Don Thurston Blog

Ladies and Gentlemen, The Envelope Please

Answer to WHO ARE WE?  WHAT’S OUR NAME?  WOULD YOU LIKE TO PLAY A GAME? OK LET’S BEGIN ( A version of a great opener by Dr. Seuss)

We started life not long after the end of the World War 2. (de Havilland Canada began manufacturing specialty aircraft.)

In short order, we changed our name to differentiate ourselves from a close relative. (de Havilland built the Beaver. This larger version is called the ?)

Our character changed several years later as we adopted much more-complicated and improved technology. (We really went to work and made the ? A versatile aircraft for extra special applications.)

Over many years our presence expanded all over the world. You will find us mostly out-of-doors in isolated and varied locations in many  parts of planet Earth.  We can also be found indoors readying ourselves for more action. (The ? was perfect for accessing difficult locations.)

Unexpectedly the bloom came off the rose and we fell out of fashion. To many,  we simply disappeared. With tenacity, foresight and old-fashioned effort we are now well back in the saddle and once again taking our place around the world. (The market became very competitive, product improvements ceased, and the ? Could no longer compete. Like a miracle, ? was reborn)

Part of our name, while not the premium animal brand in Canada, is well-known. (Not the Beaver but the ?)

Hockey provides some direction for our other name. You will need to search out two players on a west-coast team. (The Sedin ?)

We are animal, vegetable and mineral. (? made of all these ingredients.)

If the expression “work horse” means anything to you, that is what we are. (The ? is a good name for us.)

Reliability and durability are in our DNA. ( The ?  must be this.)

You will need to keep a steady hand to solve this riddle as you navigate through the clues.  (Steady hands and navigational skills are required to fly the ?)

? = Twin Otter.

Another Mystery Company

 We can trace this company as far back as the mid 1800’s where it originated  in the United Kingdom. The rapid industrialization produced large amounts of coal tar. The demand for construction material brought coal tar and wood together resulting in a significant business.

Canada offered opportunity as big construction projects, in particular railways, were in high gear across the country,. The new company soon had operations fromCape BretontoVancouver.

Head office for the Canadian businesses was established in Montreal in 1914 where it remains today. By 1927 the North American company added public ownership and was listed on the Torontoand Montreal Stock Exchanges.

Typical of many, this company recognized the resource exploitation potential that existed in Canada.  For the next fifty years a long series of transactions diversified this company into industrial minerals, construction materials and salt. Oil investments were tried and soon aborted. A company altering strategy was initiated in the mid fifties through acquisitions of pulp and paper assets. It all added up to creating one of the largest Canadian corporations with operations from coast to coast.

Forest products overtook all other ventures which had shaped the company earlier. Over time all of the original core business were reorganized and sold as were any non Canadian assets. It was not until 1989 that the last divestiture took place. This set the stage for profitable growth. Changing circumstances and poor decisions  generated  great difficulties in a shrinking industry and lingering environmental issues.  On two occasions, a pension plan and a government inspired investment company acquired substantial ownership.

The company faced many issues and without a Herculean effort would have most certainly floundered.

By 2012 credentials include the largest North American producer, the second largest in the world with revenues exceeding $5 billion, total assets greater than $6.5 billion and employment of 10,000. The company is a technological leader in research, production, energy use and environmental measures.

The contrast from its roots is profound.



Name This Company

The mystery company is the fifth largest in its industry in the world. It is the second oldest company in Canada after the Hudson Bay Company. Its history is fascinating, complex and perplexing. After many twists and turns, the current business is similar to the starting point.

The founder was a true entrepreneur, risk taker, and pioneer. He used every innovation possible in his operations and in securing key raw materials. He had good marketing sense. Building on success, his non-core interests included, lumber, transportation, hotels and banking. Politics did not escape his purview. Ownership was distributed to the public relatively recently, in 1945, providing a platform for raising capital and acquisitions. Changing regulations heralded a cross Canada expansion leading to a national presence.

By then the directors saw limited growth ahead for the domestic industry. To solve this perceived limitation an aggressive acquisition program was undertaken. Target industries were forecast to grow more quickly both in Canada and elsewhere. Ventures included home improvement centers, chemicals and industrial products. Sports made up part of the portfolio. The core business expanded in Canada through a major purchase. Leadership came from acquired companies and from a prominent Canadian ex-civil servant.

The expansion initiated by acquisition met with limited success. Predictably divestitures followed until a business franchise similar to the original remained. During the diversification process awkward deals were made resulting in dilution of the family’s ownership and much reduced influence.

By this time far reaching changes had taken place in the core industry. To regain market share and establish a global position, there seemed nothing for it, but to return to the roots, simplify and consolidate ownership. Although onerous and expensive, this strategy was successful. Consolidation and divestures brought the company back to the single original business.

This new platform allowed for three very aggressive transactions. The first, a merger resulting in a major international player followed by two acqusitions to realize an even broader global reach.

Investors can take solace in knowing and understanding the corporation’s business. A financial commitment now depends on their perception of its quality.

Name this Company [ revealed ]

The answer is Imperial Oil.

We have discussed Imperial Oil , Canadian Celanese (Is That All There Is), Bick’s Pickles and Hershey’s (About Pickles and Chocolates) as examples of companies with varied pedigree and different current outcomes. For the record Imperial Oil Limited (IOL) is the only remaining company with substantial Canadian operations.

Bick’s was made in Canada. Hershey’s was a US subsidiary. Celanese was a Canadian public company with a majority US shareholder. IOL was founded in Canada and now a Canadian public company with a majority US shareholder.

Are there business lessons to be learned keeping in mind product obsolescence is not a significant reason for these dramatic corporate restructurings?

There is no shortage of well worn reasons. Canadian Celanese was too small to compete in a more globalized economy. Petrochemical plants needed economies of scale, access to deep water shipping, and lower feed stock prices. The textile operations needed lower labour costs and economies of scale.

Bick’s is a bit of a conundrum. The company enjoyed many of the necessary competitive advantages operating in Canada.

Hershey’s relocated to add efficiencies and avoid a large capital replacement program.

That leaves us with IOL.

The popular analysis will say that this company operates in an industry with a competitive advantage supplied by a Canadian resource rich environment. The oil and gas are here, both in more conventional reservoirs and in sand. The market is here as well.

The question is why do Imperial and Exxon Moblile, as a majority shareholder, choose this very successful model in comparison with the majority of other global companies doing business in Canada?

One answer is results. While there have been changes in strategy such as reduced attention to the western sedimentary basin, IOL is a model of consistency. Performance seems to follow.

Name this company!

Test your business knowledge by naming this company.

  • We have conducted business in Canada for more than 130 years
  • Throughout that time we have maintained a consistent program of innovation
  • We have been long time supporters of community activities across Canada
  • Our shareholders have benefited mightily
  • Corporate social responsibility is very high on our agenda
  • We operate a significant asset in the Northwest Territories
  • Our logo phonetically spells out the initials of our early shareholder
  • Over the years we have diversified our business: for a period of time we were producing building products as part of a vertical integration program
  • One of our more popular spokesmen became a TV personality as a result of our advertising campaign
  • We were  involved in uranium exploration
  • For many years we owned operations in South America
  • Many of  employees have gone on to major positions in our industry
  • Our  financial credentials are substantial including a price earnings multiple of 12, a price to book ratio of 3.5, a five year earnings  per share growth of 10%, a 95% equity to total capital and a return on shareholders equity of 19%
  • Our executives and technical people have moved into key positions with our related companies across the world
  • Considerable controversy surrounds one of our significant operations
  • We continue to prosper and as far as can be seen our business is solid now and will continue to be so

Come back next week to find out which company this is and to continue discussions about the comings and goings of corporate Canada.