3 More Canadian Companies That Could Be Acquired

Looking to find the next company to be acquired? These three are ripe for the picking.

The Motley Fool

Yesterday, both Bell Aliant and Talisman Energy were in the news, for similar reasons.

BCE announced that it was going to acquire the 56% of Bell Aliant it didn’t already own, for a cost of nearly $4 billion. General market sentiment says that deal will be successful, much to the chagrin of investors who liked the smaller Bell’s generous dividend yield of nearly 7%.

While there’s no concrete offer on the table for Talisman Energy, rumors swirled that French energy giant Repsol was considering a bid for the company. Although nothing is official yet, investors took the opportunity to bid up Talisman’s shares more than 13% in anticipation of something happening soon.

To toot my own horn a little, back in May I wrote an article that identified two companies as takeover targets. Those companies? Bell Aliant and Talisman Energy. If only the rest of my predictions were that accurate.

It isn’t really that hard to identify possible acquisition targets. Generally, struggling companies are sought, since the suitor is looking to buy assets on the cheap. Often, management of these struggling companies is fed up with trying to turn things around, so it’s more willing to listen to an offer, and if one company already owns a stake in another, chances are it’ll end up buying the whole thing at some point.

Here are three Canadian companies that could be gobbled up next.

1. Cogeco Cable

Cable television is a good business to be in. Margins are high, pricing power is good, and customers generally stick with one provider. Plus, competition is limited to just a handful of companies. Even though Cogeco Cable (TSX: CCA) is somewhat of a smaller operator with a market cap of just $3 billion, it’s still a big player in both Ontario and Quebec. It also owns a U.S.-based subsidiary that operates in five states.

Rogers Communications (TSX: RCI.B)(NYSE: RCI) owns nearly 20% of the company, and it’s very possible that it could buy out the shares it doesn’t already own. Rogers has significantly underperformed its peers over the last year, and management might think that making a big move will help win back shareholder support.

2. North West Company

Canada’s retail space has seen a flurry of acquisitions over the last 18 months. First Empire Company gobbled up Safeway, and then Loblaw responded by buying Shoppers Drug Mart. For a little while there, grocery was one of Canada’s most exciting sectors.

One company that makes sense as a possible acquisition is North West Company (TSX: NWC), which mostly operates in Canada’s north. Often, the local North West store is the only place in town, allowing it to have higher net margins than its competitors, even after accounting for higher labour costs.

At a market cap of just over $1 billion, North West is the perfect size to be acquired by Canada’s third-largest grocer, Metro (TSX: MRU). Metro missed out on all the acquisition excitement, and obviously wants to join the club. Plus, buying North West would give it exposure in western Canada, where it’s currently absent.

3. Intact Financial

Power Financial (TSX: PWF) owns a majority stake in some of Canada’s finest financials, including IGM Financial, the parent of Investors Group, and Great-West Lifeco. However, the stock has essentially been dead money over the last decade, and management hasn’t raised the dividend in five years. The company needs to do something to get out of its funk.

There’s a case to be made that management should acquire Intact Financial (TSX: IFC). Intact is Canada’s leader in property and casualty insurance, with a large auto insurance arm as well. These are all areas of the market where Power has no exposure, since it’s focused primarily on life insurance.

Plus, it already has an army of nearly 4,000 agents as a ready-made sales force for home and auto insurance through its Investors Group subsidiary. Buying Intact would mean that the average Canadian could manage almost their entire financial life through their Investors Group agent, which could lead to some very loyal customers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nelson Smith owns shares of IGM FINANCIAL INC.

More on Investing

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

This 8% Dividend Stock Pays Cash Every Month

Earn monthly cash of $154 with this 8% dividend stock.

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Should Investors Buy the Correction in Lundin Mining Stock?

Lundin (TSX:LUN) stock has fallen by 10% in the last few weeks, but so has the price of copper. Coincidence?…

Read more »

Metals and Mining Stocks

Best Stocks to Buy in May 2024: TSX Materials Sector

A TSX materials sector ETF could help investors gain cheap diversified exposure to the hot sector's stocks – so will…

Read more »

man is enthralled with a movie in a theater

Should You Buy Cineplex While it’s Below $9?

With analysts expecting a significant recovery in the second half of 2024, is this the last chance to buy Cineplex…

Read more »

oil tank at night
Dividend Stocks

Think Oil Is Going Higher? 3 Dividend Stocks to Buy Now

Looking for steady dividend growth? These three Canadian oil stocks could provide substantial dividend income in the coming years.

Read more »

Profit dial turned up to maximum
Dividend Stocks

This 7% Dividend Stock on the TSX is Worth Watching

With this superb TSX stock now trading at the bottom of its 52-week range, it's certainly a dividend stock you'll…

Read more »

Dots over the earth connecting the world
Dividend Stocks

1 Magnificent Dividend Stock Down 23% to Buy Right Now Near a Once-in-a-Decade Valuation

Patient investors could be happy with this dividend stock a few years down the road.

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

2 TSX Dividend Stocks to Buy While They Still Offer Great Yields

These top dividend-growth stocks now offer 7% dividend yields.

Read more »