They Dig Canada

Yesterday, Thomson Reuters released a report on global M&A activity since the beginning of the year. Most of the numbers were predictably gloomy: global M&A is down 40% and US M&A is down nearly 50%. In Canada, on the other hand, M&A is up 25% from last year. Pretty much the entire increase can be accounted for by the merger of Petro-Canada and Suncor. This $20 billion deal made up nearly 30% of 2009's Canadian M&A of $61 billion, but that still means Canadian M&A is flat while the rest of the world is off 40%.

My sources in Canada tell me that the M&A boom has been fueled (sorry) by a scramble to grab Canada's natural resources. The numbers bear this out. A search of the M&A database in Westlaw Business found 88 deals announced since the beginning of the year where a Canadian company was the target. 36 of those 88 were acquisitions of mining or oil & gas companies.

In 16 of those 36 deals, the acquiror was a non-Canadian entity. It has been reported that the Chinese government is implementing a "go abroad" investment strategy and in the last few days, they appear to have taken a special interest in Canada. On June 29th the Swiss-Canadian oil company Addax was acquired by Sinopec for a 47% premium over its share price. Denison Mines, meanwhile, has been fighting off rumors that it sold a control stake to Sinosteel and today CIC, the Chinese sovereign wealth fund, announced it was buying 17% of Teck Resources.