takeovers

LOBLAW COMPANIES LTD., $47.01, Toronto symbol L, has received approval from competition regulators for its acquisition of Shoppers Drug Mart Corp. (Toronto symbol SC), which operates 1,253 drug stores across Canada. To win approval for the purchase, Loblaw has agreed to sell 18 stores and 9 pharmacies. It does not plan to close any of its 1,000 supermarkets. Loblaw will pay roughly $12.4 billion in cash and shares for Shoppers when the deal closes on March 28, 2014. The price is equal to 93% of its $13.3-billion market cap. After the deal closes, Shoppers shareholders will own 29% of the combined company....

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AEROPOSTALE $8.14 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646- 485-5410; www.aeropostale.com; Shares outstanding: 78.5 million; Market cap: $639.7 million; No dividends paid) has adopted a shareholder rights plan. These schemes are often called poison pills, because they aim to thwart hostile takeovers by issuing many new shares to existing shareholders if someone tries to take over a company.

A number of private equity firms now hold interests in Aeropostale, and they are pushing it to put itself up for sale so one or more of them can take it private.

It’s uncertain which direction Aeropostale will take, or whether any of its private equity shareholders can force a sale....

AEROPOSTALE $8.14 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646- 485-5410; www.aeropostale.com; Shares outstanding: 78.5 million; Market cap: $639.7 million; No dividends paid) has adopted a shareholder rights plan. These schemes are often called poison pills, because they aim to thwart hostile takeovers by issuing many new shares to existing shareholders if someone tries to take over a company.

A number of private equity firms now hold interests in Aeropostale, and they are pushing it to put itself up for sale so one or more of them can take it private.

It’s uncertain which direction Aeropostale will take, or whether any of its private equity shareholders can force a sale. However, their involvement does highlight its underlying value and turnaround potential.
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ALIMENTATION COUCHE-TARD, $77.60, symbol ATD.B on Toronto, rose over 6% this week after reporting its latest quarterly earnings. In the three months ended October 13, 2013, the company’s sales fell 3.0%, to $9.0 billion from $9.3 billion a year earlier (all figures except share price in U.S. dollars). The year-ago quarter included 92 days of results from Norway’s Statoil Fuel & Retail ASA, which Couche-Tard bought for $2.7 billion in June 2012, while the latest quarter included just 84 days. The shorter period was due to an adjustment to align Statoil’s accounting period with Couche-Tard’s. That was the main reason for the lower revenue. Excluding that, the company benefited from higher fuel volumes and merchandise sales. Couche-Tard gets about 30% of its revenue by selling merchandise....

GEORGE WESTON $85.19 (Toronto symbol WN; Shares outstanding: 127.9 million; Market cap: $11.1 billion; TSINetwork Rating: Above Average; Yield: 2.0%; weston.ca) owns 63.1% of Loblaw. It will help it pay for Shoppers by buying $500 million of new shares. After Loblaw completes the purchase, Weston will own 46% of Loblaw.

Loblaw will operate Shoppers as a separate chain and does not plan to close any stores. That makes sense, because most Shoppers stores are small outlets in urban areas where there is little overlap with Loblaw’s mainly suburban supermarkets.

Shoppers will also keep its own brands and loyalty program. However, combining marketing and distribution should save the company $300 million annually by the end of the third year.
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LOBLAW COS. $47.97 (Toronto symbol L; Shares outstanding: 283.0 million; Market cap: $13.6 billion; TSINetwork Rating: Above Average; Dividend yield: 2.0%; www.loblaw.ca) is buying Shoppers Drug Mart (Toronto symbol SC), which operates 1,240 drugstores across Canada.

Assuming regulators and Shoppers shareholders approve, Loblaw aims to complete the $12.5-billion purchase in six to seven months.

GEORGE WESTON $85.19 (Toronto symbol WN; Shares outstanding: 127.9 million; Market cap: $11.1 billion; TSINetwork Rating: Above Average; Yield: 2.0%; weston.ca) owns 63.1% of Loblaw....

LOBLAW COMPANIES LTD., $48.39, Toronto symbol L, is buying Shoppers Drug Mart Corp. (Toronto symbol SC), which operates over 1,240 drugstores across Canada. Under the deal, Shoppers investors can choose to receive $61.54 in cash or 1.29417 Loblaw common shares and $0.01 cash for each Shoppers share they hold. Loblaw will cap the cash portion, so Shoppers investors will probably wind up with $33.18 in cash plus 0.5965 of a Loblaw common share. Based on today’s share price, the deal is worth $12.5 billion. This is a big purchase for Loblaw, which has a market cap (or the value of all its outstanding shares) of $13.6 billion....

ACI WORLDWIDE (Nasdaq symbol ACIW; www.tsainc.com) makes software for processing transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments. Its products also help cut fraud. In mid-February 2012, ACI completed its $540 million purchase of S1 Corp. This acquisition has been a good fit: S1 sells transaction software for banks, credit unions, retailers and other payment processors. It has over 3,000 clients worldwide....

TECK RESOURCES LTD., $28.73, Toronto symbol TCK.B, fell 6% this week, along with other mining stocks, partly due to concerns about the outlook for prices of coal, copper and other commodities. China is a major resource consumer, and growth in the country has slowed along with its exports to Europe and the U.S. China’s inflation rate is also rising, which could make it more difficult to spur growth through stimulus spending or lower interest rates. As well, investors are concerned that Teck may buy control of privately held Iron Ore Company of Canada (IOC); Rio Tinto (New York symbol RIO) is IOC’s largest shareholder, with a 58.7% stake. This company mines and processes iron ore in Labrador City, Newfoundland. Trains then take the iron ore pellets to the port of Sept-Îles, Quebec, for shipment to steel mills around the world....