CANADA STRIKES BACK: Canadian companies are bulking up with foreign acquisitions. But will the pricey deals pay off? – by Ian McGugan and Barrie McKenna (Globe and Mail – September 17, 2016)

TORONTO AND OTTAWA – A decade after a flurry of corporate takeovers spurred worries that deep-pocketed foreign giants would turn Canada into a branch-plant economy, precisely the opposite story is playing out across North American markets.

Canadian companies are bulking up to global scale through a spate of bold mergers and acquisitions. This week, Potash Corp. of Saskatchewan Inc. and Agrium Inc. of Calgary announced that they are joining forces to create the world’s largest crop-nutrient company.

A few days before, Enbridge Inc. of Calgary unveiled a U.S. deal that will result in North America’s biggest energy infrastructure firm. And just a couple of weeks prior to that, Quebec-based Alimentation Couche-Tard Inc. completed a super-sized U.S. acquisition of its own to become the continent’s No. 1 operator of convenience stores.

The outburst of deal making over the past month follows a year in which the value of Canadian direct investment abroad surged to its highest level ever. Flush with cash but faced with sluggish growth prospects at home, domestic companies are eager to find new ways to expand their sales and profits. Many are taking advantage of accommodating markets to buy foreign assets and add unprecedented heft.

Corporate Canada’s appetite for growth has its risks, especially in a stock market that seems fully valued. However, it’s a logical reaction to two global trends – agonizingly slow economic growth coupled with record-low interest rates.

Companies in many countries have responded to those twin factors by doing what comes naturally. They’ve used cheap money to take over rivals, thus boosting the acquirer’s revenue despite the slow-growth environment.

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