The U.S.: Canada's south of the border
Their dollar at par, Canadians are spending big in the United States, writes Fortune's Devin Leonard.
(Fortune Magazine) -- On Sept. 20, the Canadian dollar, known as the "loonie" for the fowl that adorns it, became equal in value to the American dollar.
It was a moment of pride for our polite brethren to the north - the last time the loonie hit parity was 1976 but more important, it meant a 30% discount for anything bought in U.S. dollars compared with four years ago. In recent weeks, the U.S. has been looking like Canada's answer to Mexico: Citizens from the Great White North have been traveling south to gobble up everything from steak dinners to multibillion-dollar banks on the cheap.
The most voracious shopper so far has been Ed Clark, CEO of Canada's Toronto-Dominion Bank (Charts). Days after the currencies hit par, his company said it would pick up New Jersey-based Commerce Bancorp (Charts) for $8.5 billion. That must have seemed like a fire-sale price: Clark began talks in June, when the loonie was worth 90 cents to our dollar; by the time he unveiled the deal, the price had dropped by $1 billion Canadian.
"All the planets perfectly aligned to bring this deal to fruition," a giddy Clark told investors in a conference call.
More deals may be coming soon - especially from Canadian banks, which since 1998 have been forbidden by the government from merging with each other. What choice does the CEO of an acquisitive financial services company have but to buy in America?
"[Parity] has probably put more potential deals on the plate than were there a year ago," says Douglas Porter, deputy chief economist for BMO Capital Markets. "The currency has just had an astonishing run-up." And to think it was only yesterday that Canadian firms were bemoaning a rise in foreign takeovers on their side of the border (see "Is Canada for Sale?").
Border towns across the country, meanwhile, report an uptick in free-spending Canadians. Philip Pantano, spokesman for the Seneca Niagara Casino & Hotel in Niagara Falls, says the resort has seen a 200% increase in Canadian traffic in recent months.
In Bellis Fair mall in northern Washington State, Canadians are descending in force. "I've walked the parking lot, and it seemed like 75% of the cars had Canadian license plates," says Bethany Lyons, assistant store manager at the center's Target.
All that shopping can make a Canadian hungry. Frank Passalacqua, owner of Carl's Chop House in Detroit, says the mood among his Canadian customers is ebullient. "They're ordering bigger sizes and things they didn't order before," he says. One customer marveled that he could get two porterhouses instead of one - and did.
Already big corporations are tapping this new market. Days after the currencies became equal, Disney (Charts, Fortune 500) ran ads in Canadian papers trumpeting "Parity ... a dream come true" to lure Canadians to its theme parks.
In fact, Florida tourism officials say they expect a banner winter thanks to Canadian snowbirds. They probably won't be disappointed. "Every Canadian I meet on the golf course who goes to Florida has a smile on his face from one end to the other," says Joe Revell, a retiree from Prince Edward Island who winters in Daytona Beach Shores. "It's like they all just got a 20% to 30% discount."
So much for the almighty American dollar. But there may be one place to take solace: The San Jose Sharks look like Stanley Cup contenders this season. Canadians may have the loonie, but wouldn't they rather have a championship hockey team?