From yesterdays's Financial PostBoyd Erman and Carrie Tait, Financial Post
Published: Friday, April 28, 2006
CASH PILE What does the TSX Group Inc. have planned for its cash pile, which has climbed to almost $314-million, wonders National Bank Financial analyst John Aiken. Perhaps a little shopping trip abroad?
"With such a large and, in our view, unnecessary level of cash on the balance sheet, the obvious question becomes: Why is TSX keeping it?" Mr. Aiken wrote in a report yesterday. "This situation raises the possibility that cash is being kept in reserve to fund potential acquisitions."
With little chance of a tie-up anytime soon with the derivatives-focused Montreal Exchange because of restrictions on consolidation, TSX Group may look outside the country. Investors have been speculating about such a move for a long time. But Mr. Aiken cautions that might be a costly expedition now.
"Given valuations of international exchanges at this point, we do not believe that TSX could make an out-of-market acquisition that would be accretive in the near term."
Mr. Aiken, along with some investors, was looking for a special dividend of at least some of the money (which amounts to $4.60 a share) when the company announced its first-quarter results this week.
That said, Mr. Aiken isn't too concerned. He has a $59 target for the stock, which he rates outperform, and said that the selloff in the shares after the TSX cut fees is overdone. "This is an excellent entry point for the stock," he wrote. Boyd Erman