Canadian Stocks Extend Record as TXU Buy Spurs M&A Speculation

Canadian stocks climbed to a record for a second day on speculation there will be more takeovers, after TXU Corp. accepted the biggest-ever leveraged buyout and Fortis Inc. agreed to buy a unit of Kinder Morgan Inc.

St. Lawrence Cement Group Inc. led commodity producers higher after controlling shareholder Holcim Ltd. offered to buy out minority stockholders. Research In Motion Ltd. surged after being upgraded by an analyst.

``The buyout craze continues. We will see more deals,'' said Gavin Graham, who helps oversee about $5.1 billion as chief investment officer at Guardian Group of Funds in Toronto. U.S. private equity firms may target Canadian companies, because they represent a ``cheaper alternative to the U.S.,'' he said.

The Standard & Poor's/TSX Composite Index added 60.93, or 0.5, to 13,404.46 in Toronto, notching a seventh record in nine days. The benchmark trades at a price-to-earnings multiple of 16.8 percent, compared with a 17.8 ratio for the S&P 500.

TXU, the largest power producer in Texas, agreed to a $45 billion offer from Kohlberg Kravis Roberts & Co. and Texas Pacific Group. KKR, run by Henry Kravis and George Roberts, and David Bonderman's Texas Pacific will pay $69.25 for each TXU share, or 15 percent more than Dallas-based TXU's closing price on Feb. 23, the companies said today in a statement.

Buyout firms announced a record of more than $700 billion in acquisitions last year.

The value of mergers involving Canadian companies rose 55 percent in 2006 to C$257 billion ($222 billion), compared with C$165 billion in 2005, fueled by the oil and gas industry, according to Crosbie & Co., a Canadian investment bank.

Fortis, an investor in electric distribution utilities, will pay C$3.7 billion for Terasen Inc., Kinder Morgan's retail utility business. Fortis said it plans to raise C$1 billion by selling 38.5 million subscription receipts at C$26 apiece to a group of brokers led by CIBC World Markets, to help pay for the acquisition.

Fortis shares climbed 3 cents to C$27.38 on the Toronto Stock Exchange before trading was halted.

Canadian Companies `Cheaper'

St. Lawrence Cement jumped C$8.26, or 25 percent, to C$40.85, the biggest gain in the S&P/TSX. Holcim Ltd., the world's second- biggest cement maker, will offer C$571 million ($493 million), or C$36.50 a shares, for the 21 percent of the Canadian cement producer that it doesn't already own. The planned offer is 12 percent more than St. Lawrence's closing share price on Feb. 23.

Other commodity producers, including Imperial Oil Ltd., rose as investors speculated they could receive similar offers. Energy and raw-materials stocks were also helped by higher prices for crude oil and metals such as gold.

Imperial Oil, Canada's biggest oil company by output, climbed 35 cents to C$42.40. Parent company Exxon Corp. ``could make an offer,'' to buy out minority shareholders, Graham said. Exxon, the world's largest publicly traded oil company, owns 70 percent of Imperial's stock, according to Bloomberg data.

EnCana

EnCana Corp., Canada's largest natural-gas producer, gained C$1.34 to C$57.30. Smaller rival Canadian Natural Resources Ltd. advanced 39 cents at C$59.65.

Crude oil bounced between gains and losses before closing up 0.4 percent at $61.39 a barrel, the highest close this year, on speculation that an Energy Department report will show U.S. fuel supplies declined.

Gold for April delivery rose 0.5 percent to $689.80 an ounce in New York. Bullion extended a rally to a nine-month high, as climbing oil prices boosted the appeal of the metal as a hedge against inflation.

Nickel and lead climbed to records in London.

Kinross Gold Corp., Canada's third-biggest bullion producer, rose 71 cents to C$16.99. Barrick Gold Corp., the world's biggest bullion miner, added 37 cents to C$36.36.

Alcan Inc., the world's second-largest maker of aluminum, added C$1.11 at C$64.15. China's demand for the metal will more than double in the next five to 10 years as the country's economy grows, Alcan Chief Financial Officer Michael Hanley said today at a conference.

Alcan

Investors have speculated about Alcan as a possible takeover target since Canadian metals producers Falconbridge Ltd. and Inco Ltd. were bought in multibillion dollar transactions.

Gauges of raw-materials and energy shares gained 0.9 percent and 0.4 percent, respectively. Together, they account for more than two-fifths of the S&P/TSX's value.

Research In Motion Ltd. increased C$7.82, or 4.8 percent, to C$170.21 for its best gain in seven weeks. The maker of the BlackBerry e-mail phones was raised to ``outperform'' from ``sector perform'' by Mike Abramsky at RBC Capital Markets in Toronto. The analyst raised his profit estimate for full-year 2008 by 8.4 percent to $5.42 a share from $5, citing stronger-than-expected sales and subscriber growth. Abramsky increased his share-price forecast by 24 percent to C$208.64 ($180).

A measure of technology stocks advanced 1.9 percent. Brookfield Asset Management Inc. paced gains among financial companies, adding 1.99, or 3.1 percent, to C$66.11.

The Toronto-based manager of real estate, power plants and investment funds, may rise to $70 on its infrastructure investments, Barron's said, without citing anyone. Brookfield's assets include more than 140 power plants in North and South America, and office properties such as New York's World Financial Center. It's also is one of Canada biggest private equity investors. The stock, which touched a record, has risen 61 percent in a year.

Royal Bank

An index of financial companies, the biggest by value in the S&P/TSX with a 32 percent weighting, increased 0.5 percent.

Royal Bank of Canada, the country's biggest lender, was up 42 cents at C$55.69. Bank of Nova Scotia, the third-largest, added 25 cents to C$51.86. Royal Bank releases earnings on March 2; Bank of Nova Scotia, the third-largest, will report March 6.

``The banks' results should be good,'' Graham said, citing strong mutual fund sales and domestic retail banking.

source:www.bloomberg.com