acquisition strategy

Pure Industrial REIT, $4.54, symbol AAR.UN on Toronto (Units outstanding: 50.5 million; Market cap: $229.3 million; www.piret.ca), owns industrial properties across Canada. As of September 30, 2011, the real estate investment trust owned 62 buildings containing 4.1 million square feet of leasable area. Pure Industrial has 38% of its leasable area in Ontario, 25% in Alberta, 15% in B.C., 10% in Manitoba, 5% in Quebec, 4% in Saskatchewan and 3% in New Brunswick. Pure Industrial’s largest tenants by square footage are TransForce (a major Canadian trucking company), Advance Engineered Products, Kingspan Insulated Panels (a subsidiary of Kingspan Group plc) and RSAC Canada and Reliance Metals Canada (which are both subsidiaries of multinational metals processor Reliance Steel & Aluminum)....

CGI GROUP INC. (Toronto symbol GIB.A; www.cgi.com) is Canada’s largest provider of computer outsourcing services. It also operates in 15 other countries. Canada and the U.S. each accounted for 47% of its revenue in the latest fiscal year; Europe and Asia supplied the remaining 6%. The company often uses acquisitions to fuel its growth. CGI’s most important purchase in the past few years was its $932.2-million acquisition of Stanley Inc. in September 2010. Stanley provides computer outsourcing services to military and civilian agencies of the U.S. government....

Softchoice Corp., $12.43, symbol SO on Toronto (Shares outstanding: 19.8 million; Market cap: $246.1 million; www.softchoice.com), resells other companies’ software (around 60% of sales) and hardware (40% of sales) to organizations of all sizes. It has more than 40 offices in the U.S. and Canada. Softchoice is the fifth-largest reseller of Microsoft software in the U.S. and the largest in Canada. Of the 200,000 software titles it sells, 33% are made by Microsoft. The company also resells hardware, including computers, servers and networking equipment, from IBM, Hewlett-Packard, Cisco and other device makers. Softchoice’s competitors include Dell Inc. and CDW Corp. The company also manages software licenses for clients ranging from small companies with as few as 25 computers to large banks with over 70,000. Canadian customers include Bank of Montreal, TD Bank, Rogers Communications and Canadian Tire....

ALIMENTATION COUCHE-TARD, $29.85, symbol ATD.B on Toronto, is our “Stock of the Year” for 2012. Next week, Wall Street Stock Forecaster, our newsletter that focuses on high-quality U.S. stocks, will reveal its #1 pick for 2012. We’ve had great success with Alimentation Couche-Tard since we recommended it in our December 2008 issue at $15.50. That’s a gain of 92.6% in just over three years. We said then that the company’s growth-by-acquisition strategy was risky, but Couche-Tard lowered its risk by aiming to acquire profitable, well-managed chains with room for expansion and profit improvement....

EUROPEAN GOLDFIELDS $11.95 (Toronto symbol EGU; TSINetwork Rating: Speculative) (44 (20) 7408 9534; www.egoldfields.com; Shares outstanding: 183.8 million; Market cap: $2.2 billion; No dividends paid) is now the subject of a friendly takeover bid from Eldorado Gold (symbol ELD on Toronto). The offer is for 0.85 of an Eldorado share and $0.0001 in cash for each European Goldfields share. European Goldfields’ board of directors has approved the takeover. European Goldfields’ Skouries and Olympias gold projects in Greece and its Certej project in Romania would be good fits for Eldorado, which has mines in Greece and Turkey. Eldorado Gold is now trading at $14.20, which makes the cash and share portions of its offer worth a combined $12.07 per European Goldfields share. European Goldfields is trading just below that price, which indicates that many investors are not expecting a higher offer. However, European Goldfields says it received proposals from a number of potential buyers earlier this year, so a rival bid could still emerge....

Uni-Select, $26.61, symbol UNS on Toronto (Shares outstanding: 22.9 million; Market cap: $609.4 million; www.uniselect.com), distributes auto parts and related tools and equipment. The company is the second-largest distributor of auto parts in Canada and the sixth-largest in the U.S. In the three months ended September 30, 2011, Uni-Select’s sales rose 40.9%, to $472.5 million from $335.3 million. The gain was mostly due to the contribution of FinishMaster, which Uni-Select bought for $217 million in December 2010. FinishMaster is the largest independent distributor of automotive paints, coatings and related accessories in the U.S. Uni-Select’s earnings per share rose 8.2% in the latest quarter, to $0.79 from $0.73 a year earlier....

Parkland Fuel Corp., $12.87, symbol PKI on Toronto (Shares outstanding: 67.9 million; Market cap: $873.9 million, www.parkland.ca), operates gas stations, convenience stores and a fuel distribution business, mostly in western Canada and Ontario. The company was called Parkland Income Fund prior to its conversion to a dividend-paying corporation on December 31, 2010. Parkland owns 167 rural gas stations and convenience stores. Its brands include Fas Gas Plus, Race Trac Gas and Short Stop (convenience stores). Many stations sell propane in addition to gasoline and diesel fuel. The company also operates Esso gas stations in western Canada and Ontario under a licensing deal with Imperial Oil Ltd. (symbol IMO on Toronto)....

DUNDEE REIT $34.01 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 66.1 million; Market cap: $2.2 billion; Dividend yield: 6.4%) is buying Whiterock REIT (Toronto symbol WRK.UN) for $580 million in cash and units. The purchase will make Dundee Canada’s fourth-largest REIT by market cap, up from sixth.

Whiterock owns 88 office, industrial and retail properties in eight Canadian provinces and two U.S. states. These properties contain over 10.8 million square fee of leasable area. Dundee already owns and manages 18.9 million square feet of office, industrial and retail space.

Dundee’s growth-by-acquisition strategy adds risk, but it is steadily diversifying its holdings outside western Canada by purchasing more properties in eastern Canada. Whiterock has 57% of its assets in Ontario, 14% in Quebec and 6% in the Atlantic provinces.

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AltaGas Ltd., $32.19, symbol ALA on Toronto (Shares outstanding: 88.3 million; Market cap: $2.8 billion; www.altagas.ca), mainly extracts, processes and distributes natural gas. It also processes natural gas liquids and generates power in Alberta. In the three months ended September 30, 2011, AltaGas earned $19.0 million. That’s up 17.3% from $16.2 million a year earlier. Earnings per share rose 15.0%, to $0.23 from $0.20, on more shares outstanding. These figures exclude unusual items, mainly gains and losses on contracts that AltaGas uses to lock in selling prices for its gas and electrical power. Cash flow per share rose 7.8%, to $0.55 from $0.51. Revenue rose 24.3% in the quarter, to $369.3 million from $297.4 million. That’s because the company started up a new gas-fired generator and finished renovating a gas-processing plant....

Xylem Inc., $23.49, symbol XYL on New York (Shares outstanding: 184.6 million; Market cap: $4.3 billion; www.xyleminc.com), sells equipment and services for the full spectrum of clean water and wastewater applications: from collecting, distributing, using and returning water to the environment. Xylem is a Greek-derived word that refers to vascular tissue that carries water and nutrients through plants. The company operates through two divisions: The Water Infrastructure division sells a wide range of products, including water and wastewater pumps, controls and systems, as well as water treatment and testing equipment....