By John Tilak
TORONTO, July 7 (Reuters) - Canadian mergers and
acquisitions slipped in the first half of 2016, with sluggish
activity in natural resource sectors offsetting some large
infrastructure deals, according to Thomson Reuters data released
on Thursday.
Goldman Sachs (NYSE:GS) GS.N topped the league tables, Barclays Plc
BARC.L ranked second, and Lazard was third, followed by Morgan
Stanley MS.N , Wells Fargo (NYSE:WFC) WFC.N and J.P. Morgan Securities
Canada.
CIBC, Scotiabank and RBC were the strongest performing
domestic banks. RBC also advised on the highest number of deals.
Deal volume fell to $108.2 billion from $137.9 billion a
year ago, the data showed.
The biggest transactions were TransCanada's TRP.TO $10.2
billion acquisition of Columbia Pipeline Group, and Fortis Inc's
FTS.TO proposed $11.3 billion purchase of ITC Holdings Corp.
While energy and other resource companies started taking
advantage of firmer commodity prices to raise equity, they have
been cautious on acquisitions.
Cross-border deals were fueled by both outbound and inbound
acquisitions.
"The most significant trend is the continued increase in
cross-border activity by pension funds, asset managers like
Brookfield and selected strategic operators," said Bruce
Rothney, chief executive of Barclays Canada, which advised ITC
on the Fortis deal.
"Because of their long-term focus and longer duration
liabilities, they continue to aggressively pursue alternative
investment categories," he said.
Rothney expects further consolidation in the power sector,
with Emera EMA.TO , Fortis and Hydro One H.TO likely to be
active dealmakers.
Energy deals have largely been asset sales from struggling
producers looking to strengthen balance sheets and, in some
cases, simply survive.
Last month, Penn West PWT.TO agreed to sell its
Saskatchewan assets to Teine Energy Ltd for C$975 million
($749.19 million) in an a bid to avoid a default.
"The oil-and-gas asset market has improved. That's driven
some of the financings," said Derek Neldner, head of Canadian
investment banking at RBC, which advised Penn West on its sale.
"The cross-border trend is up quite significantly," he
added. "It's partly a function of a weak Canadian dollar that
has made Canadian businesses more attractive to foreign buyers."
Investors remained cautious about Britain's vote on June 23
to leave the European Union.
"The full effect of Brexit remains to be seen," said Alan
Klein, co-head of Simpson Thacher & Bartlett's M&A practice.
"Deals that make strong strategic sense will continue to move
forward in the second half of the year."
Among law firms, Simpson Thacher was the lead M&A advisor,
followed by Osler Hoskin & Harcourt and Blake Cassels & Graydon.
($1 = 1.3014 Canadian dollars)