merger

VERIZON COMMUNICATIONS INC. $38.23, New York symbol VZ, owns 55% of Verizon Wireless, a joint venture with UK-based Vodafone. Verizon Wireless has now agreed to buy privately held Alltel Corp., which provides wireless services to 13 million customers in mainly rural areas of 34 states. Verizon Wireless will pay $5.9 billion in cash and assume Alltel’s debt of $22.2 billion, for a total price of $28.1 billion. Verizon’s share works out to $15.5 billion, which is equal to 2.2 times the $6.9 billion or $2.37 a share it earned in 2007. After the merger, Verizon Wireless will be the largest wireless company in the United States, with over 80 million customers. The company aims to complete the takeover by the end of this year. Alltel and Verizon use similar cellular technologies, so Verizon should have few integration problems. Verizon feels the merger will generate annual cost savings of $1 billion in the second year after closing....

MOLSON COORS CANADA INC. (Toronto symbols TPX.A $55 and TPX.B $57; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 150.4 million; Market cap: $8.6 billion; SI Rating: Average) continues to enjoy the benefits of its February 2005 merger with U.S. brewer Coors. Thanks mainly to lower operating costs, earnings in the three months ended March 30, 2008 jumped to $0.32 a share from $0.14 a year earlier (all amounts except share prices and market cap in U.S. dollars). The savings have also helped the company cope with rising prices for barley and hops. Sales rose 16.7%, to $1.4 billion from $1.2 billion, due to strong demand for its core brands in the United States and Canada. Sales growth in the UK lagged due to tax increases and a recent smoking ban in pubs. Molson Coors is a buy. The ‘A’ shares are the better choice....

THOMSON REUTERS CORP. $36 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 640.3 million; Market cap: $23.1 billion; SI Rating: Above average) is the new name for The Thomson Corp. (old symbol TOC), following its merger with UK-based Reuters Group plc. The new company provides a variety of information services to professionals in the finance, medical, scientific and legal fields. If you assume the two companies merged on January 1, 2007, revenue in the three months ended March 31, 2008 would have increased 13.8%, to $3.3 billion from $2.9 billion a year earlier (all amounts except share price and market cap in U.S. dollars). Pro forma operating earnings, which exclude income taxes and interest costs, rose 36.6%, to $579 million from $424 million. The company expects the merger will cut its annual expenses by $1.2 billion by the end of 2011. Thomson Reuters is a buy....

MICROSOFT CORP. $29.39, Nasdaq symbol MSFT, has dropped its hostile takeover bid for Internet search firm Yahoo! Inc. (Nasdaq symbol YHOO). Microsoft raised its cash-and-stock offer, from $31 a share to $33, but Yahoo demanded at least $37. Microsoft had earlier threatened to present its offer directly to Yahoo’s stockholders. However, a long proxy fight would make it harder for Microsoft to retain Yahoo programmers and other key employees. As well, Yahoo would probably take steps to make itself less desirable to Microsoft. This might include outsourcing some of its Internet search business to rival Google Inc. Microsoft will continue to expand its online businesses through internal growth and smaller acquisitions. That could include increasing its 1.6% stake in privately held Facebook, a social networking Internet site with over 69 million users worldwide. Microsoft could expand its online revenues by integrating its Live search engine and Outlook email program with Facebook. It’s also possible that this week’s drop in Yahoo’s share price to around $26 will prompt Yahoo to negotiate a new deal with Microsoft....

NOVA CHEMICALS CORP. $24 (Toronto symbol NCX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 83.1 million; Market cap: $2.0 billion; SI Rating: Extra risk) makes industrial plastics that manufacturers use to make a wide variety of products including auto parts, construction materials and packaging. Nova’s plant in Joffe, Alberta is the world’s largest producer of ethylene and polyethylene, and benefits from its proximity to Alberta’s large oil and gas reserves. The stock peaked at $43.70 in July 2007, but has dropped since due to fears that a slowing economy in the United States would hurt demand for its products. The U.S. accounts for roughly 45% of sales. Nova’s cyclical operations and exposure to volatile oil and gas prices adds risk. However, last year’s merger of its money-losing foam cup operations into a 50:50 joint venture cuts its costs....

Agrium and Nova use natural gas to make their products, and ready access to large gas reserves gives them a cost advantage over their competitors. However, only Nova is a buy at current prices. AGRIUM INC. $72 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 158.0 million; Market cap: $11.4 billion; SI Rating: Average) is a leading producer of fertilizers and crop protection products. The company uses natural gas to make ammonia, the basic ingredient in fertilizers. Most of Agrium’s facilities are near large gas suppliers in Alberta, which helps keep its input costs down. Agrium will soon close its fertilizer plant in Kenai, Alaska, since it couldn’t find a reliable source of natural gas for the plant. The company looked into a plan to convert coal to natural gas. However, Agrium feels the project’s $2 billion U.S. cost is too expensive. It earned $3.25 U.S. a share (total $441 million U.S.) in 2007....

METRO INC. $25.25, Toronto symbol MRU.A, earned $58.1 million in its second quarter ended March 15, 2008, down 6.0% from $61.8 million a year earlier. Per-share earnings fell 3.8%, to $0.51 from $0.53, on fewer shares outstanding. If you exclude restructuring costs in the year-earlier quarter, earnings per share fell 8.9%. Sales in the quarter crept up to $2.37 billion from $2.36 billion, while same-store sales rose 0.3%. Strong price competition continues to hurt profits at Metro’s Ontario stores. However, the company is beginning to realize the benefits of a new computerized information system. A new distribution warehouse will also improve efficiency at its Quebec stores. Metro is a buy for aggressive investors....

FORDING CANADIAN COAL TRUST $62.31, Toronto symbol FDG.UN, rose 10% this week after South Korean steelmaker Posco agreed to pay $308 U.S. a tonne for coal from BHP Billiton in the coal year that began on April 1, 2008. That’s 210% more than the industry benchmark price of $98 U.S. in the prior year. Fording is still negotiating new prices with its customers. Higher coal prices will help it offset rising labour, transportation and other costs. It should also let Fording increase its current quarterly distribution of $0.50 a unit, which implies an annual yield of 3.2%. Fording is still a buy for aggressive investors....

THE THOMSON CORP. $36 (Toronto symbol TOC; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 638.9 million; Market cap: $23.0 billion; SI Rating: Above average) provides specialized information to users in the legal, accounting, financial, scientific and healthcare professions. Over 80% of Thomson’s revenue comes from electronic products, such as software and databases. As well, 80% comes from subscriptions, which gives its predictable revenue streams. In 2007, Thomson earned $1.1 billion before one-time items, up 28.4% from $857 million in 2007 (all amounts except share price and market cap in U.S. dollars). Per-share earnings rose 27.1%, to $1.69 from $1.33. Revenue grew 10.6%, to $7.3 billion from $6.6 billion. If you disregard acquisitions, revenue rose 6%. Thomson aims to complete its merger with UK-based Reuters Group plc in mid-April. The deal will let Thomson take advantage of Reuters operations to expand sales in Europe and Asia and cut its reliance on North America, which accounts for 83% of its revenue. The company can also market Reuters products to its own customers....

Fears of a slowing economy and falling advertising revenue have hurt all three of these information providers in the past few months. However, investments in new printing presses and other modern equipment will help keep their costs down. They should also gain from their expanding Internet businesses and lower computing costs. TORSTAR CORP. $17 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 78.7 million; Market cap: $1.3 billion; SI Rating: Above average) publishes The Toronto Star, Canada’s largest daily newspaper. It also publishes other daily and community newspapers in Southern Ontario. Newspapers supply 70% of Torstar’s profit and revenue. The remaining 30% comes from wholly owned subsidiary Harlequin Enterprises Ltd., which is the world’s largest publisher of romance novels....