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Telus has a history of rewarding shareholders with dividend growth, according to Yield Hog panelist Tony Demarin of BCV Asset Management. (SHAUN BEST/Shaun Best/Reuters)
Telus has a history of rewarding shareholders with dividend growth, according to Yield Hog panelist Tony Demarin of BCV Asset Management. (SHAUN BEST/Shaun Best/Reuters)

M&A

Telus, Methanex possible takeover candidates: Morningstar Add to ...

Mergers and acquisitions "will likely accelerate" this year and could involve Telus and Methanex becoming takeover candidates, says investment data firm Morningstar Inc.

Morningstar analysts have compiled a list of North American companies they believe are most vulnerable to being acquired, and although no Canadian firms were among its top 10 considered most likely to receive a buyout offer, they did say that both Telus and Methanex may be put into play as members of a wider group of 100 firms that could have attractions for leveraged buyouts or mergers.

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In the view of Morningstar analysts, a combination of Telus and BCE "seems like a high probability over the next couple of years." The firm issued the call Thursday in a report titled "The Return of the Blockbuster Deal?"

Although rumours of a tie-up between Canada's two telephone giants were common a few years back, Morningstar believes one possible impetus to a revival of the chatter is that the companies already share a wireless network and Telus took a run at BCE when it was in play just before the 2008 financial panic.

"Who acquires whom is an open question, though Telus has sat out the recent acquisition wave in the Canadian media industry," Morningstar said. The biggest problem with a deal going through is that it may not be approved by regulators, it said.

Vancouver-based Methanex is the world's biggest producer of methanol, a key chemical ingredient used in everything from windshield wiper fluid to gasoline. Morningstar says the company is vulnerable because it lacks natural gas supply and consequently is operating below its profitability potential.

Among its top rated takeover candidates are SunTrust Banks, a regional U.S. lender hit hard by financial crisis; Petrohawk Energy, which has been challenged by low gas prices; Range Resources, a big holder in the Marcellus gas play; Leap Wireless, whose telecommunications assets would be worth more if acquired by a larger carrier and Myriad Genetics, a medical firm that will benefit from the emerging trend of pairing diagnostic tests with cancer treatments.

Morningstar said it picked its top candidates based on their attractive prices to a potential acquirer because of either low stock market valuations or because market players are underestimating their long term cash flow potential.

 

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