Acquisitions Can Enhance Their Growth

Article Excerpt

It pays to be skeptical of companies that grow by acquisition. Even the most promising acquisitions can come with hidden problems and unexpected costs that devastate the buyer’s finances. However, some companies are strong enough to overcome the drawbacks of growing by acquisition. Here are four examples. Only three are buys right now, and then only for aggressive investors. SAPUTO INC. $33 (Toronto symbol SAP; SI Rating: Average) has made itself the top dairy producer in Canada in the past few years through acquisitions. However, heavy regulation limits Saputo’s growth in Canada. Consequently, the company is aggressively expanding outside Canada. It is targeting the United States where it’s now the fifth-largest cheese producer, and Argentina, where it’s the third-largest dairy company. Saputo earned $0.43 a share (total $45.0 million) in its third fiscal quarter ended December 31, 2005, down 21.8% from $0.55 a share ($58.3 million) a year earlier. Higher fuel costs, lower U.S. cheese prices and restructuring costs hurt earnings. But Saputo’s sales rose…

You are trying to access subscriber-only content.

To read this article, you may subscribe or sign in.
If you are already a subscriber, log in here.

If you wish to become a subscriber, click here. Or you may enjoy access to all our publications when you become a Member of Pat McKeough's Inner Circle Pro.