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Big Oil Merger, Sales Taxes and Weekend Reading

Merger News

Suncor (SU) is about to potentially merge with Petro Canada (PCA) in an all stock exchange to become the largest energy company in Canada.  Should the deal meet Canadian government approval, both companies will trade under the symbol SU.  Existing PCA owners will receive 1.28 shares of SU for every share of PCA that they own.

Question for you, what are your thoughts on selling a company that is about to merge with another?  I’ve been thinking about selling my PCA shares ever since the big news.

Disclosure: I hold both SU and PCA.

Sales Tax Going up in Ontario!

It seems that Ontario may be going the way of harmonized sales tax (like Atlantic Canada).  The Ontario government may say that it’s for the business owners, but in the end, it’s the consumer who will be paying more taxes.  When they harmonized sales tax here in NL, everything went up in price.  Gasoline, baby clothes, new houses, real estate/lawyer fees and insurance all got more expensive.

This new change in the taxation system may affect other Canadians as well as there are quite a few mutual fund companies based out of Ontario.  This may result in mutual funds increasing their MERs.

You can read more about this on Canadian Capitalist.

Weekend Links

One year ago, I explained the differences in Non-Refundable Tax Credits and Tax Deductions.

Four Pillars hosted this weeks Carnival of Personal Finance!

The Financial Blogger lists 3 reasons why investors should not time the market.

Money Grubbing Lawyer has an entertaining article about negotiating in: Leave Emotion out of Negotiation.

The Digerati Life writes about the buy and hold strategy.

Lazy Man and Money lists 7 new rules of financial security.

The Sun’s Financial Diary evaluates Pin vs Signature debit transactions.

Brip Blap tells us that everything will be fine.

Money Smart Life claims that all CEO’s are crooks!

My Dollar Plan explains how to manage money in your marriage.

Generation X Finance lists 5 things we can learn from the market bust.

Frugal Dad shows us the financial impact of having kids early.

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9 Comments

  1. Canadian Capitalist on March 27, 2009 at 8:46 am

    Thanks FT! Have a great weekend!

  2. The Reverend on March 27, 2009 at 9:07 am

    Why are you thinking of selling your PCA holdings? Worries about the merger not going through and a share price impact (a la BCE)? Diversification issue?

    • FrugalTrader on March 27, 2009 at 9:16 am

      Hey Reverend,

      PCA is held in my dividend portfolio, after the merger, I’m thinking that SU will keep it’s low payout. In addition, I already own shares of SU in my RRSP and I don’t want to be over exposed to the one company.

  3. Finance_Addict on March 27, 2009 at 10:58 am

    Based on SU isn’t PCA trading roughly $3 dollars below it’s eventual selling price? Would you want to wait for that small gap to close?

  4. Aman@BullsBattleBears on March 27, 2009 at 11:00 am

    great links to look at!

    FT, when you say overexposed, what % of your portfolio would end up being SU shares?

  5. Millionaireby45 on March 27, 2009 at 11:17 am

    I think it is crazy to have two separate taxes and I think it only makes sense harmonized them. At the same time, I think that they should reduce the harmonized tax by a few percent. This would result in some services/items having higher taxes and some having lower ones and hopefully on average the overall taxes that an individual would pay would remain neutral.

  6. CanadianFinance on March 27, 2009 at 11:48 am

    PCA was on my watch list for a Smith Manoeuvre. As SU, the dividends may not fit my plan.

  7. FrugalTrader on March 27, 2009 at 12:24 pm

    Aman, approximately 5% of my portfolio will be SU after the merger.

  8. Dividend Growth Investor on March 31, 2009 at 11:47 am

    FT,

    You could easily sell the shares. However, if you are confident that the deal would go through and the spread is worth it, why not play some merger arbitrage to get top dollar for your holdings?

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