Takeovers to come

It was interesting to see a journo tackle the ever tricky topic of “which firms are going to be taken over next”. Names included: CAE, (CAE:TSX), Cognos (CSN:TSX), AGF (AGF-B.TSX) and GMP Capital Trust (GMP-UN:TSX). I buy the CAE and Cognos ideas, and perhaps AGF now that the shares have performed better of late. But GMP?

Why would the boys ever sell out? If you already have plenty of $ personally, what’s the point of selling your team to HSBC, Lehman Bros. or a local bank? I’m not even sure I see the rationale for why a global player would want to add that much bulk. Only C.I. (CIX-UN:TSX) makes any sense, as their acquisition of Rockwater (RCC:TSX) can be assumed to be just the first step in a series of moves.

Here are some ideas that were missed on his list, but are equally worthy candidates in my mind:

MacDonald Dettwiler (MDA:TSX)
– decent balance sheet (current debt/EBITDA of 2x), no controlling shareholders, two distinct businesses under one roof (space biz and information/tech platform)

Open Text (OTC:TSX)
– lots of reasons why a strategic buyer might want it, particularly now that Hummingbird has finally been merged in, free cash flow will return in earnest, the entire street is patiently waiting for this movie to end

Q9 Networks (Q:TSX)
– the business is starting to grow nicely, $49 million in working capital, $54 million in cash, profitable

Intermap Technologies (IMP:TSX)
– $50 million in working capital, just one local analyst covering the name, revenue grew 50% yr./yr. but the firm inexplicably increased losses by almost 100%, only one new board member has been added in 6 years

Research In Motion (RIM:TSX)
– 8 million subscribers starts to get interesting for the handset fellows (Motorola, Nokia, etc.), SEC “issues” only make it more likely – not less – that something will happen here vis-a-vis a strategic takeover

Dalsa (DSA:TSX)
– chronic boom-bust nature of the stock price makes for often frustrated shareholders, cap ex on hollywood “play” misunderstood by the market, $23MM in cash flow from ops in 2006, $51MM in working capital, Savvas is a super fellow but no clear succession plan

Merge Cedara (MRG:TSX)
– a train wreck as a result of accounting woes, but what they are doing is important to their hospital clients, $46MM in cash (market cap of $150MM), $21MM in deferred revenue

To our i-banking friends, this list is yours for the pitching.

MRM