Here's your rumor......and why its moving!!
Merger Mania
TransCanada rises on takeover rumors
CALGARY, Aug 25 (Reuters) - Shares in TransCanada PipeLines Ltd. (TRP-T) , the country's biggest pipeline company, rose in strong volume on Wednesday amid rumors that it could be a takeover target for a major U.S.-based rival.
TransCanada, whose stock had been suffering this summer as it kicked off a sweeping restructuring, was up 50 Canadian cents to C$22.35 on turnover of nearly one million shares in Toronto. That represents an 11-percent increase in one week.
TransCanada, best known for its huge natural gas pipeline operations stretching from Alberta to eastern Canada and the U.S. Midwest, was rumored as a target for Houston-based Enron Corp. (ENE-N) , the energy services industry's biggest player.
"Judging by the way the stock has been behaving (the rumor) is quite strong," said Levesque Securities analyst Winfried Fruehauf, author of a new report that addresses the possibility of a marriage of the two pipeline titans.
"The street wants to know why we think this thing is moving and we said so," Fruehauf said.
He said Enron could benefit from such a deal by consolidating its interests in U.S. Midwest gas pipelines, such as Northern Border, in which both have ownership stakes.
Enron would also control Alberta's huge pipeline network as well as the cross-Canada mainline and TransCanada's interest in the Foothills pipeline that feeds gas into Northern Border.
Such a move would come just as demand for Canadian gas and prices are stronger than in recent memory.
The two firms are also partners in natural gas pipelines and processing in Colombia, the analyst noted.
TransCanada, with C$26-billion in assets, is undergoing a shakeup that began last year with investor concerns over its wide diversification into riskier non-regulated businesses such as gas liquids processing and petroleum marketing in the United States. Those businesses are already on the auction block.
Analysts have also raised fears about the effect on TransCanada's bottom line when the competing C$4.5-billion Canada-U.S. Alliance Pipeline starts pumping gas late next year.
In July, Chief Executive George Watson, who was instrumental in TransCanada's C$14 billion takeover of NOVA Corp.'s huge Alberta pipeline business in 1998, resigned suddenly just ahead of a big senior executive shuffle.
Former Imperial Oil Ltd. (IMO-T) resources division boss Doug Baldwin is TransCanada's interim CEO as it searches for a new top officer.
Fruehauf said he believed TransCanada could be given a value in a takeover deal of up to C$30 a share. "That would pretty well be the top number," he said.
Scotia Capital Markets analyst Sam Kanes said in a recent report he believed that all Canadian pipeline companies had recently moved up as investors searched out "defensive" stocks ahead of a traditionally weak autumn market.
However, Kanes said TransCanada and Westcoast Energy Inc. (W-T) both had takeover premiums built into their prices.
The most logical buyer for TransCanada was Enron, he said, because the U.S. firm had been speculated as being an early bidder for NOVA Corp. two years ago before TransCanada kicked off its C$14-billion acquisition of the Alberta pipeline company.
JF |
