Canada Turns Hostile as Investors Vote on $36B in Mergers
Date: Sunday, January 08 2006
Canada Turns Hostile as Investors Vote on $36 Bln in Mergers
Jan. 6 (Bloomberg) -- Canadians, who have long prided themselves on civility, may have to adjust to a new reality. When it comes to mergers and acquisitions, dealmakers such as Carl Icahn and Greg Wilkins are turning the country into a land of hostile takeovers.
``We assessed the likelihood and the risks of being successful,'' Wilkins, chief executive officer of Toronto-based Barrick Gold Corp., says of his $10.4 billion bid to form the world's biggest gold miner by acquiring Placer Dome Inc. ``We thought that the route we took was going to lead us to the most likely positive solution.''
Investors will vote on $36 billion in takeovers involving Canadian companies in the next five weeks, capping the biggest year for mergers since 2000. Four of the deals are unsolicited, and the value of hostile bids in the past four months is greater than the previous three years combined.
Rising commodity prices, low interest rates and Canadian rules that encourage hostile bids are giving companies such as Barrick more confidence to make unsolicited offers. January's packed deal schedule suggests 2006 may top last year for mergers, with more hostile bids expected, some bankers say.
``We're seeing more hostile bids than we ever have before,'' says Peter Buzzi, co-head of mergers at RBC Capital Markets, which ranked second among banks for advising on Canadian transactions last year. ``Part of it is the overall increase in activity -- if you're more confident, you're more likely to do something on a hostile basis.''
Hostile bids that may be settled this month include a C$4.9 billion ($4.2 billion) battle between Luxembourg-based Arcelor SA and ThyssenKrupp AG of Germany for Dofasco Inc., Canada's biggest steel producer. South Carolina businessman Jerry Zucker bid C$832 million for Hudson's Bay Co., the country's No. 1 department-store chain, and billionaire Icahn bid $1.19 billion to take control of Fairmont Hotels & Resorts Inc. in Toronto.
There were 2,213 Canadian deals valued at $156 billion announced last year, according to data compiled by Bloomberg. That compares with 2,086 deals valued at $94.4 billion in 2004.
``Based on our current backlog, we look at 2006 as being an exceptionally busy year, as good or better than 2005,'' says Buzzi.
Hostile bids are more successful in Canada than in the U.S. because investor-rights plans designed to block them usually are struck down by Canadian regulators, Nash says.
Corporate governance rules such as Sarbanes-Oxley also have discouraged U.S. companies from making hostile bids without access to their targets' finances, he said. That's discouraging third party ``white knights'' from topping a hostile bid.
[Proofreader's note: this article was edited for spelling and typos on January 9, 2006]