recent acquisitions

CONAGRA FOODS INC., $29.36, New York symbol CAG, fell 5% this week after it cut its profit outlook for the current fiscal year. In January 2013, ConAgra paid $4.75 billion for Ralcorp Holdings, the largest maker of private label food in the U.S. To put the price in context, ConAgra’s current market cap (or the value of all its outstanding shares) is $12.3 billion. The company is taking longer to absorb Ralcorp than it expected, and strong competition has hurt sales of its branded foods....

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Pat McKeough responds to many requests from members of his Inner Circle for specific stock picks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. Last week we had a question from an Inner Circle members about one of the rare pharmaceutical stocks in Canada. Valeant Pharmaceuticals was purchased in 2010 by Biovail, then Canada’s largest pharmaceutical firm, and the new company adopted the Valeant name. The company has an aggressive policy of growing by acquisition—it made over a dozen in 2012 alone—and Pat examines several of its recent acquisitions and assesses the overall risks and rewards of this growth strategy. ...

AutoCanada Inc., $45.30, symbol ACQ on Toronto (Shares outstanding: 21.7 million; Market cap: $981.8 million; www.autocan.ca), has 32 franchised car dealerships in six provinces. It sells numerous brands, including Chrysler, Dodge, Jeep, Ram, Fiat, Chevrolet, GMC, Buick, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, and Volkswagen. However, Chrysler vehicles (including Dodge, Jeep, Ram and Fiat) supply nearly 75% of its revenue. The company aims to increase its number of dealerships by 20% over the next two years. To that end, it bought People’s Automotive, a Volkswagen dealership in Grande Prairie, Alberta, for $3.8 million earlier this year. It also paid $23.3 million for two dealerships in Winnipeg that sell Audis and Volkswagens....

MCKESSON CORP., $157.39, New York symbol MCK, recently agreed to buy Celesio AG, a German firm that distributes prescription drugs in Europe and Brazil. The company will pay $8.3 billion for Celesio, including its debt. To put that in context, McKesson’s market cap (or the value of all its outstanding shares) is $36.2 billion. Shareholders representing at least 75% of Celesio’s votes must approve the deal. The family of Celesio’s founder, which controls 50.01%, has already agreed to the takeover. However, Elliott Management, a private equity firm that holds roughly 25% of Celesio’s shares, now opposes the purchase....

PRECISION DRILLING CORP., $9.75, Toronto symbol PD, sells contract drilling services to oil and natural gas producers. The stock fell sharply after the Alberta Investment Management Company (AIMCo) sold its entire 15% stake in the company for $9.50 to $9.75 a share. AIMCo is a Crown corporation that manages Alberta’s public-sector pension plans and other special funds. Precision ran into trouble in 2009, because the credit crisis hurt its ability to refinance short-term loans it needed to buy U.S.-based contract driller Grey Wolf Inc. That’s when AIMCo purchased notes and shares in Precision....

High Liner Foods, $41.99, symbol HLF on Toronto (Shares outstanding: 15.2 million; Market cap: $638.5 million, www.highliner.com), processes and markets frozen seafood. The company was called National Sea Products before it changed its name in 1998. High Liner sells its products in grocery stores throughout the U.S., Canada and Mexico under the High Liner, Royal Sea, Fisher Boy, Mirabel and Sea Cuisine labels. It also sells food to restaurants and institutions under its High Liner, FPI, Mirabel and Viking brands. In addition, High Liner is a major supplier of private-label seafood to North American distributors and grocery stores. In 2007, the company acquired the manufacturing and marketing operations of FPI Ltd. (a former recommendation of our Successful Investor newsletter) for $161.7 million. At the same time, Ocean Choice International bought FPI’s fish harvesting and processing operations in Atlantic Canada for $158.5 million....

ACI WORLDWIDE $62.74 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402- 334-5101; www.tsainc.com; Shares outstanding: 39.5 million; Market cap: $2.4 billion; No dividends paid) makes software that processes transactions involving credit cards, debit cards, ATMs, point-of-sale terminals and interbank payments....

CISCO SYSTEMS INC., $21.53, Nasdaq symbol CSCO, reported higher-than-expected earnings in its latest quarter. However, it expects weaker sales in the current quarter. That caused the stock to drop 8% this week. The company is a leading maker of hardware and software that links and manages computer networks. Its hardware includes routers, local area network (LAN) and asynchronous transfer mode (ATM) switches, and dial-up access servers. In Cisco’s 2014 first quarter, which ended October 26, 2013, its earnings rose 11.6%, to $2.9 billion from $2.6 billion a year earlier. Earnings per share rose 10.4%, to $0.53 from $0.48, on more shares outstanding....

DUNDEE REIT, $28.25, symbol D.UN on Toronto, owns and manages 24.3 million square feet of office and retail space. The real estate investment trust has a 94.9% occupancy rate. As the Canadian economy improves, the trend in interest rates is likely to be upward. That rise—or the anticipation of an increase—can push down prices of REITs and high-yielding stocks, such as utilities. That’s largely why a number of REITs, including Dundee, have moved down lately. When interest rates rise, REITs may suffer because they have a lot of mortgage debt, and it’s more expensive to raise money and refinance existing loans. As well, their units, which typically offer high yields, compete with fixed-income instruments for investor interest....