Does HQ drain really matter?
BY GARY LAMPHIER, EDMONTON JOURNALAUGUST 13, 2009
Drip, drip, drip, drip. Can you hear that sound?
No, it's not a leaky faucet. It's the steady dribble of corporate head offices leaving Edmonton.
Churchill Corp., which announced plans to move its senior execs to Calgary on Wednesday, is merely the latest to head south.
In June, North American Energy Partners made a similar trek down the QE II, as CEO Rod Ruston and a handful of top officers fled their former base in Acheson, just west of the city, for Cowtown.
Meanwhile, the recent takeovers of two other key local firms--Lockerbie& Hole and Eveready Inc.--have further shrunk the city's modest base of head offices.
All four of the above-named firms were among the capital region's 10 largest public companies, based on market value, and three of the four ranked among the city's biggest construction firms.
Like North American Energy, whose senior execs wanted to be closer to their key customers, Churchill says the move should yield improved efficiencies.
"The head office for Stuart Olson, our largest operating subsidiary, is based in Calgary. Given the amount of work they do, and our involvement in some of those decisions, it necessitated a lot of travel by senior management," says Andrew Apedoe, Churchill's VP, investor relations.
"That was part of the driver."
The fact that Churchill CEO Jim Houck resides in Calgary was surely a factor too, although Apedoe insists that wasn't the main one.
Although the depleted ranks of major head offices in Edmonton worries some--Edmonton Economic Development Corp. boss Ron Gilbertson, for one, concedes the trend is "really disturbing"-- it's as much about civic image and corporate bragging rights as anything else.
The economic impact is likely to be negligible.
You can count on two hands the number of senior execs at Churchill and North American who are actually involved in the moves. Meanwhile, both firms will continue to run far larger operational offices in the Edmonton region.
In fact, under Churchill's complex reorganization plan, it also plans to shift the head office of its Laird Electric division to Edmonton from Fort McMurray. Churchill has also struck a deal with an unnamed firm to sell its long-troubled Triton industrial division.
While some will lament the loss of some of Edmonton's most iconic companies -- Stuart Olson was founded in this city 70 years ago, and Lockerbie&Hole's roots go back more than a century--the changes to the local corporate landscape are hardly unique. Over the past few years, virtually every large Canadian city has lost head offices, mainly through corporate takeovers.
Many of Ottawa's high-tech stars have disappeared or been swallowed by foreign buyers. Toronto has lost such marquee players as Inco, Dofasco, Falconbridge, and Four Seasons Hotels, to name just a few.
Vancouver has arguably suffered the biggest outflow of head office jobs of any major Canadian city. Local giants such as MacMillan Bloedel, Intrawest, Westcoast Energy and Terasen have all been snapped up by foreign buyers.
It's the same story in Montreal, where the disappearance of players like the Royal Bank, Seagram, Sun Life, Molson and Alcan has badly damaged the city's profile as a major head office centre, and dampened its growth prospects.
Even Calgary hasn't escaped the loss of key head offices, although a long-predicted wave of consolidation among the major exploration and production companies that remain has yet to occur.
In Edmonton, as elsewhere, there's also a flip side to the story. While several major local players have left, others have emerged to take their place.
Capital Power--recently spun off by Epcor Utilities through an IPO (initial public offering) on the Toronto Stock Exchange--now ranks as Edmonton's most valuable public company, with a market cap of $1.6 billion. Affiliate Epcor Power, with a market cap of about $800 billion, ranks fourth.
Liquor Stores Income Fund, K-Bro Linen and AutoCanada also rank among the larger publicly traded firms in the city. All were formed over the past few years, and now trade on the TSX.
Alberta Investment Management Co. (AIMCo), with$70 billion of financial assets, is another major new player on the local scene.
There has also been phenomenal growth among some of the more established public companies in the city. Stantec, with a market cap of more than $1.3 billion and roughly 10,000 employees, has grown exponentially.
Canadian Western Bank, which boasts a market cap of more than $1.1 billion, was named the best-performing bank stock in North America before the financial crisis hit. After a tough 2008, its stock price has rebounded sharply this year.
And then there's Edmonton's sizable collection of major private companies, Crown corporations and other players. Most of them--from Katz Group and PCL Construction to Clark Builders, Servus Credit Union and ATB Financial--have enjoyed explosive growth over the past decade, despite the challenges of the past year or two.
Add it all up, and it's clear that Edmonton's corporate sector is alive and well. Even if one hears the occasional drip.
© Copyright (c) The Edmonton Journal
http://www.edmontonjournal.com/business/Does+drain+really+matter/1887907/story.html
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