The Ottawa Citizen from Ottawa, Ontario, Canada • 31

BUSINESS SATURDAY, AUGUST 21, 1999 D3 THE OTTAWA CITIZEN Business 1 I a Department stores by prov. British Columbia Alberta Saskatchewan Manitoba Ontario Quebec Atlantic Total department stores Home stores Warehouse stores Brandon Winnipeg Downtown Winnipeg Polo Park Winnipeg St Vital Banks told to tighten up Branch closings, job losses necessary, central bankers say By Eric Beauchesne 1 West Edmonton Edmunton Southgate Edmonton Londonderry Edmonton Eaton Centre Red Deer Calgary Eaton Centre Calgary Northland Calgary Southcentre Lethbrdige B.C. ALTA. SASK. MAN.

i ONT pa II Regina Cornwall 111 miii tin inn 11 11 1 Saskatoon Midtown ffT FEffm nll lull I I I 'T i .1. il lllii I il.n.ii.iinil i.riinnil Hamilton Eastgate Barrie Toronto Don Mills Hamilton Limeridge Sudbury Vaughan Promenade Hamilton Eaton Centre Toronto Eaton Centre Markham Markville London Galleria Toronto Yorkdale Pickering Town Centre London Masonville Toronto Sherway Oshawa London Westmount Mississauga Square One Newmarket Burlington Mississauga Erin Mills Ottawa Rideau St Catherines Pen Centre Brampton Bramalea Ottawa Bayshore Kitchener Waterloo Scarborough Town Centre Ottawa Place d'Orleans Nanaimo Woodgrove Victoria Eaton Centre Vancouver Pacific Centre Burnaby Brentwood Burnaby Metrotown Vancouver Park Royal Coquitlam Surrey Guildford Richmond Lansdowne Abbotsford Sevenoaks Kelowna Orchard Park SOURCE: THE CANADIAN PRESS landlords face decisions Major interests make contingency plans as retail icon Eaton's disintegrates Linmor revenues recovering Linmor Technologies, a network soft- ware company, said that revenues are recovering after a big decline in the fi- nal quarter of the last fiscal year. In that i quarter ending Mar. 31, Linmor rev- enues plunged more than 80 per cent 1 to $65,755 losses rose five percent to $1.25 million. Linmor said that in the I quarter ending June 30 it had estimated revenues of $348,000 but did not dis-! close whether it made a profit or loss.

Nuvo posts record profits Nuvo Network Management Inc. has posted record revenues and the fourth straight quarter of profits. The net-; work-management company said sales rose 149 per cent to $1.6 million in the quarter ending June 30 and I profits rose to $50,084 compared to a loss of $53,701 a year earlier. Investors sent the penny stock up 2 cents, or 10 per-cent, to close at 22 cents on the Alberta Stock Exchange. IDS names new CFO i-' IDS Intelligent Detection Systems has replaced a top officer.

Adrian Van I Vroenhoven, a consultant, is the new 'chief financial officer, replacing Sanje Ratnavale who resigned. Mr. Rat- navale continues as a director of the 'J company which makes bomb and drug detection gear. JDS Uniphase stock soars JDS Uniphase Inc. stock hit a new 52-week high yesterday, rising $5.90 or four per cent to close at $151.

In the last month the stock of the high-flying maker of fibre-optic gear has risen 20 per cent. JDS has operations in Ne- pean, the U.S. and Europe. Imasco to fight lawsuit against $10B BAT deal Imasco Ltd. says it will fight a class-action lawsuit against a $io-billion deal that would see parent company British American Tobacco take over all of Imasco and spin off its non-to-'bacco businesses.

The lawsuit, filed Thursday in Ontario Superior Court, alleges that the deal is not in the best interests of Imasco share-! holders. The international suit seeks an injunction to stop the transaction from closing at $40 a share. It is also asking for $1.26 billion in damages from the two companies and Imasco's Canadian officers and directors, charging breach of fiduciary duty. Chicago approves after-hours trades The Chicago Stock Exchange said yesterday it will extend its trading hours into the late afternoon to snare an increasing number of investors who want to buy and sell outside traditional market times. The move by the third-largest U.S.

stock exchange which accounts for about three per cent of U.S. stocks traded daily beats industry stalwarts the New York Stock Exchange and the Nasdaq Stock Market to the punch in shaking up the way financial markets have done business for decades. Both have announced plans to extend their hours, but have put off implementation until at least next year to further study the issue. Phelps Dodge makes bids for metals producers Phelps Dodge Corp. of Phoenix increased its bid yesterday to acquire Asarco Inc.

and Cyprus Amax Minerals two of the world's leading producers of copper and metals, a day after the two companies had publicly rejected its overtures. Asarco and Cyprus had announced a $2.2 billion U.S. merger last month that would form the largest U.S. copper company and had rejected a lower bid by Phelps Dodge worth about $2.56 billion. Initial bids accepted in Deutsche Telekom cable auction German telecommunications giant Deutsche Telekom said yesterday it has received initial bids for its lucrative cable television network.

Companies that said they made offers included U.S.-based Callahan Associates International, Dutch-based United Pan-Europe Communications and Germany's PrimaCom. Microsoft Corp. reportedly is in talks with Deutsche Bank to form an alliance for a bid. Deutsche Telekom spokesman Hans Ehnert said the bid deadline passed at noon yesterday, but refused to release details on the bidders. Deutsche Telekom has been ordered by the government to shed its cable TV units.

Citizen staff and news services STRANGE BREW momentum. But Brian Card, an analyst with the Corporate Research Group, doubts that the strong stores will be auctioned piecemeal. He expects major Canadian and U.S. retail chains and shopping-centre owners to package and broker the sale of the most attractive Eaton properties. "I suspect that the major interests are working on contingency plans now because it is in nobody's interest to have major shopping centres anchor stores close," Mr.

Card said. This scenario is good news for the 350 employees of the local stores, or for municipalities which collect more than $100,000 annually in taxes from each local store. 'Every scenario you can think of happens in a case like this, and it could be terrible for some of Dougal Casey Real estate analyst Some local Eaton's employees were shocked at the closing of the Quebec stores, particularly the flagship Montreal store. But after years of living with uncertainty, most went about their work and chatted with customers about the options ahead. Canadian industry representatives maintained yesterday that much of Eaton's space is still attractive as some of the country's best real estate, particularly in urban centres.

The departure of Eaton's could boost returns for landlords who replace the low-traffic retailer with tenants willing to pay more than Eaton's toughly negotiated low-rent rates. "It is unfortunate that a major customer of ours and a Canadian icon is running into trouble," says CEO Jon Love of Oxford Properties, with 500,000 square feet of Eaton's space in Orleans, B.C. and Alberta. "But in our 11 9 2 4 27 9 2 64 2 1 Eaton's stock closed at $0.71 on the TSE Thursday. Trading halted yesterday.

Daily close Aug. 19 1 $0.71 0.11 QUE. Montreal Downtown Pointe Claire Les Galeries d'Anjou St. Bruno Laval Mont Royal Rockland Sherbrooke Quebec Les Galeries de la Capitale Quebec Ste. Foy THE OTTAWA CITIZEN narrow self-interest, there will be a gain in cash flow from the space they leave." Bayshore shopping centre is controlled by Cambridge Shopping Centres and Rideau Centre by Cadillac-Fairview and two other real estate companies.

The Ontario Municipal Employee Retirement System, with a $4-billion real estate portfolio that includes 10 million square feet of leasable space, is unruffled that Eaton's might fold eight of its 18 retail properties. "We're confident these locations would sell themselves," said Jane Courtemanche, OMERS manager of malls in suburban Toronto, London, Red Deer, and Kelowna, B.C. "Strong regional shopping centres are going to continue to be viable. We don't anticipate it would impact on the value of our asset." The OMERS Eaton's properties in some of the country's most active regional locations are the types of malls where the retail world expects few problems, says Ken Jones, director of the Centre for Studies in Commercial Activity at Toronto's Ryerson Polytechnic University. It's the smaller, less well-located centres where Eaton's is the sole anchor where landlords will have difficulty, says Mr.

Jones. "When a mall (like that) loses its only major department store it has an impact on the image or attractabili-ty of a centre," Mr. Jones notes. "Look at what happened to the ones that already closed. In Peterborough, Sarnia, Guelph, they've turned to office space, recreation." The stronger locations have the option of re-use or conversion of space.

However Mr. Casey, the U.S. expert, cautions that replacing a once-solid anchor with a completely different use can jeopardize investment. "In the U.S., we do have situations where a mall gets re-used, and looks active," he said. "But typically, someone ends up taking a writedown somebody had to bite the bullet and say this is no longer a mall I thought was worth $80 million, it became a site that is now worth $12 million.

It looks vital but it's not the same value asset." June sales were up 5.8 per cent from June, 1998, and up 4.2 per cent the first six months of the year, it noted. Statistics Canada, which focuses on the ups and downs of sales from month to month, rather than year to year, and then adjusts them to eliminate seasonal fluctuations, said furniture sales rose 2.7 per cent in June and auto sales 2.3 per cent. "All other sectors posted lower sales, with clothing stores (down 2.8 per cent) and food stores (down 1.6 per cent) leading the way." Retailers in the western provinces and Ontario rose, while sales were down in Quebec and in New Brunswick. But on balance, Statistics Canada said "sales have picked up considerably since the fall of 1998." was a stumbling block. "That precluded a lot of Americans from being particularly interested," he said.

"Americans aren't that attracted to this type of ownership structure." Home Hardware, a co-operative based in the southwestern Ontario community of St. Jacobs, was pleased with the acquisition. "Beaver Lumber is a strong Canadian brand supported by an excellent network of stores and owner operators," Paul Strauss, chief executive of Home Hardware, said in a statement. The deal is subject to regulatory approval. The Canadian Press 3 0 1998 NFLD.

I N.B. N.S. I (fell Moncton Vi's 1 Halifax Branch closings, job losses and increased concentration are part of the price that must be paid for the global restructuring of the banking industry, central bankers are warning. And governments should be removing labour market barriers to what will be further bank mergers and takeovers, an association of central bankers, including the Bank of Canada, says in a new report. "Looking ahead, there is little reason to believe that the forces for change will abate," says the report by the Bank for International Settlements.

In Canada, the government is expected to approve, the proposed takeover over of Canada Trust by TD Bank, which could result in the loss of nearly 5,000 jobs and the closing of 275 branches. At the end of last year, Finance Minister Paul Martin rejected the proposed mergers of the Royal Bank of Canada with the Bank of Montreal and of the Canadian Imperial Bank of Commerce with TD Bank, amid public concerns about job losses, branch closings and increased concentration in the industry. But the central bankers say job losses, branch closings and increased concentration should not only be expected but encouraged by government to help financial institutions compete in an increasingly competitive global industry. "There is widespread agreement on some of the features of the required restructuring," the report said. "The number of banks is expected to decline and their average size to increase, leading to a rise in concentration." Canada, however, already has one the highest levels of banking concentration with the five largest institutions having 78 per cent of total industry assets, the central bank report shows.

Of 17 industrial countries, only in Sweden and the Netherlands is the industry more concentrated. A reduction in the number of banks is needed to reduce excess capacity in the industry and an increase in their size to meet rising competitive pressures, especially in the wholesale sector, the report says. "Costs will need to be cut further. Branch networks should shrink and be converted to higher value-added services. "At least in the medium term, employment should fall and skills would" have to be upgraded." And the bank says there is a "broad consensus" on some of the policies governments should adopt to promote the needed restrachiring of the industry.

"Facilitating labour shedding, and reducing inflexibilities in the labour market more generally, remains a priority," it said. But the report also warns of the some of the dangers that mega mergers create for governments and for banks. "Deals have grown larger, reaching unprecedented proportions," it notes. "This risks raising the significance of the too-big-to-fail issue." The concern is that mega banks may take financial risks in the belief that because of their size governments could not allow them to fail. ExpressVu sues dish dealer TORONTO Bell ExpressVu, one of Canada's two licensed direct-to-home satellite TV services, has filed a major claim against one of its own dealerships for selling imported and unauthorized satellite dish gear.

The claim filed yesterday against Tedmonds and Co. of Toronto is for $10 million U.S. in actual damages, $5 million U.S. in punitive damages, as well as reimbursement to any customers and a permanent injunction against further sales of black-market systems. "This legal action should send a message to other satellite dealers who sell illegal grey and black market equipment that breaking the law has a price," said Ian Gavaghan, vice-president and senior legal counsel for Bell ExpressVu, which is owned by BCE Inc.

The action comes as so-called grey marketeers prepare a series of legal challenges in courts across the country this fall. A Federal Court ruling in 1997 concluded that dealers selling equipment to receive and decode U.S. satellite signals is illegal. But the new cases will try a different tactic, invoking the Charter of Rights to make case for freedom of expression. The Canadian Press by Joan Walters and bert hill TORONTO All options are possible not all of them attractive for landlords and investors of the 64 Canadian shopping centres where the ailing Eaton's has an increasingly tenuous hold, industry observers say.

"Every scenario you can think of happens in a case like this, and it could be terrible for some of them," says Dougal Casey, senior director of investment strategy for Clarion Partners real estate investment managers in New York. "If a major anchor like Eaton's goes dark, it can mean disaster. It's very serious stuff for those shopping centres as investment assets." Eaton's owns or leases, often with partners, about 13 million square feet of varying quality retail space, including a. handful of large and recently renovated flagship stores in downtown Toronto, Vancouver and Montreal. The abrupt closure yesterday of Eaton's nine Quebec stores, including Montreal, underscored that locations were more likely to be picked up piecemeal as the retailer disintegrates, analysts said.

Retail analysts expect that two of the three Ottawa-area stores will quickly find new owners because they are in strong shopping centres in a market with the highest average household incomes of major Canadian cities. Barry Nabatian of Market Research Corp. said the Rideau Centre and Bayshore stores "would certainly be prized properties." Sears has already indicated an interest in the Bayshore Shopping Centre store and the Rideau Centre store is likely to attract strong interest. The Place d'Orleans store has a big question mark hanging over it. Eaton's planned to close the store 15 months ago, along with a Gatineau outlet that was shut, but relented.

The Orleans market has been the slowest to recover from government downsizing in the mid-'oos but it is gaining Retail sales BY ERIC BEAUCHESNE Canadians spent more than they earned in the winter and retailers paid the price in the spring. That's how one analyst explained weaker-than-expected retail sales figures for June and the second quarter of 1999, which revealed consumers were spending a lot more on cars and furniture but less on everything else. Retail sales edged up 0.3 per cent in June to $21.4 billion, following a similar increase in May, Statistics Canada said yesterday. That left sales for the April-to-June period up 0.7 per cent from the previous quarter, following a 2.5-per-cent surge in the first quarter. "Canadians outspent their incomes in the first quarter of 1999," noted Warren Lovely, economist at CIBC Molson sells TORONTO Molson Inc.

got completely out of the home renovations market yesterday, selling its Beaver Lumber division to Home Hardware Stores Ltd. for about $68 million. The sale was the latest move by the brewing, sports and entertainment company to focus on its core brewing operations. Last year, Molson sold its 25 per cent stake in The Home Depot Canada to the chain's U.S. parent company for $375 million.

And in 1997 the company sold its 45 per cent stake in Quebec- based home improvement chain Reno-Depot for $147 million. "I am happy that we have now sold this significant asset which no longer figures disappointing World Market. But after rebuilding their savings and with the improvement in employment in July they should be back in the stores this summer, he added. News of the poorer-than-expected retail sales came as the industry was focused on what appeared to be the final death throes of retailing giant Eaton's, which announced it was shutting its nine stores in Quebec. While Statistics Canada reports were greeted with disappointment by most analysts, one argued that in fact sales are doing well.

"Despite the doom and gloom of some recent retail reports that 1999 would not be an impressive year, the first half of 1999 proves otherwise," said Toronto-based retail analyst firm J.C. Williams Group. Beaver to Home Hardware 8T0BBORN fits our strategy to return to our core brewing business," Molson president James Arnett said in a press release. Brewing industry analyst Keith Howlett of Research Capital Corp. in Toronto said Beaver Lumber had been for sale for at least a year.

"I would say the price they achieved was certainly less than what they were hoping, but as time went on the price continued to deteriorate. "If you'd asked me a year and a half ago, I would have thought they'd get significantly better than this." Mr. Howlett said the ownership structure of Beaver Lumber where each store is jointly owned by the company and the store operator.