What’s the deal with NAFTA deadline?
Paul Ryan last week imposed the firmest deadline yet on a renegotiated North American Free Trade Agreement.
The speaker of the U.S. House of Representatives says Congress has to have a deal in hand by May 17 — Thursday of this week — if Congress is to vote on its ratification in December.
But no members of trade-related Congressional committees can be found who know of any fixed deadline. Some even say a deal could be reached as late as next month and still be voted on by the current Congress, before the next Congress begins work in early 2019.
Robert Lighthizer, the U.S. Trade Representative, wants a deal this month but hasn’t specified a date.
Meanwhile, Ryan and Lighthizer are at odds on critical NAFTA issues, including agriculture and proposed dispute panels that would decide cases where governments seek to overrule private investors.
Mindful of the fluid state of affairs in Washington, Chrystia Freeland, the Canadian foreign affairs minister, was nonchalant last week when pressed on Ryan’s deadline.
A deal “will take as long as it takes,” was Freeland’s sanguine response to repeated reporter questions on Ryan’s deadline. Donald Trump, the U.S. president, needs a big win heading into midterm elections that could cost his Republican Party control of the House, the U.S. Senate or both.
An administration notably lacking in accomplishment needs a new NAFTA that Trump can claim will restore the U.S. jobs he (incorrectly) says were lost due to the existing deal.
A U.S. under internal political pressure for a deal is one that is less likely to stick to its leastagreeable demands. So, Freeland is waiting out the U.S. rather than choosing to cave to its many demands for concessions. Groundless worries about Canadian Tire’s latest acquisition Investors in Canadian Tire Corp. Ltd. got the jitters over last week’s purchase of Helly Hansen, a global maker of rugged outdoor clothing based in Oslo.
Canadian Tire stock plunged as much as 6.9 per cent in intraday trading last Thursday with the deal’s announcement. The price is indeed high, at $985 million for an apparel line with just $461 million in sales last year.
And Canadian Tire’s last major international foray, a U.S. chain of hardware stores, was a disaster.
But that was decades ago. and Canadian Tire has since proved itself expert at integrating acquisitions.
The company has stayed close to its core competence with its purchases of workwear-apparel retailer Mark’s and sporting-goods giant Forzani Group (Sport Chek and other banners).
The new additions sell products of their flagship sister chain Canadian Tire, and all three benefit from the Canadian Tire “money” loyalty program, yet management has skilfully retained the unique brand identity of the three chains.
That Helly Hansen’s profit margins lag peers in the outdoor-apparel sector is indica- tive of promising upside potential for the 141-year-old Norwegian brand, which has wholesale and distribution operations in more than 40 countries.
Canadian Tire knows the particular brand well, as they have stocked Helly Hansen goods for a decade. It can increase sales by expanding Helly Hansen to Mark’s and Sport Chek.
But the factor that likely will make the difference in Helly Hansen’s improved future performance is simply the transition from passive to active management. For the past six years, Helly Hansen has been owned by the Ontario Teachers’ Pension Plan, a sage investor in identifying solid acquisitions but not a manager of its holdings.
Canadian Tire has pioneered a sort of housebroken aggressiveness in growing its businesses with vigour, but without alienating its customers, em- ployees or suppliers in the process. Resisting Suncor’s allure Calgary’s Suncor Energy Inc. is gaining lustre as one the world’s safest oil plays for investors.
The essential context, of course, is high and rising oil prices — up 65 per cent over the past 12 months.
If higher prices are here to stay, as many investors believe, how best to play the oil-price surge?
To back up a bit, the West Texas Intermediate benchmark price broke above $70 (U.S.) last week, quite a recovery from the oil-glut low of $29.
The prolonged oil-price slump finally triggered a longexpected boom in demand, largely in the dynamic economies of the Pacific Rim, especially China; and from a shift in North American vehicle-buyer preference to gas-guzzling SUVs and light trucks.
The diversified Suncor is Canada’s largest producer, from its own operations and its near 60 per cent stake in Syncrude Canada Ltd., the No. 2 oilsands producer after Suncor.
Meanwhile, the firm’s “downstream” assets, including the PetroCanada network of refineries and filling stations, is a cushion against weakness in upstream production.
What’s not to like for this stock, now highly touted on the Street?
It’s expensive, with a priceearnings multiple of 18.8. The prospects of getting its landlocked tarsands oil to market faster and cheaper have dimmed with fierce opposition to the proposed Kinder Morgan pipeline.
On the demand side, there’s no saying Chinese and North Americans’ renewed love affair with gas-guzzlers will last in an era of sustained higher pump prices.
And on the supply side, American shale oil producers continue to boost production of oil with far lower production costs than Athabasca’s output, and readier pipeline access to global markets.
All to say that the current euphoria over the global oilprice recovery could make Suncor an overpriced stock sooner rather than later.
Canadian Tire has proved itself expert at integrating its acquisitions