Canaccord Advises Investors To Drop Bell Canada Deal For Alcan

Chris Rankin, an analyst at Canaccord Adams, has some advice for investors trying to make money off previously announced takeovers. He looked at a pair of deals: The private equity purchase of Bell Canada Inc. (BCE), and Rio Tinto Plc’s (RTP) bid for Alcan Inc. (AL).

Teachers’ and its partners are offering Bell shareholders C$42.75 per share, and Rio plans on handing over US$101 for every Alcan share. Shares of both of those stocks are trading below these offer prices, with Bell around C$40.90 on the Toronto Stock Exchange, and Alcan near US$98.70 on the New York Stock Exchange at midday Monday.

When there is a gap between where a stock is trading and the price it will be bought, merger arbitragers take positions in those stocks to pocket the difference. The margin between the offer price and price where the stock are trading usually shrinks as the closing price approaches.

In a research note, Mr. Rankin said investors should take their money out of Bell and put it in Alcan. He believes the CRTC, the regulator that has to approve the Bell deal, will take longer than expected to give its blessing. Mr. Rankin thinks approval could take until March 27, 2008, a date based on reviewing six other transactions over the past seven years which have required similar approval from the CRTC.

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