Canada Stocks Gain on Oil, Takeover Speculation; Suncor Rises

By John Kipphoff

Nov. 26 (Bloomberg) -- Canadian stocks gained a fourth day, the longest rally since August, as energy shares climbed on rising oil prices and speculation commodity producers whose shares have slumped may be targeted for buyouts.

Suncor Energy Inc. led energy producers higher after Nexen Inc. dismissed speculation it may be a takeover target. Potash Corp. of Saskatchewan Inc. advanced along with prices of corn and soybeans. BCE Inc. plunged after its auditor said that the planned C$52 billion ($42 billion) leveraged buyout would leave Canada’s biggest phone company insolvent.

The Standard & Poor’s/TSX Composite Index rose 2.4 percent to 8,643.52 in Toronto. The S&P/TSX has still fallen 38 percent this year and is poised for its worst annual drop on record, after worldwide credit losses approached $1 trillion and commodity prices slumped form records.

“I’m cautiously optimistic for a three-month rally,” said Andrew Martyn, who helps manage about C$450 million at Toronto- based Davis-Rea Ltd. “There are some really beaten-down companies. Look for companies who need no money. The long-term trend is still down.”

Measures of energy and raw-materials producers gained 6.4 percent and 6.5 percent, paring their respective year-to-date declines to 34 and 41 percent. The two industries account for more than two fifths of the S&P/TSX’s value and led the index to a record in June as a five-year boom in commodities peaked.

Oil-Sands Producers

Suncor Energy Inc., the second-largest oil-sands producer, gained 12 percent to C$26.19. The stock has lost more than half its value this year. Canadian Natural Resources Ltd., owner of the Horizon oilsands mine, rose 12 percent to C$49. EnCana Corp., the nation’s biggest energy company, added 8.4 percent to C$56.33.

Nexen, the co-owner of the Long Lake oilsands project in Alberta, gained 11 percent to C$22.28 and earlier climbed as much as 19 percent, before reiterating that it isn’t for sale. Rival oil and gas producers, including France’s Total SA and Royal Dutch Shell Plc, were considering takeover bids, the Financial Times reported Oct. 29, without saying where it got the information. Total spokesman Kevin Church and Shell spokeswoman Sarah Smallhorn declined to comment today.

Petro-Canada, which is has put on hold a final decision on its C$25.3 billion ($20.6 billion) Fort Hills oils sands project, added 13 percent to C$29.20.

Long Lake partner Opti Canada Inc. and Fort Hills investor Teck Cominco Ltd. also rose. Opti jumped a record 44 percent to C$1.80.

Teck, Canada’s biggest diversified mining company, added 26 percent to C$5.27. It has still lost 85 percent of its value this year on concern that it won’t be able to repay $9.8 billion in loans that it took out to finance acquisitions.

China Rate Cut

Crude oil for January delivery climbed 7.2 percent to $54.19 a barrel in New York after China, the second-biggest energy-consuming country, cut interest rates to bolster growth, and on speculation that OPEC nations, the producers of more than 40 percent of the world’s oil, may cut output again. Futures have dropped 63 percent from a record in July.

Natural-gas, copper, corn and soybean prices advanced, sending the Reuters/Jefferies CRB Index of 19 commodities to a 3.3 percent gain, its third in four days since falling by over half on Nov. 20 from a July record.

Potash, the biggest maker of crop nutrients by market value, increased 5.5 percent to C$76.26. Goldcorp Inc., the second-biggest bullion mining company by market value, gained 7.2 percent to C$32.75.

BHP Billiton Ltd., the world’s largest mining company, may target other acquisitions to replace the growth its failed hostile bid for Rio Tinto Group would have provided, said Evy Hambro, a BlackRock Inc. money manager.

Rebound

Research In Motion, the maker of the BlackBerry e-mail phone, gained 8.3 percent to C$55 after sliding 12 percent in two days on analyst reports saying a shortage in supply may hurt sales of its new “Storm” handset in the U.S. The stock has retreated two thirds since reaching a record on June 19.

“You have to be prepared to hold for two years,” Martyn said. “This feels like a bear-market rally.”

BCE dropped 34 percent to C$25.25 and earlier slid 40 percent for its steepest decline since January 1983, when Bloomberg records begin. The current price in Toronto is 43 percent below the C$42.75 a share offered for BCE by the Ontario Teachers’ Pension Plan and its partners.

BCE, which planned to go private by Dec. 11, said KPMG has evaluated the company and said it would probably be insolvent if it completes the deal under current terms and market conditions. KPMG also said the phone company’s current capital structure meets solvency requirements, BCE said.

“It looks unlikely that the BCE deal will be completed,” said Michael Smedley, who helps manage about $1.2 billion at Morgan Meighen & Associates in Toronto, including BCE shares. “It’s the most serious local market event to take place during this long financial crisis.”

Telus, the nation’s second-largest phone company, declined 1.9 percent to C$38.09. Rogers, the biggest mobile-phone provider, slipped 2.3 percent to C$34.40.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.