AIR CANADA COURIER BUY SHARPLY ALTERS INDUSTRY Air Canada's 54 mln U.S. dlr acquisition of Gelco Corp's <GEC> Canadian unit has dramatically altered Canada's fast growing courier industry, largely dominated by U.S. companies until this year, company officials and analysts said. State-owned Air Canada takes over the country's second largest overnight courier business just two months after another Canadian company, <Onex Capital Corp Ltd>, approved the acquisition of number one ranked Purolator Courier Ltd from New Jersey-based Purolator Courier Corp <PCC>. But analysts said the two acquisitions were prompted by financial restructuring undertaken by the U.S. parent companies and likely don't represent an industry trend toward buying out foreign owned courier operations. "It's a case of whether you can buy from the right people at the right time," McLeod Young Weir Ltd transportation analyst Tony Hine commented. The two acquisitions fit with a larger move by U.S. companies embroiled in a take-over or restructuring to sell-off their Canadian units to generate ready cash, said Nesbitt Thomson Deacon Inc analyst Harold Wolkin. "There is a very good correlation between the U.S. parent selling Canadian subsidiaries and the U.S. parent either being under siege or taking someone else over," he said. Gelco Corp, of Minnesota, decided to sell Gelco Express Ltd as part of its previously announced program to sell off four operating units to buy back shares and pay down debt, Gelco Express marketing vice president James O'Neil told Reuters. The sale is the first under Gelco's divestiture program, and proceeds will be used to help pay down 350 mln U.S. dlrs of debt by year-end, the company said. While company officials declined to disclose earnings and revenue figures, O'Neil said Gelco Express holds a dominant position in the industry, handling more than 50,000 packages a day and generating revenues of more than 100 mln Canadian dlrs a year. The earlier move by Purolator to sell its Canadian unit formed an important part of a company restructuring program, adopted after another Canadian Company, <Unicorp Canada Corp>, acquired a 12.6 pct stake in Purolator and said it would consider acquiring the whole company. Last month, Purolator agreed to be acquired by a company formed by E.F. Hutton LBO Inc and certain managers of Purolator's U.S. courier business. For Air Canada, its acquisition of Gelco's Canadian courier business represents an "excellent financial investment" in a market it sees growing by 25 to 30 pct annually, spokesman Esther Szynkarsky said. The airline also announced it acquired a 65 pct stake in EMS Corp, of Calgary, an in-city messenger service. It did not disclose financial terms, but Szynkarsky said the two acquisitions totalled about 90 mln Canadian dlrs, and the two business have combined yearly revenues of 170 mln dlrs. She said the acquisition fit with Air Canada's strategy of seeking attractive investments that compliment its main airline business. Gelco will continue to operate with current management, independently of Air Canada, although Air Canada already operates its own air cargo business that includes a small door-to-door courier operation. "They're well run, they're a good investment, they're doing well in a growing market, and that's the way we want to keep it," Szynkarsky said. Analyst Hine said the Gelco and Purolator Canadian units will likely retain operating links with their U.S. delivery network, generating traffic for the former parent companies without them having to tie up capital in Canada. "The nature of the business is that incremental traffic is incremental revenue," Hine said. "It's sort of a sausage maker business where you put in place the sausage grinder, and the more sausage you can stuff through, the more money you make," he added.