spin off
More and more, I find that I cringe a little every time an investor tells me that they recognize their current investment approach is not appropriate, but they are not yet ready to switch. With a little probing, these investors usually go on to explain that they have lost too much money with the current approach, and they “can’t afford” to sell out at current prices and convert that paper loss into a real one. Instead, they plan to stick with the current approach for an indefinite period. Sometimes they want to hold on to their current portfolio until they get back to break-even. Others say they’ll be satisfied if the current loss shrinks by, say, half. I recall one time in summer 2000. A friend asked me to have a short chat with a female relative who had just gone through a divorce and had received “a very generous settlement”. He said he didn’t know the details but the lady wanted an outside opinion on what to do with her money....
AGRIUM INC. $87 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 147.0 million; Market cap: $12.8 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.6%; TSINetwork Rating: Average; www.agrium.com) has expanded its retail operations in the past few years.
This business is now the world’s largest seller of seeds, fertilizers and other products to farmers, with over 1,200 stores in North America, Australia, Argentina, Chile, Uruguay and Brazil. In 2012, the retail division accounted for 65% of Agrium’s revenue and 32% of its earnings.
In addition, Agrium makes nitrogen-based fertilizer at four wholly owned plants in Canada and one in the U.S. It also owns 50% of a nitrogen facility in Argentina and 26% of one in Egypt. Operating in these countries adds risk, but these plants only account for a small part of Agrium’s revenue. In addition, this division makes potash and phosphate fertilizers.
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This business is now the world’s largest seller of seeds, fertilizers and other products to farmers, with over 1,200 stores in North America, Australia, Argentina, Chile, Uruguay and Brazil. In 2012, the retail division accounted for 65% of Agrium’s revenue and 32% of its earnings.
In addition, Agrium makes nitrogen-based fertilizer at four wholly owned plants in Canada and one in the U.S. It also owns 50% of a nitrogen facility in Argentina and 26% of one in Egypt. Operating in these countries adds risk, but these plants only account for a small part of Agrium’s revenue. In addition, this division makes potash and phosphate fertilizers.
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The recent breakup of a marketing alliance between potash producers in Russia and Belarus could cut the commodity’s price by 20%. The move has already hurt the prices of fertilizer stocks.
Unlike its fertilizer-making competitors, Agrium derived just 4% of its revenue and 8% of its earnings from potash in 2012....
Unlike its fertilizer-making competitors, Agrium derived just 4% of its revenue and 8% of its earnings from potash in 2012....
SNC-LAVALIN GROUP INC., $44.62, Toronto symbol SNC, rose 8% this week after it said that it plans to sell all or part of AltaLink, which provides electricity to 85% of Alberta’s population through 12,000 kilometres of power lines and 280 substations. SNC could also spin off AltaLink as a separate publicly traded firm. The company did not say when it expects to complete this process. As of June 30, 2013, AltaLink’s net book value was $856.8 million. That’s equal to 13% of SNC’s $6.8-billion market cap (or the value of all its outstanding shares). The sale is part of SNC’s plan to sell some of its less important operations. The company will invest the cash from these sales in engineering projects in areas with strong potential, such as mining, water treatment and oil and gas....
CANADIAN TIRE CORP., $92.02, Toronto symbol CTC.A, has announced more details of its plan to spin off most of its real estate holdings as a new, publicly traded real estate investment trust (REIT). This new REIT, called CT Real Estate Investment Trust, will hold 72% of Canadian Tire’s real estate assets, including 255 stores and one distribution centre. Canadian Tire will be CT REIT’s major tenant, accounting for 95.7% of its rental income. The average lease term is 16 years for the retail stores. Canadian Tire will also sign a new deal to lease the distribution centre for 17 years....
CANADIAN TIRE CORP., $89.56, Toronto symbol CTC.A, rose 6% this week after the company reported better-than-expected earnings. In the three months ended June 29, 2013, Canadian Tire’s earnings rose 15.9%, to $154.9 million from $133.7 million a year earlier. Earnings per share rose 17.2%, to $1.91 from $1.63, on fewer shares outstanding. That easily beat the consensus estimate of $1.80 a share. Sales rose 1.0%, to $3.02 billion from $2.99 billion. Same-store sales gained 2.0% at the company’s 490 Canadian Tire stores, thanks to strong sales of automotive and kitchen goods. Higher demand for seasonal merchandise, like bicycles and patio furniture, also contributed to the higher results....
TIM HORTONS INC. $54 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 153.4 million; Market cap: $8.3 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.9%; TSINetwork Rating: Average; www.timhortons.com) is the largest fast-food company in Canada, with 3,453 outlets that mainly serve coffee and donuts. The company also has 808 U.S. stores.
The stock has moved up lately in response to demands from Highfields Capital Management, a U.S.-based activist investment firm that owns 1.5% of Tim Hortons’ shares. Highfields has proposed several ways to boost shareholder value, including slowing Tim Hortons’ expansion in the U.S., where it faces intense competition from larger chains like McDonald’s, Dunkin’ Donuts and Starbucks.
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The stock has moved up lately in response to demands from Highfields Capital Management, a U.S.-based activist investment firm that owns 1.5% of Tim Hortons’ shares. Highfields has proposed several ways to boost shareholder value, including slowing Tim Hortons’ expansion in the U.S., where it faces intense competition from larger chains like McDonald’s, Dunkin’ Donuts and Starbucks.
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TIM HORTONS INC. (Toronto symbol THI; www.timhortons.com) is the largest fast-food company in Canada, with 3,453 outlets that mainly serve coffee and donuts. The company also has 808 U.S. stores. The stock has moved up lately in response to demands from Highfields Capital Management, a U.S.-based activist investment firm that owns 1.5% of Tim Hortons’ shares. Highfields has proposed several ways to boost shareholder value, including slowing Tim Hortons’ expansion in the U.S., where it faces intense competition from larger chains like McDonald’s, Dunkin’ Donuts and Starbucks....
TIM HORTONS INC. $54 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 153.4 million; Market cap: $8.3 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.9%; TSINetwork Rating: Average; www.timhortons.com) is the largest fast-food company in Canada, with 3,453 outlets that mainly serve coffee and donuts....
CANADIAN TIRE CORP., $83.78, Toronto symbol CTC.A, jumped 13% this week after the company announced a plan to spin off most of its real estate holdings into a new, publicly traded real estate investment trust (REIT). Under the company’s plan, which is similar to a move by grocery retailer Loblaw Companies Ltd. (Toronto symbol L), Canadian Tire will transfer 250 of its stores, a distribution centre and other properties to the new REIT. In all, these assets total 18 million square feet and are worth $3.5 billion; that’s 72% of Canadian Tire’s 25 million square feet of real estate. After this transaction closes in the fall of 2013, Canadian Tire will sell units of the REIT to the public. It will hang on to an 80% to 90% interest. Meanwhile, the company earned $73.0 million in the three months ended March 31, 2013. That’s up 2.8% from $71.0 million a year earlier. Earnings per share rose 3.4%, to $0.90 from $0.87, on fewer shares outstanding. That matched the consensus estimate....