Disclosure: Bullpen receives compensation from VersaBank for research coverage. VersaBank is also an IR client of LodeRock Advisors, an affiliate of Bullpen.
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WHAT'S ON TAP
HOT OFF THE PRESS
BCE sells tower stake to La Caisse for $2.5B
BCE Inc. (BCE) is forming a wireless tower infra company and selling a 49.9% stake to La Caisse for $2.45B, echoing the Telus deal last year at better economic terms…
… which likely reflects the size difference, with BCE’s being Canada’s largest dedicated tower company. The monetization will help drive progress towards its 2027 leverage target of 3.5x (and 2030 target of ~3x)…
… though it’s partly optics, as just under 50% of TowerCo’s cash flows will go to La Caisse. The sell-down could also help fund the company’s growth ambitions…
… with most of the spend tied to its $1.7B Saskatchewan AI project coming this year. While BCE’s multiple has compressed on both industry and company headwinds…
… and turnarounds of this scale take time, there’s room for a re-rate if these moves result in improving fundamentals.
High Liner gets taken out by Umios for $1.3B
High Liner Foods (HLF) is getting taken out by Umios in a ~$1.3B deal, which adds ~15% to its top line…
… and diversifies the business away from Japan (66% from 75%), with roughly three-quarters of High Liner’s revenue coming from south of the border.
The transaction also builds on Umios’ downstream operations…
… creating a vertically integrated North American seafood business, which complements its growing European footprint and supports global expansion plans.
Given the strategic importance, Umios was willing to pay up - though the near-80% premium price tag is on par with HLF’s long-term average multiple…
… reminding us of the recent $2.5B Jamieson takeout (also a Japanese buyer), as foreign capital takes advantage of the persistent discount in Canada.
Ovintiv buys Logan Energy for $1.3B
It didn’t take long for the Logan Energy rumours to be proven true, with Ovintiv (OVV) stepping in to the tune of $1.3B - expanding its presence in the Montney…
… by 200K core acres (80% undeveloped) and adding 220 premium return wells (35% IRR at $55 WTI) to its drilling inventory. While the immediate production lift is small…
… management expects run-rate synergies of ~$60M, which would improve OVV’s EBITDA netback by 4% (all else equal).
The company expects to keep the balance sheet in good shape, with a sub-$4B net debt target post-close…
… which gives them the financial capacity to continue pursuing growth while digesting this one and last year’s $4B NuVista deal.
CAE sells Flightscape to SITA for $500M
CAE Inc. (CAE) closed up 5% after announcing the $500M sale of Flightscape to SITA, which represents ~5% of the company’s enterprise value…
… and most of the 8% of non-core revenue under review due to a lack of strategic fit.
The company thought when we bought Flightscape that there was a synergy in going to market with our training systems. The reality is they go to market completely differently from the airlines.
As that part of the portfolio gets shopped, the company should see the performance of its civil aviation segment recover…
… though a return to growth could take time, with the backlog down heading into fiscal 2027 and the Middle East conflict having a near-term impact.
As that headwind dissipates, a leaner company should emerge - which could drive the defense re-rate CAE has missed out on if new management can execute.
ON OUR RADAR
VersaBank (VBNK) received the final regulatory green light for its reorganization, which aligns its structure to the standard US bank framework…
… given the segment should overtake its scale in Canada if it continues on its current trajectory, with management targeting US$3B of SRP volumes in 2027.
GAINERS & LOSERS
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