Garda, Verenex and BCE follow-up

Allright, time for a little follow on previously mentionned stocks.

Let's start with Garda (GW.to). The stock is in an absolute freefall. Down more than 30% today on the Toronto Stock Exchange and closed at 1.58$. This is a stock that has a 52-week high of 20.82$. It seems that the stock is in the middle of a perfect storm: disappointing results, lots of debt, trying to sell a unit in the middle of a credit crisis... Things aren't looking too good and the market is really punishing it.

Verenex Energy (VRX.to) was also mentionned in an earlier post. After falling from 9$ to 7$, the stock had a 25% 1-week gain and has closed at 8.79$. Still no news about the strategic review (i.e. wanting to sell the company) but the operations are perceived has solid (by opposition to the disappointing Garda) so the stock hasn't been punished like GW.

Lastly, BCE closed at 37.20$ with a sale price of 42.75$ to be given in less than 3 months. It certainly still looks like an attractive opportunity from a pure arbitrage point of view but remember that the credit market is very tight and the biggest deal in Canadian history could potentially not get done because of lack of capital from the buyers.

As you can see, with the credit crisis, the merger and acquisition world is rough. Stock Investment Partner suggest that you be careful when trading on an arbitrage basis.

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.