takeovers
Last week, the Canadian government said it would block BHP Billiton’s (New York symbol BHP) hostile, $38.6-billion U.S. takeover bid for Potash Corp. of Saskatchewan (New York and Toronto symbol POT). However, under the Investment Canada Act, which governs foreign takeovers of Canadian companies, BHP now has 30 days to modify its offer so that it is a “net benefit” to Canada. In light of the federal government’s decision, we updated our buy/sell/hold advice in last week’s Successful Investor and Wall Street Stock Forecaster hotlines. We cover Potash Corp. in The Successful Investor and BHP in Wall Street Stock Forecaster....
BHP BILLITON LTD. ADRs, $92.14, New York symbol BHP, rose 10% this week after the Canadian government said it would block its hostile takeover bid for Potash Corp. of Saskatchewan (New York and Toronto symbol POT). However, under the Investment Canada Act, which governs foreign takeovers of Canadian companies, BHP now has 30 days to modify its offer so that it is a “net benefit” to Canada. BHP’s offer is worth $38.6 billion. That’s equal to 15% of its $256.4-billion market cap. The company has room to raise its bid. That’s because BHP’s shares also trade on the London Stock Exchange, and British law would require BHP to hold a special shareholders’ vote if the value of any new bid is more than 25% of BHP’s market cap. At the time of the original announcement on August 17, 2010, the bid represented 21% of BHP’s market cap. If BHP drops the takeover attempt, it could use the cash it planned to spend on Potash Corp. on share buybacks. It could also raise its $1.80 dividend, which yields 2.0%. BHP could also pay a special dividend....
POTASH CORP. OF SASKATCHEWAN, $141.32, Toronto symbol POT, fell 4% this week after Ottawa said it would block the hostile takeover offer by BHP Billiton Ltd. (New York symbol BHP). However, under the Investment Canada Act, which governs foreign takeovers of Canadian companies, BHP now has 30 days to modify its bid so that the takeover is a “net benefit” for Canada. The stock is now trading at 8.7% above the $130.00 U.S.-a-share that BHP is offering. That indicates that investors expect a higher offer from either BHP or another bidder. BHP still has room to raise its bid. That’s because BHP’s shares also trade on the London Stock Exchange, and British law would require BHP to hold a special shareholders’ vote if the value of a takeover offer is more than 25% of BHP’s market cap. At the time of the original announcement on August 17, 2010, the bid represented 21% of BHP’s market cap. Right now, the offer is equal to 15% of BHP’s market cap....
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing, including how to spot the best bargain stocks for your portfolio. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Spinoffs can bring two-way benefits, to the parent and the spun off division.” In a spinoff, a company sets up part of its operations as a separate public company, then hands shares in this company over to shareholders, or gives them a chance to buy these bargain stocks cheaply. Often, the spun off business and the parent both gain. Here’s why:...
One part of our three-pronged investing program is to spread your money out across the five main sectors of the economy: Manufacturing & Industry; Resources; Consumer; Finance; and Utilities. (The other two parts are to hold mostly high-quality, dividend paying stocks, and downplay stocks in the broker/public-relations limelight.) The proper proportions depend on your circumstances and risk tolerance. In general, stocks in the Resources and Manufacturing & Industry sectors expose you to above-average volatility, and stocks in the Utilities and Finance sectors entail below-average volatility. Consumer stocks usually fall in the middle. That’s because consumer firms benefit from continuous and often habitual use of their products and services, so they have much more stability in their sales and earnings, no matter what the overall economy is doing. Of course, this depends on an individual company’s situation and other factors....
CEDAR FAIR L.P., $14.11, New York symbol FUN, owns 11 amusement parks, six outdoor water parks, one indoor water park and five hotels, mostly in the midwestern and northeastern U.S. The stock rose 17% this week. That’s because Cedar Fair has cancelled a friendly, $11.50-a-unit takeover offer from private-investment firm Apollo Global Management. Many unitholders thought that price was too low, so this move raises the possibility of a higher bid. Cedar Fair will pay Apollo $6.5 million in cancellation fees. To put this figure in context, Cedar Fair earned $35.4 million, or $0.63 a unit, in 2009....
TECK RESOURCES LTD., $39.78, Toronto symbol TCK.B, rose 5% this week after the company announced that it had signed a new shipping agreement with Westshore Terminals Income Fund (Toronto symbol WTE.UN). Teck ships coal from its British Columbia mines to Westshore’s Vancouver port, which loads and ships more coal than any other port on North America’s west coast. From there, trains carry Teck’s coal to its North American customers, and ships carry it to Asian steelmakers. Under the new deal, Westshore will process 3 million tonnes of coal a year for the next two years at fixed rates. That’s about 12% of the 25 million tonnes of coal that Teck should produce this year....
Over the years, we’ve recommended many stocks that have been taken over for big profits. In fact, some readers of our newsletters and investment services tell us that they never had a stock taken over at a profit until they began following our advice. (To get all the details on our stock market strategy, and how it can help your portfolio, don’t miss our free report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.” Click here to download your copy and get started right away.) More on the stock market strategy that helps us routinely spot takeover candidates a little further on. But first, here are just a few recent takeover targets we’ve recommended. All rewarded our readers with big gains:...
AGRIUM INC., $53.94, Toronto symbol AGU, has raised its takeover offer for U.S.-based fertilizer maker CF Industries Holdings Inc. (New York symbol CF). CF shareholders will still receive one Agrium common share for each CF share they own. But they will also get $45.00 in cash, up from $40.00 under the old bid (all amounts except Agrium’s share price in U.S. dollars). This new offer expires November 18. Using current prices, Agrium’s offer is worth $95.50 per CF share (or a total of $4.6 billion). However, CF is trading at $79.02, or 17.3% below Agrium’s offer....
CGI GROUP INC. $13 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 306 million; Market cap: $4 billion; Price-to-sales ratio: 1.0; SI Rating: Extra Risk) is Canada’s largest provider of computer-outsourcing services. CGI helps corporations and government agencies automate certain routine functions, such as accounting and buying supplies. This lets its clients focus on their main businesses, and improve their efficiency. The company has over 100 offices in 16 countries. Canada accounts for roughly 60% of its revenue, followed by the U.S. (35%) and Europe (5%). BCE Inc. (Toronto symbol BCE) is CGI’s largest client, supplying roughly 12% of its annual revenue.