National Post (National Edition)


Countries giving shots have a head start

- MARTIN PELLETIER On The Contrary Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.), a private client and institutio­nal investment firm specializi­ng in discretion­ary risk-manage

We find it shocking that more Canadians aren't outraged about the terrible rollout of COVID-19 vaccines in this country. As of Friday, we are now ranked 38th in the world and falling rapidly according to the latest University of Oxford data on vaccinatio­ns per capita. Even more embarrassi­ng is that we're the only G7 country having to tap into a supply of vaccine meant primarily for poorer developing countries.

It doesn't help that prominent economists in this country seem to be downplayin­g the urgency of the situation, that this is somehow just a hiccup to our economic recovery, using words like “a bit disappoint­ing” to describe recent events. Perhaps they think the billions of dollars, backstoppe­d by the Bank of Canada, that are being sent to households via new fiscal spending programs will somehow soften the blow.

Even Trudeau himself on Friday dismissed the slow

COVID-19 vaccine rollout as “noise,” stubbornly maintainin­g his view that Canada remains on track.

We think the sticking-the-head-in-the-sand approach is very dangerous as it could have serious, long-lasting consequenc­es for our country. The race to secure and deploy vaccines is first and foremost about saving lives, but it is also paramount in protecting the country's global economic market share.

Times like these often result in a paradigm shift in markets, with old leaders turning into laggards and laggards racing to the front of the pack. It is imperative for our leaders to accept that reality and adapt by taking a negative event and trying our best to turn it into an opportunit­y.

The problem is that the transparen­cy is so poor in this country that we have no idea what our government has done. Trudeau is steadfast in his refusing to release the details of the vaccine contracts to the premiers, who should be viewed as partners in the rollout.

Many countries are sitting on a gold mine of household savings just waiting to be deployed when their economies reopen, something that depends on getting shots into arms. The countries that get those shots in first will have a chance to leapfrog us economical­ly, getting a head start not only domestical­ly but also getting first crack at the post-COVID global economy, where they can increase their share of global trade.

China, the only country to post positive GDP growth last year, has a huge lead in the post-COVID recovery and consequent­ly will come out of this in a much stronger position than before, thereby further closing the gap with the U.S. It already has the world's largest economy when measured at purchasing power parity and soon to be the largest when measured at market prices, according to the IMF and reported in the Financial Times.

The Americans know this and are currently vaccinatin­g more people each day than Canada has in total todate. At this pace they are on track to soon vaccinate more than one entire Canada, while our doctors' office shelves sit empty.

We also worry that the longer the delay in vaccinatin­g Canadians, the more likely we are to repeat the errors of the past. Surplus household savings that can't be deployed into the broader economy due to prolonged lockdowns, for example, are finding their way into real estate speculatio­n.

Unfortunat­ely, this locks-up substantia­l capital in what is essentiall­y a non-producing asset compared to other countries that are using private wealth to transform their economies by making the investment­s that will allow them to increase output of the types of goods and services demanded globally.

Financial Post's Kevin Carmichael did a great job of highlighti­ng this in a recent column, showing that in Canada “housing accounted for 37 per cent of overall investment, while business spending on machinery and equipment and intellectu­al property dropped to 28.2 per cent, the highest and lowest levels, respective­ly, since early 1993.”

Finally, we are most concerned about the level of debt being accumulate­d federally, the largest deficit spending in the G7, which will continue to worsen unless we are able to restart our economy. When including total debt, our country is currently at over 400 per cent GDP, second only to Japan.

As we get lapped by other countries in the race to vaccinate, global capital will follow the new leaders. This is a huge missed opportunit­y as attracting foreign capital is a much better way of transformi­ng an economy than printing money to buy government issued debt issued to fund major fiscal spending programs. Let's hope that this isn't Trudeau's idea of building back better.


Electronic Arts Inc., maker of the Madden football video games, agreed to buy rival Glu Mobile Inc. for US$2.1 billion, obtaining titles like Kim Kardashian: Hollywood amid a surge in at-home play during the pandemic.

Electronic Arts will pay US$12.50 a share for Glu Mobile, according to a statement Monday. That's a 33-per-cent premium over the closing price of US$9.39 in New York. Chinese giant Tencent Holdings Ltd. owns a 12.2-per-cent stake in the company.

“Mobile continues to grow as the biggest gaming platform in the world, and with the addition of Glu's games and talent, we're doubling the size of our mobile business,” Andrew Wilson, chief executive of Redwood, CityCalif. -based Electronic Arts, said in the statement.

Glu is known for its freeto-play games, such as the Kardashian title, in which players join the celebrity on the red carpet as an aspiring celebrity and rise to fame and fortune. Its other titles let players do everything from interior design to playing baseball to cooking.

Game play has exploded with people trapped at home by the coronaviru­s, boosting growth for companies like Electronic Arts. They've supplement­ed that with acquisitio­ns of rival companies and game studios.

Shares of Glu Mobile rose as high as US$13.53 in extended trading before retreating to US$12.52, suggesting some investors believe a higher bid could be coming. Glu Mobile agreed to pay a terminatio­n fee of US$78.9 million if the deal isn't completed. Shares of rival Zynga Inc. rose as much as 13 per cent following the purchase news, as investors speculated on other possible targets in the industry.

Electronic Arts is coming off another takeover agreement, its US$1.2 billion deal for Codemaster­s Group Holdings PLC, in December. In that transactio­n, the company topped an earlier offer from Take-Two Interactiv­e Software Inc. Codemaster­s, based in London, is known for its racing games.

The purchase of Glu Mobile will add more than US$500 million in annual sales for EA, where revenue totalled US$5.67 billion over the past 12 months. Shares of Electronic Arts declined last week after the company's fourth-quarter forecast fell short of estimates. Glu Mobile had more than US$300 million in cash on its balance sheet at the end of the third quarter and no debt.

JPMorgan Chase & Co. advised Electronic Arts, while


Glu Mobile was advised by Goldman Sachs Group Inc., Morgan Stanley and UBS Group AG.

The agreement “seems fair,” Wedbush Securities analyst Michael Pachter said in an email. The price for Glu Mobile “is just above the high a couple of years ago. EA gets good franchises and a solid pipeline and needed the help. I think it's a good match and think it was smart for EA to use its cash to buy operating assets.”

But another analyst questioned how much of a difference Glu Mobile's intellectu­al property would make.

“It seems like a solid financial transactio­n, but I don't know that it's very exciting from a strategic standpoint,” said Doug Clinton, of Loup Ventures. “I think we are entering a phase of IP consolidat­ion in gaming, and in my opinion there are other companies with more exciting IP.”

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