Koch’s decision to buy Georgia-Pacific has sparked an interest in forest product companies’ shares.
Koch’s decision to buy Georgia-Pacific has sparked an interest in forest product companies’ shares.
The Globe and Mail recently reported that speculation of possible further takeovers has caused the shares of companies such as Abitibi-Consolidated, International Paper, Weyerhaeuser and Domtar to shoot up.
On the heels of Koch’s announcement that it had acquired Georgia-Pacific for $13.2 billion, Abitibi-Consolidated’s shares jumped 24 cents, or 5.3%, whereas the worth of Domtar’s shares rose by 5.04%. Weyerhaeuser’s shares rose by 4.6%, and International Paper’s increased by 5.3%.
The buoyed prices are particularly significant in light of the recent plummet many forest product companies’ shares have taken. Domtar, after posting disappointing Q3 results was forced to take the drastic measure of suspending its dividend.
However, according to Daryl Swetlishoff of investment firm Raymond James, the recent increases are par for the course when news of a takeover of such magnitude as the Koch/Georgia-Pacific scenario hits the stands.
“When you have a catalyst like this, it causes investors to look at the stocks in terms of merger-and-acquisition multiples and less so in terms of cash-flow multiples,” the Globe reported him as saying. “The Georgia-Pacific acquisition has focused investors to identify situations where the underlying asset value is out of whack with its current share price.”
The Globe and Mail further reported that Norbord could possibly be next in line for a takeover, due to its solid assets and a stock price that dropped 8.5%
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