RBC Capital Rates IPSCO (IPS) a Top Pick; Ripe for a Takeover

In a note today from RBC Capital on IPSCO Inc. (NYSE: IPS), the firm initiated coverage on the stock with a Top Pick rating and $116 price target, calling the company a market leader and ripe for a takeover.

The report said IPSCO is a prime takeover candidate with upside to $168. Analyst Marie Millien said, "M&A activity has been red hot in the pipe and tube industry. IPSCO has (1) a dominant position in these markets; (2) exposure to the fast-growing seamless and premium connections segments of the OCTG market; (3) efficient operations; and (4) $600 to $700 million of discretionary free cash flow a year, making it an obvious target. Recent OCTG transactions closed at EV/EBITDA multiples between 7.15x and 8.9x. At 7.0x our 2007 EBITDA estimates, IPSCO would be valued at $168, or a considerable 75% upside, in the event of a takeover."