- On Monday, LKQ Corporation agreed to acquire Uni-Select (TSX:UNS) for C$2.8 billion, leading to Uni-Select’s share price soaring 16.6 per cent
- On Tuesday, Baytex (TSX:BTE) agreed to acquire Eagle Ford operator Ranger Oil for C$3.4 billion, leading to Baytex’s share price plummeting 8.00 per cent
- Uni-Select’s shareholders are expected to receive C$48.00 for each share held
- Ranger shareholders will receive 7.49 Baytex shares plus US$13.31 cash for each Ranger common share, for total consideration of about US$44.36 per share
Two billion-dollar acquisition announcements were made earlier this week, each with opposite impacts on the Canadian stock market.
On Monday, LKQ Corporation, an American company, announced its acquisition of Uni-Select for C$2.8 billion. Uni-Select’s share price surged above every other stock to 16.6 per cent, more than double the percentage of its nearest competitor. Additionally, the Toronto Stock Exchange’s S&P/TSX composite index, which had been struggling for weeks, ended the day up 0.2 per cent at 20,260.13. While it wasn’t solely due to Uni-Select’s performance, it was a contributing factor.
On Tuesday, Baytex Energy Corp announced its plan to acquire Eagle Ford operator Ranger Oil for C$3.4 billion. The announcement caused Baytex’s share price to drop 8.75 per cent and lead the losers’ chart at 12.48 p.m. ET.
Big-budget transactions can have a significant impact on a company’s fortune and the value of its shares. Investors may buy more shares to reap impending gains or divest their shares to minimize losses.
Uni-Select shareholders are expected to receive C$48.00 for each share held. The acquisition will provide LKQ with an opportunity to establish a significant presence in Québec, including Uni-Select’s Boucherville, Québec head office, expanding upon LKQ’s already existing business operations in that province. The transaction is projected to generate approximately US$55 million of annual run-rate cost synergies by the third year following closing, plus incremental revenue and margin opportunities across the Uni-Select and LKQ businesses. LKQ plans to fund the transaction through a combination of cash on hand and new debt.
While LKQ Corporation is a leading provider of alternative and specialty parts to repair and accessorize automobiles and other vehicles, Uni-Select is a leader in the distribution of automotive refinish and industrial coatings and related products in North America.
Regarding the second transaction, Ranger shareholders will receive 7.49 Baytex shares plus US$13.31 cash for each Ranger common share, for total consideration of approximately US$44.36 per share. The cash portion of the acquisition is expected to be funded, in part, through expanded credit facilities and the issuance of debt securities. When the transaction is completed, Baytex shareholders will own approximately 63 per cent of the combined company, and Ranger shareholders will own approximately 37 per cent. The acquisition is expected to close in the second quarter of 2023.
The transaction more than doubles Baytex’s EBITDA and nearly doubles its free cash flow. The combined organization will be led by Eric T. Greager, President and Chief Executive Officer of Baytex and the Baytex leadership team.
Baytex Energy Corp. is an energy company based in Calgary, Alberta, while Ranger Oil Corporation is a pure-play independent oil and gas company engaged in the development and production of oil, NGLs, and natural gas, with operations in the Eagle Ford shale in south Texas.
