Canadian M&A surges in third-quarter as mining, real estate deals rebound

By John Tilak

TORONTO (Reuters) - Canadian mergers-and-acquisitions activity nearly doubled in the third quarter, fueled by deals in the mining, real estate and cannabis sectors, according to Thomson Reuters data released on Thursday.

Quarterly deal volume was up 91 percent to $75.7 billion from $39.6 billion in the same period last year, the data showed, bucking a global trend of declines in Europe and Asia.

Mining transactions in the quarter included Barrick Gold Corp's (Toronto:ABX.TO - News) planned $6.5 billion acquisition of Africa-focused miner Randgold Resources (LSE:RRS.L - News), as well as China's Zijin Mining Group's (Shanghai:601899.SS - News) C$1.86 billion ($1.45 billion) deal to acquire Nevsun Resources (Toronto:NSU.TO - News).

It was the strongest period for Canadian mining M&A since the second quarter of 2011. Mining deals slowed in recent years, due in part to commodity price pressures, balance sheet weakness and investor pushback against miners seen as overpaying for assets.

The Barrick-Randgold deal, which had no premium and is being paid with equity, was well received.

“The structural issues facing the mining industry aren't going away. But I do think the Barrick-Randgold transaction may be the catalyst to trigger more consolidation in the gold space,” said Richard Tory, head of Canadian investment banking and global head of metals and mining at Morgan Stanley. The investment bank advised Barrick and Zijin on their mining deals.

Announced hostile deal activity picked up in the quarter, reaching a high since the end of 2016, according to data tracked by Kingsdale Advisors.

Highlights included Husky Energy's (Toronto:HSE.TO - News) unsolicited, $5 billion bid to acquire MEG Energy (Toronto:MEG.TO - News). In the mining sector, Lundin Mining's (Toronto:LUN.TO - News) hostile bid for Nevsun put the base metals miner in play, before Zijin agreed to a friendly deal.

"This represents the first real wave of hostile bid activity we have seen since these rules were amended in 2016,” said Geoff Barsky, head of Canadian and international M&A at BMO, which is advising MEG.

Brookfield Asset Management's (BAMa.TO) $11.4 billion agreement to acquire Forest City (FCEa.N) was the biggest deal in the quarter. Meanwhile, Constellation Brands Inc's (NYSE:STZ - News) $4 billion investment in Canopy Growth (Toronto:WEED.TO - News) highlighted the interest in Canada's red-hot cannabis market.

"The multibillion-dollar transactions are the best indicators of confidence levels in deal makers," said John Emanoilidis, co-head, M&A at Torys LLP, one of Brookfield's legal advisers on the Forest City deal. "We're seeing a great deal of money competing for deals and some very robust auction processes."

At least 17 deals were valued at more than a billion dollars in the quarter, the data showed.

($1 = 1.2864 Canadian dollars)

(Reporting by John Tilak; Editing by Tom Brown)