Briefly:

Previous Brieflies this week: | MON | TUE | WED | THURS |

(May 2, 2007) CIBC World Markets predicts that the TSX composite will hit a record 15,000 by year’s end due to a booming mergers and acquisitions market and continued strength in global resource prices.

The predictions are part of the investment firm’s Canadian Portfolio Strategy Outlook report. The 15,000 target will provide investors with a total return, including dividend yield, of 18.5% in 2007. The report says it would mark the fourth consecutive year that the TSX’s total return topped that of the S&P 500.

In addition to helping fuel another year of strong earnings growth, the report predicts that M&A activity will increase the value of TSX-listed firms.

“Premiums continue to hold up, with acquirers recently paying nearly 20% above the market price, on average, to land their targets,” says Jeff Rubin, chief economist at CIBC World Markets. “Such activity has already had an appreciable impact on boosting performance in such sectors as utilities, telecoms, gold and base metals.”

Rubin notes that one defining feature of the latest trend in the mergers and acquisitions game is the expanding pace of private equity leveraged buyouts. Buyout funds put nearly $11 billion US into Canadian investments, more than double the prior year’s pace. He says he wouldn’t be surprised if 2007 will easily surpass that figure, especially with a $30 billion-plus deal for BCE currently in play.

“The recent resurgence of the leveraged buyout market after its demise in the late 1980s has been driven by two factors — decade-low interest rates and very tame credit spreads on highly leveraged loans,” Rubin says. “The initial LBO craze was driven by the innovation of the junk bond market. Today’s market relies partly on collateralized debt obligations that enable banks to repackage and resell leveraged loans in an increasingly liquid and competitive market.”

• • •

Corporate tax change bad for Canada: C.D. Howe

(May 2, 2007) The C.D. Howe Institute is concerned that new tax changes implemented by the federal Conservative government that disallow interest deduction on foreign investment will hurt the Canadian economy.

Federal Finance Minister Jim Flaherty’s March 19 budget proposed to withdraw tax deductibility for interest expenses on finance investments by foreign affiliates. C.D. Howe argues this move could affect Canadian businesses’ ability to participate in the global economy and even to remain competitive in home markets.

With an increasingly global economy, multinationals more commonly steer capital finance through low-tax jurisdictions and pursue advanced international tax strategies, the Institute says. Canadian direct investment abroad now exceeds foreign direct investment here, and Canadians’ income from foreign direct investment has more than doubled in the past four years, to $30 billion.

It’s not just business that might suffer by implementing a tax that discourages this type of investing. C.D. Howe says the government could substantially undermine the profits of Canadian businesses, which would directly reduce government tax revenues.

“[The tax] may prove not to be a significant direct revenue-raiser for government because no company will pay non-deductible interest if it can possibly avoid doing so. A better approach might be to reduce Canadian tax rates, thus cutting the payback on international tax planning — exactly what the March budget failed to address,” the Institute writes.

• • •

Insurer targets jet-setters with new product

(May 2, 2007) XN Financial has launched its comprehensive personal risk management program in Canada. The insurer says the product is designed to meet the specific needs of people who live, travel and do business globally.

XN Global Personal Risk Management (GPRM) combines insurance products and services that address all aspects of managing domestic and cross-border personal risk. XN says the program can be tailored to the exact needs of the individual, or group, and is supported by proprietary technology and global 24/7 multilingual call centre support.

“The vast majority of domestic insurance products are not a reliable solution for people who pursue an international lifestyle and/or conduct global business activities,” said XN CEO Daniel Anber. “Corporate executives, business owners and affluent private individuals and their families are exposed to a variety of risks requiring a comprehensive solution from a provider who understands their unique needs and the nature of the cross-border environment.”

• • •

CPP Investment Board names new directors

(May 2, 2007) Finance Minister Jim Flaherty announced Wednesday the appointment of three new directors to the Canada Pension Plan Investment Board.

Geraldine Sinclair, Ian Bourne and Murray Wallace will take up their positions on the board effective immediately, says the Ministry of Finance.

Sinclair is a Vancouver, B.C., communications executive with 23 years of business experience in Canada and the U.S. Bourne is a retired senior executive based in Calgary, Alberta, with 38 years of corporate experience. And Wallace is a London, Ontario, chartered accountant with 40 years of experience in the financial and provincial government sectors.

The directors were selected from a list of candidates provided by a joint federal–provincial nominating committee.

• • •

(05/02/07)