Blessed by the Potato

If you’re interested at all in the Teranet (TF.UN) story, then you’ve probably already heard that Borealis/OMERS has decreased its hostile takeover bid from $11/unit to $10.25, to reflect the downturn in the markets. That has… displeased me. These guys seem to be screwing around just because they can, and it’s not going to end well for anyone. The downturn in the markets had made their original hostile offer gain the blessing of management, but then yanking the rug out from under them is not going to lead to a smooth takeover. It’s not like they would have been getting a raw deal at $11: they’d get a good 7% tax-free yield (an artifact of the Con income trust tax grab is that it doesn’t affect pension funds). Personally, I think the fund is a decent buy at $10.25, and I’m not just saying that because my cost base happens to be $10. It’s a cash generating machine with a government-sanctioned monopoly for another 5 years. It yields 8.5% now, or 7.4% at the original $11 bid. Their payout ratio is getting down below 70% — the magic number where they can maintain distributions after 2011; for the pension fund, they could theoretically extract the entire distributable cash amount, yielding 10% on the original $11 bid, 11% on the revised bid.

I know things are in the crapper lately, but I just can’t wrap my head around why OMERS would make such an opportunistic, dishonourable course change. Unless a big holder out there is in trouble (and there might be some who bought in after the hostile takeover bid was announced and paid $11 in the hopes of a bidding war), I can’t see them getting the support they need to bring this deal to a close. I know that I would rather just hold on and continue to collect my 8% for another decade than give it up for $10.25, even if the current market conditions mean that there are lots of safe trusts out there with yields above 10% I could move to. If the buyout fails, then Teranet will probably drop to join them, and then I’ll just buy more. Heck, if we figure that the fair market value of Teranet is about $8 right now (so it yields about the same as IPL.UN is right now), and that OMERs should pay a premium of about 30% to take them over, if only from the tax treatment alone, then we can see that the $10.25 bid is lowballing it…

Ah, well, reputations are cheap these days, whereas credit is not, so I guess I can’t blame OMERS.

Well, the Weather Network has changed its front page, and in the process dropped London, Canada’s 10th largest city, from it’s short list of cities to click on without having to search by name. I feel kind of snubbed, now. Thunder Bay has also gotten the boot.

The weather network is running a contest to win a skid school driving lesson, which is kind of neat. Enter here.

Well, the Halloween party is over and it went off fairly well. Our neighbours’ party was much bigger than ours, and lasted longer, too, but they managed to keep things fairly well under control — we could barely hear them inside in the room closest to their house, and not at all from the bedrooms; best of all, no broken glass in the parking lot! One issue though, was public urination. At least two guys came around the fence into our parking lot to pee, and were shameless about it. One guy I saw make a bee-line for the fence, and I shouted “hey, it’s not a washroom!” and he just bashfully waddled 3 steps away and then peed anyway. Another guy came over while we were out in the parking lot, and, came around the fence, looking right at us, went pee. He was seriously just two parking spaces away, something like 10 feet, peeing. And there were girls there.

Now, as those who know me well (I mean really well) know, I understand the urge to pee sometimes frequently. That panicked, painful need to pee, whether due to a small bladder, overactive kidneys, or both. There have been several times when I’ve been stuck in traffic or out on a walk and been sorely, sorely tempted to just go out in the wild. But I don’t, because I’m civilized; I hold it until a washroom is available, I try to plan ahead, and I buy a lot of donuts I don’t really want so I can use the Tim Horton’s without guilt. Somehow though, there are a large number of guys around here who just don’t seem to care at all. There are a few alleys down Richmond here (where all the bars and clubs are) where on a weekend, those alleys will reek of piss. Walking down at prime drunk time, you’ll almost invariably see someone there, peeing, in full view of all the people walking down the street (it’s an alley, not a stall). The sidewalk will be wet with this little river that mysteriously starts six feet down the alley, springing from an apparent leak in the wall.

What could possibly possess these people, in the age where we pick up after our dogs, to just urinate in public, and to do so with so little shame? For the Halloween example, these guys were at a party in a house, a house with washrooms — how long could the line up have possibly been? And how callous do you have to be to pee on the neighbours of your hosts? While they watch? Of course, Wayfare has told me that there are much worse things they could be doing, such as breaking bottles, or breaking into our house… but relativism doesn’t make the smell go away the next morning when I have to get my car (and having my house broken into was probably better than getting mugged, but it still fucking sucked).

I don’t think I’ll ever understand that mindset, one that I think goes along with breaking bottles in the street (and my parking lot) for no reason. I don’t think my lack of comprehension is in any way a bad thing, either, but aside from tasering wayward urinators, is there any way to keep them at bay?

Superior Plus Propane is a bit of a weird company, with 5 seemingly unrelated businesses all running under the one banner. They have just announced a new deal that is just as complicated as they are.

SPF will be taking over the Ballard corporate structure, including its $800 million in tax losses, while Ballard creates a new corporate umbrella, New Ballard, that will take everything else from Ballard (the fuel cell stuff, the assets and liabilities, and $41 million of SPF’s cash for their trouble). SPF has, in the same breath, announced that they will convert to a dividend-paying corporation at the end of the year. This means that they are going to give up 2 years of the tax holiday on income trusts, and the wording of the release suggests to me it’s because they have something they want to take over, and the growth limitations are holding them back.

It seems to be a great deal for everyone involved: SPF just got $800 million in tax losses they can claim in future years (which should be worth something like $160-$240 million in future cash/tax savings: they won’t pay tax for ~7 years thanks to that) for the low, low price of $40 million. Ballard got some (presumably much-needed) cash in a very tight credit market, and they gave up something they aren’t likely to need any time soon to do it. Investors in SPF who pay taxes (i.e.: not me) will benefit, as they are going to keep the distributions the same (the current payout ratio is about 80%, so they need some income growth going forward to get it down to the 70% range when they eventually start paying taxes), but now they will be eligible for the dividend tax credit for the investors.

As crazy as this deal sounds, it might become more commonplace as long as there are trusts to convert with cash, and companies afraid of trying a debt issue that have tax liabilities they can sell, so this could mark the first of many such deals to come.

So this deal makes SPF start to look attractive to me at it’s current $10 price and 16% yield. I am concerned about certain parts of its business: the propane part should be fairly steady, and makes up about a quarter of their business. Half comes from the ERCO sodium chlorate part, which is a chemical used in the bleaching process for the pulp & paper industry. I honestly don’t have a very good handle on what might be coming down the pipe there, which scares me a bit, but I think an assumption of zero growth/zero decline is probably fair. Another quarter comes from dry wall and natural gas/electricity reselling, which is not something I want to own right now, what with all the drop-offs in new home construction. Of course, the question is how much of the negative news in a third of their business is already priced in? At a 16% yield, with a distribution classed as a dividend, and a 7-year tax holiday, I think I’m happy with it. I will have to see what the morning brings though, as I don’t think I would still be buying at much above $10.

“What the fuck is this shit?!!!” I exclaimed as I woke up and saw the weather. Three inches of wet, heavy snow.

In October.

There were a great many trees that still had their leaves — many of which were still green when we got hit with this snowfall. With all that extra foliage to hold onto falling snow, there was a lot of damage from fallen trees and branches. We look to have lost the small lilac bush in our front yard. Plus, the power was out for about 2 hours last night.

This is insane, heavy snow before Halloween. I can recall a few flurries in past Octobers, but this is the first time in my life that there’s been heavy snow on the ground before the leaves have even finished changing. I suppose there are a number of factors underlying this weather insanity. Global weirding is probably one culprit.

But I think the largest part of the blame belongs to Shoppers Drug Mart & Zellers. I went there last week, and was greeted by a wall of wrapping paper and bows. That’s Christmas stuff. Christmas, as in, the holiday at the end of December. This is October, and there are but three allowed holidays to consider: Thanksgiving, “harvest”, and Halloween. Halloween is, of course, the biggest, best, and last of these. It’s one of the most commercial, with the coolest props and the best candy. Some stores (i.e.: costume stores) stay in business just due to what they manage to sell for Halloween. It’s also an ancient and magical holiday that deserves our respect and reverence, because otherwise it will mess us up.

So when Halloween sees shit going down like Zellers putting out their Christmas shit early, and Shoppers Drug Mart taking away the candy, before Halloween has had its night, it gets — to put it mildly — uppity. “You want some Christmas shit?” the vulgar, drunken spirit of Halloween asks. “Here, have yourself a merry little white Christmas, you winter-loving assholes.”

And we get snow.