Stocks exploring strategic options

With the economic situation apparently worsening, many companies are in trouble and seeking help. One way to do this is to explore strategic options. This is a fancy expression that usually means that the company is looking for a buyer. Let's look at two recent examples of firms listed on the Toronto Stock Exchange.

Last week, oil and gas explorer Verenex Energy (vnx.to) announced a review of strategic alternatives noting that competitors were very eager to find or acquire new reserves. However, one week later there is still no offer officially on the table.

Today, Garda World Security Corp (gw.to) revealed disappointing quaterly results, lost more than 50% of its value on the stock market and started exploring strategic alternatives. The word on the street is that bankers at BMO Nesbitt Burns are close to closing a deal that would see Garda sell its cash-in-transit or armoured car division. The CEO is also thinking about taking the whole company private. This company is known to move pretty quickly and we could see a conclusion to this review faster than Verenex's.

Keep in mind that review of strategic options do not always lead to a sale of the company. With the credit market as tight as it currently is, potential buyers could have trouble getting the financing needed. Entering a position based on the announcement of a review can be considered speculation and should be done only by risk averse stock market investors.