Calgary Escapes Economic Doldrums as Stampede Drums Up Deals

Calgary Escapes Economic Doldrums as Stampede Drums Up Deals
Jule Hazen competes in steer wrestling in the rodeo at the Calgary Stampede. Photographer: Mario Tama/Getty Images

Calgary’s Stampede rodeo is helping Canada’s fourth-largest city avoid the economic turmoil that’s roiling Europe, the U.S. and other parts of Canada.

The Stampede, an annual 10-day event featuring calf roping and pancake breakfasts, has become the city’s top networking event with executives and bankers hatching deals between chuck-wagon races and cocktail parties. The economic crisis in Europe failed to put a damper on this year’s 100th Stampede, which ends July 15, bankers and executives said.

“Stampede is a very good time for deals,” said Michael Tims, chairman of Peters & Co., a Calgary-based investment bank, in an interview sandwiched between four pancake breakfasts. “The way things look M&A looks very strong for the rest of the year.”

Oil and gas deals totaled $29.9 billion in Alberta in the 12 months ended July 9, with Scotiabank leading the value of transactions at $11.1 billion, according to data compiled by Bloomberg. That’s up from $28.5 billion in the previous 12-month period.

Companies spend millions of dollars, paying more than $1,000 to entertain each client, and sponsoring rodeos and chuck-wagon races where drivers lead a team of horses pulling a covered wagon similar to ones settlers to the area used more than a century ago. Even with the price of oil slipping 14 percent this year and natural gas hovering near a 10-year low, bankers say they are connecting more buyers and sellers than last year, said Tims.

Progress Energy

Petroliam Nasional Bhd’s announcement a week before the Stampede of a $5.05 billion takeover of Progress Energy Resources is this year’s biggest transaction in Calgary’s energy sector, the largest employer in the city. The Malaysian company plans to export Progress Energy’s gas to Asia in the coming years by building a liquefied natural gas terminal on neighboring British Columbia’s coast.

“We saw a big premium on a large-size company and we’ve seen interlopers on deals,” said Sandy Edmonstone, head of global energy at National Bank of Canada’s investment banking arm, referring to the Petroliam Nasional deal. “It gives me reason to be cautiously optimistic.”

As Encana Corp., Canada’s largest natural gas producer, sells off assets to cope with sinking fuel prices, smaller companies are struggling to pay employees and bills, said Tims. Other companies are making strategic moves to take advantage of near-record low prices for the heating fuel by buying smaller competitors, he said.

Out of Office

Stampede networking is important for financial industry headhunters. The event allows people to “get out of the office” and meet in “neutral” locations, which helps get transactions done, said Brent Ludwig, chief executive and founder of Ludwig Financial, a recruiting firm.

“At one party you can bump into 15 to 20 relevant people,” said Ludwig, dressed in cowboy boots and hat. “It’s the maximum return for time and money.”

At the same time, the real estate market in Canada’s fourth-largest city is bucking the trend of pricier Vancouver to the west where sales have begun to shrink. Commercial properties and inner-city houses and condominiums are selling “like crazy,” said Cody Battershill, a real estate agent, in an interview.

“Stampede is a huge benefit and I’ve already gotten a few deals done,” said Battershill. “People come from across the country and around the world and look at the opportunities here and decide to consider it as a place to relocate.”

Housing Rally

Sales of homes in Calgary in July are 29 percent higher than in the same period last year, while the average price has risen 4.8 percent to C$420,572 ($411,357), according to municipal statistics. Buyers are coming from countries like Pakistan and China to work in the city’s oil and gas sector, he said.

Calgary was the best city for commercial real estate investors last year, according to a June 29 global survey by Investment Property Databank Ltd. Rental income and higher property values in Calgary produced a return of 22 percent, the London-based research firm said.

Calgary’s economy is set to grow 3.8 percent this year, according to the Calgary Chamber of Commerce. Net migration to the city is up 300 percent since 2010. By contrast, Canada’s economy is expected to grow 2.1 percent, according to a Bloomberg survey.

The city’s economic development branch is working with a Chinese bank to help it set up a branch in Calgary, said Bruce Graham, president of Calgary Economic Development, without identifying the bank. A large retailer also plans to set up a logistics center in the city this year, following a similar move by Target Corp., he said.

“There’s still a great deal of momentum,” Graham said in an interview. “People are keeping one eye on what’s happening in the global economy and at the same time one eye on all the opportunities.”

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