A potential acquisition generally causes an upward movement in the price of the company being acquired, and often a downward movement in price for the company making the purchase. Why? Existing shareholders of the company being acquired need to be compensated enough to encourage them to want to sell their stock, and the company making the purchase often has to pay well-over fair or book value for the company it is buying in order to get the shareholders to agree to the offer.
Are there any Canadian companies that might be the target of an acquisition going forward?
Below I have listed four Canadian companies that appear to be nice targets for a number of large and cash-rich businesses:
1) Shoppers Drug Mart (TSE:SC)
Shoppers is a healthy and profitable company with a loyal following. U.S. Based Walgreen Company (NYSE:WAG) is poised for Canadian expansion.
2) Bell Alliant (TSE:BA)
A declining land-line revenue stream, but an acquisition hungry and cash-rich partner in Bell Canada Enterprises (TSE:BCE).
3) Manitoba Telecom (TSE:MBT)
With limited growth, and a declining land-line revenue stream, Manitoba Telecom management could look kindly to cash-in and take a healthy buyout from Telus (TSE:T) or Bell (TSE:BCE).
4) Corus Entertainment (TSE:CJR.B)
With the rampant media consolidation happening in Canada right now, Shaw Communications (TSE:SJR.B) would be a likely suitor for Corus.
Full Disclosure: Matthew Clarke owns or indirectly controls shares in Shoppers Drug Mart and Bell Canada.