Q: After many years of holding a full position in Laurentian Bank, I am just now breaking even if I sell at the current price. But with BNS and TD not interested in acquiring LB and the other major banks tied up in their own acquisitions, who does that leave as a potential buyer? Is it too risky to hold onto my shares lest the price plummets if there is no sale?
5i Research Answer:
Risks have certainly increased here with bidders dropping out left and right. We had expected TD and BNS to be most interested, and they are out. The stock was $33 before the first announcement, and with 'no sale' is certainly vulnerable to get back there. A sale 'could' go as high as ~$50, so the risk/return scenario is now getting close to about even. While we still think it is worth holding, because banks are very scarce assets in Canada, if one has a big holding we would adjust positions to a comfortable size upon last week's developments.