That is the bottom line of Andrew Coyne's piece today.
...Anticipating a bidding war, investors marked up the price of Alcan stock beyond even the 20% premium implied by Alcoa's offer: the stock closed at $90.57, up 34% on the day. The effects spilled over into the broader market: The S&P/TSX Composite Index jumped more than 95 points, or 0.7%. On a market capitalization of nearly $2.25-trillion, that works out to an additional $16-billion in asset value.
All told, then, in addition to the roughly $8-billion windfall for Alcan shareholders, the Alcoa bid enriched shareholders in other Canadian companies by approximately the same amount. And that's not all. An increase in the purchasing power of the Canadian dollar means imports cost less: on roughly $265-billion in merchandise imports from the U.S. a year, a halfcent rise in the dollar translates into savings of nearly $1-billion annually for Canadian consumers.
The solution to all this good news is having government step in and use the oh so wonderful track record to usurp the market and pick winners and losers. Or more correctly pick losers and even bigger losers, all on the taxpayers quarter.
Comments (3)
…the Alcoa bid enriched shareholders in other Canadian companies by approximately the same amount…
Not quite accurate. The rise in the TSX on Monday was largely attributable to Alcan.
Therefore, unless you are invested in TSX Composite index funds, or have positions in index linked derivatives, or have positions in equities benefitting from similar takeover attempts and/or speculations, you were not a direct beneficiary of the takeover attempt.
A rise in the C$ has a downside for the export sector which has an indirect impact on the buying power of Canadians.
Posted by cb | May 9, 2007 9:48 AM
Posted on May 9, 2007 09:48
What about the state organ corporation of a communist dictatorship buying up companies in Canada? Is there any limit to the market’s wisdom?
Posted by Alan | May 9, 2007 10:28 AM
Posted on May 9, 2007 10:28
If you don’t like Canadian companies being bought - buy some shares and don’t sell when the foreigners come calling. If you’re forced to sell because they get over the mandatory buyout number, buy shares in other, up and coming Canadian companies. But that’s not what happens. The shareholders will quietly take dividends from their new Alcoa stock or they cash out and buy a(nother) cottage. I wonder if Ralph Goodale’s lifting of limits on foreign holdings has done more to encourage buyouts than anything Flaherty has done.
Posted by Mark Dowling | May 9, 2007 11:34 AM
Posted on May 9, 2007 11:34