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On the rise

Alimentation Couche-Tard Inc. (ATD-T) was higher on Monday after the Wall Street Journal reported it has had merger talks with British retailer EG Group.

According to the report, the Montreal-based convenience store operator has traded proposals in recent weeks that would value EG at approximately US$16-billion or more including debt.

The potential deal would create a convenience store giant, combining Couche-Tard’s more than 14,000 stores across the United States, Canada and Europe with EG’s over 6,000 locations across 10 countries.

“Back in September (Bloomberg), EG Group had been speculated to explore a sale so the merger talks with Couche-Tard are not a total surprise,” said Stifel analyst Martin Landry in a research note. “Separately, Elliott Investment Management, a US based activist fund manager, has written a letter to Suncor calling for a strategic review including the potential divestiture of 1,800 gasoline stations operated under the Petro-Canada banner. There are limited suitors for both these networks given their size and Couche-Tard is well positioned in our view. Our analysis suggests that a potential acquisition of EG Group could be accretive by 12-14 per cent and a potential acquisition of Petro Canada by 4-6 per cent. We believe ATD is interested in both assets and would view their acquisition positively.”

Capital Power Corp. (CPX-T) rose with the premarket release of better-than-anticipated first-quarter results.

The Edmonton-based independent power generation company reported EBITA of $348-million, exceeding the Street’s forecast of $303-million. Normalized earnings per share of 93 cents also topped expectations (75 cents) and rose 29 cents year-over-year.

Calling the results “positive,” ATB Capital Markets analyst Nate Heywood said: “The strong print was driven by key market fundamentals and strong operational performance, with facility availability of 95 per cent. Notably, the EBITDA beat was primarily seen in the merchant-exposed Alberta Commercial business. The Q1/22 outperformance has given management confidence that it will meet or exceed the high end of its previously announced 2022 EBITDA and AFFO guidance of $1.11-$1.16-billion (ATB estimate: $1.14-billion) and $580-$630-million (ATBe: $615-million), respectively. In the near term, we expect CPX’s merchant exposure to benefit from strength in Alberta power market fundamentals. In the long term, we expect CPX to continue to focus on contracted cash flows, as renewable project developments and potential M&A are likely to be tied to PPA agreements.”

Cargojet Inc. (CJT-T) increased after it hiked its dividend and reported first-quarter revenues of $233.6-million up from $160.3-million a year ago and ahead of expectations of $208.6-million.

Its net loss for the quarter was $56.4-million (or net income of $30.4-million excluding warrant valuation loss) compared to net income of $89.4-million in 2021 (net income of $7.5-million excluding warrant valuation gain).

Cargojet also said it would increase its quarterly dividend by 10 per cent to 28.6 cents per share.

- Brenda Bouw

Activision Blizzard Inc. (ATVI-Q) climbed after Warren Buffett said Berkshire Hathaway Inc. has taken a 9.5-per-cent stake in the Call of Duty game maker.

He said a couple months after one of Berkshire’s other investment managers bought roughly 15 million Activision shares, he increased that stake to roughly 9.5 per cent of the company — or about 74 million shares — after Microsoft announced the deal in January because Activision stock was selling for less than the $95 per share deal price.

Mr. Buffett also revealed Berkshire’s stake in oil giant Chevron (CVX-N) has increased to US$26-billion, up from $4.5 billion at the beginning of the year to make it one of the conglomerate’s four biggest investments. Berkshire also spent billions buying up 14 per cent of Occidental Petroleum’s (OXY-N) shares in the first half of March, and added to its already massive investment in Apple stock.

Shares of Berkshire (BRK.B-N) were narrowly lower on Monday.

See also: Berkshire shareholders look beyond Warren Buffett, Charlie Munger

On the decline

Vancouver-based Sandstorm Gold Ltd. (SSL-T) fell on Monday after announcing it has signed a pair of acquisitions worth a total of US$1.1-billion.

Under the first deal, the company will buy Nomad Royalty Company Ltd. (NSR-T) in an all-stock deal valued at US$590 million.

Nomad shareholders will receive 1.21 Sandstorm shares for each Nomad share held.

The second deal will see Sandstorm acquire a royalty package from BaseCore Metals LP for US$525-million including US$425-million in cash and US$100-million in shares.

Sandstorm also says it has partnered with Royalty North Partners Ltd. to sell a portion of a copper royalty acquired in the BaseCore deal and keep a silver stream on the asset.

The company says once the deals close, existing Sandstorm shareholders will hold 67 per cent of the company, while Nomad shareholders and BaseCore will own about 28 per cent and five per cent respectively.

Spirit Airlines Inc. (SAVE-N) dropped after the ultra low cost carrier rejected JetBlue Airways Corp’s (JBLU-Q) US$33-per-share takeover offer, saying it had a low likelihood of winning approval from government regulators.

JetBlue shares rose in Monday trading.

JetBlue responded by enhancing its offer - but not its US$33 per share price - and promising a US$200-million reverse break-up fee - or US$1.80 per Spirit share - if the deal does not go through for antitrust reasons.

JetBlue’s offer is significantly higher than the current US$22.44 per share value of the cash and stock bid from Frontier made in February.

Frontier and JetBlue are in a battle for Spirit to better compete with legacy carriers, or the “big four” airlines that control nearly 80 per cent of the U.S. passenger market.

The Justice Department and six states in September sued to unwind JetBlue and American Airlines’s “Northeast Alliance” partnership, alleging the agreement would lead to higher fares in busy northeastern U.S. airports.

With files from staff and wires

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