Canadian companies shop for European assets

Canadian companies and pension funds are on a European acquisition binge, even as US and Chinese buyers slash spending on takeovers there. Europe’s low valuations and the robust Canadian dollar are spurring deals by Canadian companies such as Brookfield Asset Management (BAM) and Alimentation Couche-Tard.

“Canadian companies are basically punching above their weight in the European market,” says Julian Brown, head of corporate finance for Canada at Pricewaterhouse-Coopers in Toronto. The transatlantic dealmaking is part of a shift in Canada’s outward focus away from the US in favour of other foreign markets.

America’s economic recovery has lifted stock prices, making assets more expensive, and cash-rich Canadian buyers are looking for new markets outside North America to deploy resources. With Canadian companies and funds boosting spending on deals in Europe by 58 per cent in the year’s first half to US$15.1 billion, Canada was the second-biggest acquirer in Europe after the US, whose deal volume there fell more than 50 per cent, to US$54 billion.

Canada’s economy is about one-tenth the size of its southern neighbour’s. Chinese companies cut European takeovers by a third in the same period, to US$4.5 billion. Overall European acquisitions by foreign buyers fell 38 per cent as Greece, Italy, and Spain dragged down the continent’s economy.

Canada’s European acquisitions this year have run the gamut of industries, from Couche-Tard’s US$3.5 billion deal for service stations operated by Norway’s Statoil to CGI Group’s (GIB) US$3.1 billion acquisition of United Kingdom computer services provider Logica. Couche-Tard, the Laval (Quebec)-based operator of convenience stores, wants to “take a good shot at growth opportunities” in Europe, chief executive officer Alain Bouchard said in July.

Bloomberg