed.

The newly recalled products were produced as early as 2004. But Magtastik and its similar Magnetic Jr. set were designed following the 2005 US$350 million acquisition of Rose Art Industries.

The company redesigned its Magnetix building system after one child died and several others were seriously injured after ingesting a baby Aspirin-sized magnet.

The two earlier recalls cost tens of millions of dollars in expenses and litigation, and ravaged the company’s share price. The new product known as MagNext in which magnets are encapsulated in the plastic shells is set to hit store shelves this summer.

In the case of the new recall, consumers are being instructed to return the affected toys to Mega Brands for a free replacement toy.

The products are no longer in production but the company asked retailers two weeks ago to remove Magtastik and Magnetic Jr faxless online payday advances. toys from store shelves.

“While we investigated the complaints, we asked retailers to pull the products from shelves and once we realized that there was an issue we took this very cautious step of announcing a voluntary recall,” Chizick said.

Today’s recalled products were sold at toy stores around Canada and the United States, including Wal-Mart and Toys “R” Us between January 2005 and December 2007. They retailed for between $10 and $40.

The recalled products represented sales of $7 million last year. Costs related to the recalls will be reflected in fourth quarter 2007 financial results, that are slated to be released March 31.

Patty Davis of the Consumer Product Safety Commission said Mega Brands isn’t the only toymaker to recall its magnetic toys. However, she said there are no plans to ban the toy because of continuing problems.

“We are working with the voluntary standards community here in the United States to redesign these toys so the magnets don’t fall out as easily,” she said in an interview from Maryland.

Davis wouldn’t say when the organization first received complaints about the product, but noted it moved “expeditiously” to issue a recall.

Chizick also wouldn’t shed light on the timing of the complaints and couldn’t say if the company faces any lawsuit.

“We’ve received 44 consumer complaints over the last few years about these products and we’ve been talking to the CPSC and felt that in an abundance of caution should do this recall.”

The recall is sure to be yet another black eye for the toy company, whose CEO recently acknowledged the amount of time executives have been diverted by the recall problems.

Mega Brands had hoped its problems were behind it after teaming with Intertek, one of the world’s leading testing authorities, to redesign its Magnetix toys.

“We have a goal of creating toys that have zero defects,” said Chizick. “It’s a very ambitious goal but they are helping towards achieving it.”

Chizick said Mega Brands has no intention of selling its magnetic line of toys.

Mega Brands said it has received several offers, including one from the Rosen brothers, to purchase the remaining stationary division.

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Gold-mining companies, pumped up by record-breaking commodity prices, have emerged as the go-to investments in a Canadian stock market that has stumbled into deep gutters this year.

Names such as Centerra Gold and Barrick Gold, the world’s biggest producer, have logged a series of highs so far this year, even as the main index of the Toronto Stock Exchange at one point in January was down 12 per cent amid a global retreat from equities.

"What we’re seeing here is a renewed interest in the major gold-mining shares," said Bill Belovay, a manager of BMO precious-metal and resource funds at Jones Heward Investment Counsel.

"The big pension funds have decided to move out of financials and into something that will get a rise from the commodity price."

And rising is just what gold shares have done.

A measure of Toronto-listed gold miners is up about a quarter so far this year.

The gold-miner subsector jumped 3.4 per cent on Thursday to a record close, only to gain another 1 per cent yesterday.

Analysts warn of flies in the ointment, however.

Gold is priced in currently weak United States dollars, so the price run-up is somewhat exaggerated for the purposes of non-American equity investors.

Also, miners are faced with surging production costs that threaten margins.

But as the stars align toward a U.S. recession, speculators have plowed money into gold as a hedge against a falling U.S. dollar.

Tight supplies helped gold futures punch through the threshold of $1,000 (U.S.) an ounce for the first time on Thursday bad credit payday loan.

Yesterday, gold for April delivery gained $5.70 to settle at $999.50 on the New York Mercantile Exchange, but the contract touched a record $1,009 during the trading day.

Still, gold-mining shares, especially those of smaller producers, are seen as lagging the pace of the commodity price, despite the records logged by the shares of some companies.

Mark Smith, senior mining analyst at Dundee Securities, said this is partly because the profits of gold miners tend to rise only when it is supply and demand forces that drive up the price of the underlying commodity. Just a decline in the U.S. dollar won’t do it.

"When the gold-price move is real, and it’s a move that’s not based on the U.S. dollar, then gold stocks should actually outperform the commodity," Smith said.

The other culprit is the rising cost of mining gold.

Equipment shortages and rising fuel costs – the price of crude oil has also logged a series of record highs in the last few days – have led to big cost increases in the mining sector over the last few years. Miners have also been hit by a skilled-labour shortage.

"The profit margins may have grown somewhat, but not as dramatically as the gold price would imply," Belovay said.

With files from Associated Press

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Montreal–Bombardier confirmed Thursday the Iraqi government has ordered six CRJ900 regional jets valued at US$239 million, with an option for four more aircraft.

The sale comes nearly a month after the Montreal-based airplane manufacturer acknowledged it was in talks with officials in the war-torn country.

The total contract would be worth about US$400 million if all options are exercised.

The order increased the number of firm orders of Bombardier's latest regional aircraft to 248. As of Jan. 31, it had delivered 1,471 CRJ Series aircraft, including 145 CRJ900 NextGen planes.

Launched last year, the CRJ900 provides operational savings from earlier CRJ models because of greater fuel efficiency and lower maintenance costs faxless payday loans.

An Iraqi government spokesman told state-run television last month that a decision had also been made to buy 40 new airplanes from Boeing that will be delivered within 10 years.

The Bombardier and Boeing airplanes will be used to rebuild airline services in Iraq that have largely been grounded since 1991 when the United Nations imposed sanctions against Iraq following its invasion of Kuwait.

On the TSX, Bombardier shares lost three cents at $5.35 in trading Thursday morning.

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BEIJING–China's exports will grow this year despite a sharp slowdown last month, but a rising Chinese currency could hurt sales to the United States, the commerce minister said Wednesday.

Beijing is not pursuing a large trade surplus, which could hamper efforts to cool inflation, Chen Deming said.

China's trade surplus shrank by 65 per cent in February as exports to the United States fell by 5 per cent from the same month last year, while sales to Europe grew just 1 percent, according to customs data reported this week. Export growth plunged to 6.5 per cent in February from January's 26 per cent rate.

"I think our foreign trade exports still will grow steadily this year," Chen said at a news conference during the annual meeting of China's legislature.

Chen echoed economists who said February's weak figures were caused by snowstorms that disrupted shipping and the weeklong Chinese New Year holiday, when many businesses shut down.

Chen gave no forecast for China's possible global trade surplus this year direct payday loan cash advance. Economists expect it to surpass the record-high 2007 surplus of $262.2 billion.

Beijing is under pressure from the United States and the European Union to ease trade barriers and controls they say keep its currency, the yuan, undervalued. They say the controlled currency gives China's exporters an unfair price advantage, adding to its trade surplus.

Beijing has allowed the yuan to rise by about 16.5 per cent in value against the U.S. dollar since mid-2005.

Chen said there "certainly is an influence" from the yuan's rise.

"This possibly will affect this year's exports," he said, without giving any details.

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From levies on blank CDs to tariffs on background music played in dental offices, Canada has long held the reputation of being a haven for policies that support cultural and creator groups through levies, tariffs and other fees. In recent months, this love of levies has grown dramatically as a number of new proposals have emerged that could significantly increase the costs to consumers for Internet, television and new media services.

While cultural and creator groups are the main proponents of these new funding schemes, they are by no means alone, as broadcasters, cable companies and Internet service providers have jumped into the levy and tariff game.

The cultural group proposals have focused primarily on Internet services. The best known is the Songwriters Association of Canada plan to fully legalize peer-to-peer file sharing of music by adding a $5 monthly charge to the cost of Internet access. That proposal has generated considerable debate, with many consumers expressing concern about a plan that would hit all Internet users, without regard for whether they engage in peer-to-peer file sharing.

Joining the SAC plan is a recent proposal that has garnered support from a handful of creator groups that includes the Canadian Film and Television Production Association, the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), the Directors Guild of Canada and Writers Guild of Canada. The proposal envisions the CRTC establishing a new mandatory ISP contribution of 2.5 per cent of broadband revenue to help fund Canadian new media content.

Late last month, the groups released the results of a public opinion survey which they said found that "69 per cent of Canadians believe that ISPs should be required to help fund the production of Canadian digital media content in the same way that cable and satellite TV providers are required to contribute a small percentage of their revenues to the production of Canadian television programs."

The proposals do not end there. Last week, ACTRA also called on the CRTC to require broadcasters to spend 7 per cent of their revenues on Canadian English-language drama programs cash advance loan. Moreover, the Creators Copyright Coalition, comprised of 16 associations and collectives, recently recommended that government extend the private copying levy to all technologies that permit private copying.

Yet cultural groups are not the only ones clamouring for new levies and tariffs. Canada’s broadcasters have been busy lobbying the CRTC to require cable and satellite companies to add a fee to their subscribers’ bills for carriage of over-the-air broadcast signals. That would mean that advertiser supported networks such as CTV and Global would receive additional revenues from millions of Canadian television subscribers.

The cable companies unsurprisingly oppose the broadcaster proposal; however, they are also looking at new tariffs of their own. In late 2006, Videotron proposed a new Internet transmission tariff that would allow ISPs to charge content creators for transmitting their work over the Internet. This proposal is viewed as part of the larger ISP push for a two-tiered Internet in which creators and websites would pay for the privilege of having their content transmitted on the "fast track," while consigning everyone else to a slow lane.

Although it is unlikely that all of these proposals will be implemented in the short term, it would be a mistake to dismiss them out-of-hand. Indeed, the CRTC has already received submissions on the fee-for-carriage proposal and it is expected to conduct hearings that could address the 2.5 per cent broadband fee and the Internet transmission tariff later this year.

As these plans make their way through the legislative and regulatory process, one thing seems certain. While cultural groups, broadcasters and ISPs battle it out, Canadian consumers will ultimately be left footing the bill.

Michael Geist, recipient of the 2008 Electronic Frontier Foundation Pioneer award, holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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