Canadian Stocks Rise, Led by Algoma Steel, REITs, on Takeovers
Feb. 15 (Bloomberg) — Canadian stocks rose to a record for a second straight day after Algoma Steel Co. said it was in takeover talks with Germany’s Salzgitter AG, spurring merger speculation. Sunrise Senior Living REIT surged after receiving a second bid.
“There’s a lot of money available for M&A,” said Mario Richard, who helps oversee $7.5 billion as senior portfolio manager at Sceptre Investment Counsel Ltd. in Toronto. “Companies have clean balance sheets and are generating big cash flows. Many, rather than building a new plant, will try to buy existing assets. M&A will probably be here for some time.”
The Standard & Poors TSX Index gained 83.70, or 0.6 percent, to 13,288.16 in Toronto. It’s up 2.9 percent this year.
The value of mergers and acquisitions involving Canadian companies was $296.5 billion in 2006, almost double the $151.3 billion in 2005, according to Bloomberg data. Some of the largest deals recently have involved materials companies such as Novelis Inc., which agreed this week to be bought for more than $3.4 billion by India’s Hindalco Industries Ltd. A five-year rally in metals prices spurred more than $157 billion globally, of takeovers and merger plans in the industry last year.
The boost from mergers and acquisitions outweighed declines in some energy shares such as Nexen Inc., on lower earnings.
Metals Companies
Algoma rose C$5.76, or 13 percent, to C$50.44, valuing the company at C$1.61 billion ($1.38 billion). The shares, which surged to C$57.99 earlier, pared gains after the company put out its statement confirming a Globe and Mail report that the potential bidder was Salzgitter.
Talks with Salzgitter “are at a very preliminary stage,” Sault Ste. Marie, Ontario-based Algoma said. Any offer “is likely to be below” the current price of the shares, it said. Salzgitter confirmed the talks in a separate statement.
Ipsco Inc., another steelmaker, today climbed C$6.55, or 5.6 percent, to C$125.13. Stelco Inc., which exited bankruptcy in April and hasn’t posted a quarterly profit since, climbed C$3.15, or 16 percent, to C$23.40.
Teck Cominco Ltd., a zinc miner, added C$1.75 to C$87.48.
A gauge of materials stocks rose 1.3 percent, the most among 10 industry groups in the S&P/TSX.
Buyout Offer
Sunrise Senior Living soared C$3.19, or 21 percent, to C$18.05. The operator of senior residences in Canada and the U.S. said it won’t consider a C$1.4 billion ($1.2 billion) offer from Health Care Property Investors Inc. until it receives further information. Health Care Property yesterday bid C$18 a share for Sunrise, 20 percent more than a C$15 offer from Ventas Inc. Sunrise said its sale agreement with Ventas remains in effect.
Other REITs advanced. Extendicare REIT, an owner of nursing home properties, climbed C$1.62, or 9.4 percent, to C$18.85. Chartwell Seniors Housing REIT, another owner-operator of seniors’ homes in North America, added 84 cents at C$17.67.
Financials, including REITs, rose 0.7 percent as a group.
Nexen fell 67 cents to C$69.72. The oil and gas producer said fourth-quarter net income fell 75 percent to C$77 million, on lower gas prices and a writedown of assets. EnCana Corp. slipped 6 cents to C$57.19. Canada’s largest natural-gas producer said fourth- quarter earnings plunged 72 percent to $663 million. Shell Canada Ltd., Imperial Oil Ltd. and Petro-Canada have already this year reported lower fourth-quarter profit.
Crude oil for March delivery closed little changed, down 1 cent at $57.99 a barrel in New York, amid forecasts for warmer weather along the U.S. East Coast.
“Nobody cares. It doesn’t matter today, because the Canadian energy companies are all takeover targets, too,” said Doug Davis, who helps manage about $380 million as president of Davis-Rea Ltd. Investment in Toronto. “People are just throwing the dough in the market. All of this happens before the markets turn down at some point.”
Nexen
Nexen shares rose to a record C$74.77 on Jan. 24 after the Globe and Mail reported a possible takeover bid from Total SA, saying traders were speculating the French company may offer as much as C$20 billion ($16.9 billion) or C$90 a share.
Shares of oil company Talisman Energy Inc. and of aluminum maker Alcan Inc., both subjects of recent takeover speculation, rose 1.8 percent and 1.1 percent, respectively. A group of energy stocks was up 0.2 percent.
Davis, who said his firm has reduced its energy company holdings, said investors “should own some Rogers” Communications Inc., and similar companies that have the ability to generate cash and earnings even when the economy turns down.
Rogers, Canada’s largest mobile phone company, climbed 79 cents to C$38.47 before reporting, after the market closed, that earnings in the fourth quarter rebounded to a profit of C$176 million ($151.3 million) from a loss a year ago, as it sold more phones equipped to browse the Web.
Rogers led an index of phone companies 1.1 percent higher.
The following shares had unusual price changes. Stock symbols are in parentheses.
CV Technologies Inc. (CVQ CN) surged C$1.08, or 59 percent, to C$2.90. The Edmonton, Alberta-based maker of COLD-fX said in a statement that the Canadian health ministry issued a product license and product number for the influenza remedy. The company said Health Canada backed its claim that COLD-fX helps reduce the frequency, severity and duration of colds and flus.
Equinox Minerals Ltd. (EQN CN) gained 26 cents, or 14 percent, to C$2.16 for the biggest gain in the S&P/TSX. The miner said that Chambishi Copper Smelter Ltd., a Chinese owned company, has agreed to buy about 55 percent of the annual copper concentrate output of Lumwana Mining Company Ltd., Equinox’s Zambian unit. Equinox shares have gained 27 percent this week.
Algoma Steel Co. (AGA CN)
Alcan Inc. (AL CN)
Chartwell Seniors Housing REIT (CSH-U CN)
EnCana Corp. (ECA CN)
Extendicare REIT (EXE-U CN)
Ipsco Inc. (IPS CN)
Nexen Inc. (NXY CN)
Rogers Communications Inc. (RCI/B CN)
Stelco Inc. (STE CN)
Sunrise Senior Living REIT (SZR-U CN)
Teck Cominco Ltd. (TCK/B CN)
Talisman Energy Inc. (TLM CN)
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net .
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