Genivar Income Fund has been on the acquisition trail for quite some time, but its latest quarterly earnings are giving reason for some analysts to suggest that a bigger deal could be coming.
"It appears Genivar is ready to make an international acquisition, which is likely to be a larger 'platform' transaction to establish itself with a sizeable base in a new region," wrote analyst Michael Tupholme at TD Securities.
The firm is lining up the funding for it, too. Last week Genivar entered into new syndicated credit facilities and expanded its revolving credit facility from $80-million at the end of the second quarter to $225-million.
At the moment Genivar has a small international presence in Trinidad and Tobago, but that market is in rough shape after the financial crisis. The new government also has some people wondering how engineering contracts will be awarded in the future. TD predicts a new international deal could come in either North Africa or South America because the U.S. is still too battered from the recession.
This acquisition talk comes on the heels of Genivar's solid third quarter earnings. EBITDA came in at $24.3-million and diluted earnings per unit hit $0.61. "Genivar simply benefits from superior regional and end-market diversification, with a concentration of business in Quebec (a tight oligopolistic market that has avoided most of the recession) and no exposure to commercial real estate development in the U.S. or the U.K.," noted National Bank Financial analyst Benoit Caron.
Genivar's last acquisition came last quarter when the firm bought Ontario-based Pride Schropp McComb Inc. The deal was in line with Genivar's domestic strategy. "In Canada the trust is generally searching for smaller to medium sized 'bolt-on' acquisitions and continues to see plenty of such targets," TD noted.