News related to Inco
GLOBE AND MAIL
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THU JAN.29,1998 PAGE: B1
BYLINE: JACQUIE McNISH
WORDS: 951
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Takeover binge expected to sweep Canada
January's deals 'the tip of the iceberg'
BY JACQUIE McNISH
The Globe and Mail
Canada's merger frenzy seems to be only just beginning.
Market experts said the record $60.8-billion of proposed corporate marriages and acquisitions announced this month marks the dramatic opening act of a takeover binge that is expected to engulf Canada this year.
"It's the tip of the iceberg," said David Mongeau, global head of mergers and acquisitions with CIBC Wood Gundy Securities Inc. "Canada is just ripe for these consolidations."
It was only a month ago that takeover experts predicted that merger and acquisition activity would taper off after a record $100.9-billion volume of transactions in 1997.
What a difference one month can make.
Spurred by Goliath mergers at home and in Europe and the United States, investment bankers said, Canadian firms - particularly in the financial, oil and gas and real estate sectors - are accelerating acquisition strategies to stay competitive. Weaker corporations, they said, are quietly preparing asset sales or corporate restructurings to defend against hostile bids.
At the same time, Canada's sinking dollar, low interest rates and depressed commodity prices are setting the stage for a wave of takeovers in the resource sector.
"We are seeing a lot of interest from foreign buyers in Canada. It is going to be a very active year," said Daniel Labrecque, managing director of Schroder Canada Ltd. in Montreal, which specializes in cross-border acquisitions.
"Everybody is as busy as all hell," added Glenn Bowman, a partner with Toronto M&A specialist Crosbie & Co. Inc. "Given the transactions we have seen and the economic environment we are in, this could be an unprecedented year."
It has already been an unprecedented month.
More than $60-billion of mergers, takeovers and asset sales were proposed in the first 28 days of the year. That's more than half the total $100.9-billion in deals announced last year, and twice the annual total recorded four years ago.
Two-thirds of this month's total value comes from the $40-billion mega-merger proposed by Royal Bank of Canada and Bank of Montreal, which faces enormous political obstacles. Even if the bank marriage is taken off the list, merger volumes this month are at a record high.
The planned $14-billion merger of Nova Corp. and TransCanada PipeLines Ltd. dwarfs the largest previous transaction involving two Canadian companies. That deal was the $5.2-billion acquisition of Dome Petroleum Ltd. by Amoco Canada Petroleum Co. Ltd. in 1987.
Unlike the leveraged buyout boom of the late 1980s, which was driven by financial innovations such as junk bonds, this takeover boom is being fuelled by corporate strategies. Whether in banking, communications or natural resources, companies are expanding through mergers to extend their reach globally.
Companies that are left behind by each new mega-merger face increased pressure to protect their market share with matching takeovers.
"Companies are already thinking about what they need to do to catch up . . . clearly, scale matters," said Andre Hidi, co-chief executive officer of Salomon Smith Barney Canada Inc.
To a large extent, Canadian companies are responding to huge European and U.S. mergers that have involved combinations of some of the world's largest banks, technology and consumer companies.
"The full impact of globalization is now being felt and it will result in smaller players being marginalized. (There is a) need for scale to compete," Matthew Barrett, chairman of Bank of Montreal, told the editorial board of The Globe and Mail yesterday.
Companies which cannot afford mergers, investment bankers said, are busy mounting takeover defence strategies such as poison-pill plans and corporate restructurings to thwart unwanted bids.
"There is an enormous amount of interest and increasing sensitivity to new corporate strategies by companies which think that they are vulnerable," said CIBC Wood Gundy's Mr. Mongeau.
The most likely targets for hostile bids, investment bankers said, are Canadian mining and forest products companies, which have been hammered by plunging commodity prices.
Nickel giant Inco Ltd. is expected to announce a major corporate and financial restructuring to lift its stock out of the doldrums and embattled MacMillan Bloedel Ltd., Canada's biggest forest products company, is radically streamlining its operations.
"A lot of very acquisitive companies are watching developments at Inco and MacMillan Bloedel very closely," said one M&A specialist.
The surest sign of looming changes in the corporate landscape is the furious pace of work in the mergers and acquisition departments of Bay Street firms. Securities executives say their M&A specialists have been working around the clock since November to keep up with demand.
"Our people are looking at 50 potential transactions across the country right now," said David Ward, managing director of mergers and acquisitions at Nesbitt Burns Inc. in Toronto.
". . . . These are very large transactions, significantly larger than what we were seeing last year."
There seems to be no limit any more to how big mergers and acquisitions can be. Experts estimate the average value of a takeover in Canada today is about $600-million, compared with $100-million 10 years ago. In the United States the average has grown to $1-billion (U.S.).
"I can remember when a $100-million (Canadian) takeover seemed like a big deal," said CIBC Wood Gundy's Mr. Mongeau.
GLOBE AND MAIL
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WED JAN.28,1998 PAGE: B16
SOURCE: REUT STAFF
WORDS: 508
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Inco shares climb on restructuring rumours
Nickel producer reviewing options, confirms it's looking to cut staff from its Toronto and New York offices
Reuters and staff
Shares of Inco Ltd. climbed more than 6 per cent on the Toronto Stock Exchange yesterday on rumours that the company would soon announce a restructuring - including layoffs - to cut costs at the Western world's biggest nickel producer.
"Obviously, this (restructuring) is a positive development for Inco - it's going to substantially cut their costs and they're going to be able to reduce their higher-cost operations," said industry analyst Clarence Morrison at Prudential Securities Inc. in New York.
"So this is reaction more to (those rumours) than it is to pricing or anything of that nature," he said.
Inco shares gained $1.50 to close at $24.65 on the TSE in active trading of more than 1.47 million shares.
Inco spokesman Jerry Rogers said the company was still reviewing its options and had not set specific layoff targets, but he confirmed that Inco was looking to cut staff from its Toronto headquarters and New York office.
"We're looking at every expense on a company-wide basis to determine what expenses can be justified and how they can be reduced . . . and this analysis has included corporate overhead as well," Mr. Rogers said.
"In the next few months we'll be vacating our costly premises in New York City, so there'll be some downsizing at that location, and we're also looking at how we would reduce corporate overhead in Toronto as well. But as I said, we're looking at all of our operations."
Mr. Morrison said the rumours were not a shock. "We've been anticipating for some time a significant cutback in total personnel. So it's not new news, it's just confirming what was anticipated. . . . It's going to be fairly extensive, that's a certainty."
Inco's total employment is about 16,300.
Richard Aldrich, an analyst at Lehman Brothers Inc. in New York, said a formal announcement of the layoffs could come as early as next week.
"I would guess they're going to be reporting earnings on the fourth of February, so that might be an opportunity to make some announcements."
He said the stock also was boosted by an upswing in the base metals sector as a whole, which sold off recently under pressure from weak metals prices.
The base metals group climbed 3.14 per cent on the TSE yesterday, lifted by speculation that this sector could be the next to be hit by merger mania.
Vancouver-based Cominco Ltd. climbed $1.25 to finish at $23.50, Noranda Inc. of Toronto gained $1.20 to close at $26.30, and Falconbridge Ltd. of Toronto added $1.10 to end the session at $19.15.
Noranda said it will sell its 49.5-per-cent-owned Norcen Energy Resources Inc. to Union Pacific Resources for $3.5-billion (U.S.) in cash and assumed debt.
Wayne Atwell, who tracks Inco for Morgan Stanley Dean Witter, said rumours also continue to swirl that Inco is ripe for a takeover.
Takeover speculation first surfaced in late November. Rumoured suitors included Rio Tinto PLC, Australian resources company Broken Hill Pty. Co. Ltd. and Noranda. |
