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Europeans can't make a buck in Europe anymore. They are coming to Canada.


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As Italy lurchs toward default and markets test whether European leaders have the guts to save the euro, some of the continent’s strongest companies are trying to dodge the mess by setting their sights on Canadian targets as a path to growth.


One relatively small takeover announced Wednesday illustrates the potential for a spurt of similar deals in the industrial sector. Hochtief AG, Germany’s largest construction company, said its U.S. subsidiary Turner would buy a controlling stake in Edmonton-based Clark Builders for $68-million.


Privately held Clark is Canada’s 17th-largest construction firm, according to Reed Construction data, generating sales of $492-million last year. The remainder of its shares are owned by employees.


“The European guys right now are hurting. The economy is very slow,” said Maxim Sytchev, an analyst at Toronto-based Altacorp Capital. “Their base hasn’t been growing over the last three to four years and as public companies, they’re paid to grow their assets. And if you look across the world where there’s still growth … Canada right now stands out.”



More Canadian building, engineering, architectural and planning firms will get taken out in the weeks and months ahead, Mr. Sytchev predicts, and the size of the acquisitions will balloon as well.


“At some point, somebody’s going to take a run at some of the public companies,” he said.


Among the top potential targets are Toronto construction firms Aecon Group Inc. and Bird Construction Co. as well as Calgary-based Churchill Corp.


Canada’s 100 largest infrastructure projects in 2010 were worth an estimated $96-billion. Fully 46 of them were not among the top 100 the year before, underscoring just how vigorous the industry is at the moment.


One key factor stoking European interest in Canadian industrial firms is the high prevalence of public-private partnership collaborations in the domestic market. The new $2.5-billion Université de Montréal megahospital is a P3 between the Quebec government and the private sector. So is the $1.42-billion Edmonton ring road on Anthony Henday Drive.


The public-private model was first developed in the U.K. And European players have major experience with those types of contracts.


“All of a sudden you have the expertise that the European companies have and you have a Canadian market that’s growing in their area of expertise,” Mr. Sytchev said, adding he believes European firms are busy behind the scenes evaluating Canadian assets. “We haven’t seen a volume of deals come to roost yet. But I think it’s just a matter of time.”


The Canadian economy is growing robustly and construction is booming, Hochtief said in a statement outlining its purchase of Clark. Investments of up to $20-billion are slated for new public- and private-sector projects in the country over the next three years, the company noted.


“Such rapid growth is being met by only a handful of qualified construction companies,” Hochtief said. “There’s a lot of room for an expanding provider” like Clark. Hochtief’s U.S. subsidiary Flatiron is already active in Canadian infrastructure projects.


Churchill stands out as a potential takeout target because almost all of its revenue exposure is to resource-rich Western Canada. The company reported third quarter earnings on Wednesday that were below analyst forecasts. But the argument is that its geographical skew puts it in a better spot than rivals.


Canadian merger and acquisition activity is in fact shifting away from the skyscrapers of Toronto and Montreal toward Western Canada in particular, PricewaterhouseCoopers LLP said in a report released Oct.28. So far this year, there have been 265 acquisitions of Alberta companies worth close to $14-billion. Measured by value, that represents 26% of all Canadian takeover activity.




It is quite an interesting article. I would say more, but I do not want the jinx it. Is Canada the new land of opportunity? Which countries is Canada really competing with? Australia and Brazil?

Edited by jesseps
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