Coerente Capital Management a new kid on the block; Primaris’ rejection goes into stage four

For those high-net-worth Canadians sitting around over Christmas and wondering if a change of investment manager would be appropriate, the offices of the country’s newest manager will be open.

“We will be signing up clients. Bring your $10-million in. I don’t want all of it,” said Len Racioppo, who along with Marc Trottier, has formed Coerente Capital Management.

The firm, with offices in Montreal and Toronto currently registered in eight provinces, was formed by two veterans of Jarislowsky Fraser, one of the country’s best-known money managers. Both had been with that firm for more than 25 years.

At the time of their departures, Racioppo was president and chair of the investment strategy committee while Trottier was a member of the executive committee, a vice-president and a director. The twin departures were a shock to many in the investment industry. At JF, Stephen Jarislowsky will now transition out of his chief executive role while remaining as chairman.

Coerente will offer segregated management across three asset classes: stocks, bonds and money market securities. “Segregated management is more tax efficient for the client compared with a pool where you are sharing potential gains, losses and transactions. As well it provides an element of protection for individual clients who know that they have their own account,” noted Racioppo, adding that custodial services will be provided mostly by TD Waterhouse and RBC Dexia.

Aside from Racioppo and Trottier, two other JF employees, Yolande Gooderham and Jean-Francois Beaulieu have joined Coerente. Two more employees will start in January.

Coerente plans to charge half of 1% for the first $10-million; after that the fees decline to 35% for the next $15-million. After $25-million has been invested, the fee, in percentage terms, declines.

Racioppo said “Coerente in Italian/Spanish or other Latin-language related languages means coherent or consistent which is what we are trying to do, something that is understandable, fundamental for high-net-worth and foundation clients.”

Primaris’ rejection Stage four of an unsolicited offer by KingSett Capital and Ontario Pension Board for Primaris REIT — is underway.

The first stage was the hostile, $26-a-unit offer, payable in cash and which is being underwritten by TD Bank; the second stage was the expected rejection of the offer and the third stage was the mailing of the takeover bid circular. Primaris has now issued a trustees circular — a 48-page document — that underpins the REIT’s initial rejection. In bold letters, unitholders are advised to “not tender their units,” to the offer that expires Jan. 17. The circular was released at around the same time Primaris raised its monthly distributions by 4.2% (to $1.27 a year) starting mid-February.

The trustees’ circular, whose views are backed by the opinion of Canaccord Genuity, the firm retained by the independent committee to assess the offer, says the offer is financially inadequate, that it does not provide an appropriate change of control premium given that it is less than what the Primaris units returned over the past year and that it doesn’t reflect what analysts believe Primaris will be worth in 12 months. The units have consistently traded above $26.

“Many of our large unitholders are not happy with the takeover and believe the offer is both inadequate and not a permitted bid,’’ said John Morrison, chief executive at Primaris.

Not the normal pairings in takeover offer for Primaris There are some unusual match-ups in the multi-player bid for Primaris REIT. In that hostile deal, which is estimated to be worth $4.4-billion, KingSett Capital and the Ontario Pension Board are offering $26 a unit for Primaris which views itself as the country’s only publicly traded REIT focused on enclosed shopping centres. There is a side deal involving Rio-Can REIT, the country’s largest REIT, which has agreed to purchase, for about $1.1-billion, some of Primaris’ properties if KingSett/OPB is successful.

Primaris, which has been public since 2007 (it actually started life four years earlier as Borealis REIT, before changing its name to Primaris in 2007), is being advised by Canaccord Genuity, a firm that its not normally associated with. (John Morrison’s chief executive at Primaris said that firm was chosen “because they are independent.) That role is normally filled by RBC Capital Markets. Indeed on all of Borealis’ and Primaris’ public financings since 2003, RBC has been top left and CIBC World Markets has top left.

On the bidding side, TD Securities is the dealer manager even though it’s not the normal lead manager for KingSett or for RioCan. For instance on KingSett’s most recent transaction, the sale of about $500-million of properties to Dundee Industrial REIT, RBC acted for the privately held investment manager. Over the years Rio-Can has switched: originally it tended to be a CIBC client but now seems firmly in the camp of RBC. (RioCan’s chief executive, Ed Sonshine is a director at the Royal Bank. But RioCan’s chief financial officer Raghunath Davloor, used to work as an investment banker at TD Securities.)

On the KingSett/OPB side, TD Securities and CIBC World Markets have been selected as the financial advisors.

In the circular mailed to Primaris unitholders, we are told that “pursuant to the terms of a binding commitment letter, TD has fully underwritten credit facilities pursuant to which it will make available to the Offeror directly or indirectly the Senior Credit Facilities.”

TD has also agreed to provide other debt facilities fund including as real estate revolving credit facility and a mortgage back-stop facility.

RioCan is not the driving force behind the deal, and which probably explains the absence of a role for RBC. But it has agreed to kick-in $635-million, it seems that TD is the source of that finance.

 

Overstock May Take On Amazon (And Google) With A New Locker Delivery System

overstock

Lockers are the new black in e-commerce. Amazon recently debuted a Lockers delivery program, which allows customers to have their deliveries sent to nearby lockers. The service is especially helpful for consumers who aren’t at home to receive deliveries. And Google just acquired BufferBox, a service that provides a locker delivery service, for $25 million. E-commerce company Overstock is eyeing the locker space, as well.

We just received a survey from the company, which asked how we feel about Amazon Lockers and whether we have used the service. In the survey, Overstock explains their potential locker system:

Your online orders may be delivered to automated lockers installed at secure locations (office supply stores, drugstores, convenience stores, etc.). Instead of shipping your packages to your home address, they can be delivered to a specified locker location selected during checkout. There are no additional charges for the service. When the package is delivered to the locker, you receive a confirmation email or text message containing a pickup code. Using the locker’s touchscreen, the pickup code is entered to open the locker containing the package.

It would make sense for Overstock to consider a locker system. The company, which pulled in $1.05 billion in revenue in 2011, sells expensive goods, from furniture to jewelry. Not only does a locker service help those who don’t have someone at home 24-7 to accept deliveries, but it saves you the hassle of having to go to UPS or FedEx warehouses to have to pick up packages during their open hours and wait in line. Amazon has lockers in Staples stores, 7-Elevens and RadioShacks. Google seems to also believe in the validity of the model, so we may see more e-commerce sites adopting this trend.

New York infrastructure faces $89 billion gap in 20 years: official

NEW YORK (Reuters) – New York State and its local governments face a shortfall of up to $89 billion for infrastructure funding over the next 20 years, the state’s top financial official said on Thursday.

RIM cuts losses, treads water while waiting for BlackBerry 10 release

Research In Motion executives announced the financial results of the company’s quarter ending December 1. The good news for fans of the Waterloo, Ontario-based maker of the BlackBerry and PlayBook is that the company continued to reduce its hemorrhaging. RIM actually saw a slight increase in the sale of its PlayBook tablet.

The bad news is the company did so on less revenue, while shipping even fewer products than the last quarter and less than half the number of BlackBerry phones it sold this time last year. But if the BlackBerry 10 is even a moderate hit, RIM’s improved financial performance could mean a return to profitability next year.

And there’s reason to hope. “More than 150 carriers are currently completing technical acceptance programs for the first BlackBerry 10 products,” RIM CEO Thorsten Heins said in a prepared statement. “And beta trials of BlackBerry Enterprise Service 10 are underway at more than 120 enterprises, including 64 Fortune 500 companies.” BlackBerry 10 launches on January 30.

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Afghan campaign a success – PM

British troops in Afghanistan have paid a “high price” but their efforts have been a success, Prime Minister David Cameron has said on a pre-Christmas visit to UK bases in the country.

UN backs Mali intervention force

The UN Security Council authorises an African-led military force to try to oust Islamists and rebels who have taken over northern Mali.

Vote on US fiscal cliff ‘Plan B’

The Republican-led US House is set to vote on spending cuts and tax rises party leaders say will keep the US away from the “fiscal cliff”.