merger

First Capital Realty, $16.24, symbol FCR on Toronto (Shares outstanding: 92.1 million; Market cap: $1.5 billion), owns, develops and operates shopping centres throughout Canada. The company focuses on big cities, including Toronto, Montreal, Calgary, Vancouver, Ottawa, Edmonton and Quebec City. It mainly operates in the four largest provincial economies: Ontario, Quebec, B.C. and Alberta. First Capital owns interests in 172 properties, including five under development. These add up to about 20.1 million square feet of leasable area. It also has six parcels of land that it plans to develop in the future. First Capital’s shopping centres are anchored by supermarkets. Its five largest tenants are Sobeys, Loblaw, Metro Inc., Shoppers Drug Mart and Zellers....

PETRO-CANADA, $34.68, Toronto symbol PCA, jumped 17% this week after it accepted a friendly takeover offer from Suncor Energy Inc. ($29.36, Toronto symbol SU). (Suncor is not related to Philadelphia-based refiner Sunoco Inc., New York symbol SUN.) Under the terms of the deal, Petro-Canada shareholders will get 1.28 common shares of Suncor for each share they own, while Suncor investors will get one share of the new company for each Suncor share they own. Suncor shareholders will own 60% of the combined company, which will be Canada’s largest oil company in terms of market cap. Petro-Canada shareholders will own the remaining 40%. The combined company will operate under the Suncor name. However, the new company will keep using the Petro-Canada banner for its retail gas stations (Petro-Canada has 1,300 stations, while Suncor has roughly 300 that operate under the “Sunoco” banner). It will have proven oil reserves of 3.1 billion barrels, compared to 2.3 billion barrels for Imperial Oil (see below)....

Diageo plc, $45.21, symbol DEO on New York (Shares outstanding: 624.9 million; Market cap: $28.3 billion), is the world’s largest premium alcoholic beverage company, with a collection of brands in the spirits, beer and wine categories. These respectively account for 77%, 21% and 6% of the company’s sales. London-based Diageo was formed in 1997 through the merger of GrandMet and Guinness. Diageo holds some of the dominant brands in the alcoholic-beverage business, including Guinness stout, Smirnoff vodka, Johnnie Walker scotch whiskies, Captain Morgan rum, Baileys Original Irish Cream liqueur, J&B scotch whisky and Tanqueray gin. Its other spirit brands include Crown Royal Canadian whisky, Buchanan’s whisky, Gordon’s gin and vodka, Windsor Premier whisky, Seagram’s whisky, Old Parr whisky, Bushmills Irish whisky, Bundaberg rum and Cacique rum. The company also owns a number of wine brands, such as Beaulieu Vineyard, Sterling Vineyards, Rosenblum Cellars, Chalone Vineyard, Blossom Hill and Piat d’Or. Aside from Guinness, Diageo’s beer brands include Harp lager, Smithwick’s ale, Red Stripe lager and Tusker lager. Diageo also owns the global distribution rights for Jose Cuervo tequila....

MOLSON COORS CANADA INC. (Toronto symbols TPX.A $44 and TPX.B $43; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 183.8 million; Market cap: $8.1 billion; Price-to-sales ratio: 1.3; SI Rating: Average) is the world’s fifth-largest brewer by volume. Top brands include Coors Light, Molson Canadian and Carling. Molson Coors Canada took its present form in February 2005 when Molson Inc. and Adolph Coors Co. merged. Canadian shareholders received exchangeable shares of Molson Coors Canada for their Molson shares. These shares carry the same voting and dividend rights as the U.S.-based parent company’s common shares....

WELLS FARGO & CO., $8.61, New York symbol WFC, has cut its quarterly dividend by 85.3%, to $0.05 a share from $0.34. The new annual rate of $0.20 yields 2.3%. The lower dividend will save the bank $5 billion a year. To put that in context, it earned $2.7 billion, or $0.70 a share, in 2008. (Its 2008 earnings included $9.9 billion of pre-tax writedowns and other charges related to its purchase of financial services company Wachovia on December 31.) The savings should help Wells Fargo cope with higher loan defaults during the recession. Wells Fargo is making good progress integrating Wachovia into its own operations. Wells Fargo’s management still feels the merger will cut the combined company’s annual expenses by $5 billion. Wells Fargo has already written down most of Wachovia’s troubled loans and securities, so any further charges should be manageable. The company has also received $25 billion under the U.S. government’s Troubled Asset Relief Program....

BHP BILLITON LTD. ADRs $37 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.8 billion; Market cap: $103.6 billion; Price-to-sales ratio: 1.7; WSSF Rating: Average) is the world’s largest mining company. It has major operations in Australia, Chile, South Africa and the U.K. The company took its current form through the 2001 merger of Australia’s BHP Ltd. and U.K.-based Billiton plc. BHP has nine main segments: iron ore, which generates 20% of BHP’s revenues, metallurgical coal, used for making steel (17%), petroleum (15%), thermal coal, used for power generation (15%), base metals (11%), aluminum (9%), manganese (7%), stainless steel (4%) and diamonds and titanium (2%).

Acquisitions help fuel strong growth

Thanks to acquisitions and higher mineral prices, BHP’s revenue jumped by 159.9%, from $22.9 billion in 2004 to $59.5 billion in 2008 (its fiscal year ends June 30)....

MOLSON COORS BREWING CO., $38.84, New York symbol TAP, reported that its earnings before unusual items rose 1.0%, to $512.6 million in 2008 from $507.4 million in 2007. However, per-share earnings fell 1.4%, to $2.76 from $2.80 on more shares outstanding. The company didn’t report its sales figures, but its beer volumes rose 4%. Molson Coors continues to work toward its goal of cutting its expenses by $250 million a year by the end of 2009. Its plan includes cutting jobs and improving efficiency by outsourcing certain administrative and other back-office functions. So far, the company has saved $178 million. The July 2008 merger of Molson Coors’ U.S. brewing operations into MillerCoors, a new, 42%-owned joint venture with Miller Brewing, should produce an additional $500 million in annual savings by June 2011. Already, the new partnership has cut its expenses by $28 million. These savings will help Molson Coors cope with a drop in sales to bars and restaurants as the economy slows. Retail beer sales usually hold up well during recessions, so the lower costs will also help Molson Coors stay profitable as drinkers switch to cheaper brands....

BANK OF MONTREAL $32.30, Toronto symbol BMO, has agreed to buy the Canadian life insurance business of major U.S. insurer American International Group Inc. (AIG). The bank will pay $375 million, which is equal to 19% of the $2.0 billion or $3.76 a share that it earned in the fiscal year ended October 31, 2008. Bank of Montreal’s insurance operations currently supply just 2% of its total revenue, and this purchase will not significantly expand this division’s contribution. However, insurance is a future growth area. As well, Bank of Montreal probably got this business for a bargain price in light of AIG’s severe financial problems. Bank of Montreal is a buy....

Franco-Nevada Corp., $20.16, symbol FNV on Toronto, (Shares outstanding: 100.3 million; Market cap: $2 billion) holds a portfolio of about 285 royalties and other investments in gold and other precious metals, natural gas, oil and base metals. Most of its investments (95%) are located in politically stable North America and Australia, and are operated by large companies such as Barrick Gold, Goldcorp, Xstrata Nickel and EnCana. Franco-Nevada generates cash flow from royalties on mines such as Goldstrike (gold), Stillwater (platinum group metals: platinum, palladium and rhodium), and its interests in more than 100 oil and natural gas properties in western Canada. The company also has growing cash flow from its interests in mines such as Bald Mountain, Marigold, Robinson, and Falcondo. New mines such as Cerro San Pedro and Mesquite are increasing production. Most recently, Franco Nevada paid $103.5 million to acquire a 7.3% royalty interest from Gold Quarry Royalty Property in Nevada. (All figures except share price and market cap in U.S. dollars.)...

OILEXCO INC., $0.19, symbol OIL on Toronto, announced last week that its UK subsidiary Oilexco North Sea Ltd. intends to file for bankruptcy protection. The UK subsidiary holds almost all of Oilexco’s assets. In December, 2008, The Royal Bank of Scotland, Oilexco’s main lender, provided $47.5 million U.S. in bridge-financing due January 31, 2009. That provided Oilexco with just over a month to restructure. However, Oilexco said that it needed incremental short-term financing in addition to the bridge loan. In late December, 2008, the Royal Bank of Scotland informed Oilexco that lenders were not prepared to provide any further financing, prompting the bankruptcy petition. Petro-Canada, BG Group plc and Talisman Energy have reportedly expressed interest in some of Oilexco’s assets. However, after seeking bankruptcy protection, Oilexco’s assets are likely to be sold at discount prices, leaving little for shareholders....