RE:RE:RE:RE:RE:RE:Seeking Alpha Article - Canexus "However, during the company's most recent conference call, it was clear that indicative bids were well below $100M, despite total cost estimates of over $500M to build the facility".
Comment: I call B.S. A figure was never stated nor implied. I told everyone it was worth scrap, but Doug certainly didn't.
"I would argue that management and their advisers made a very smart decision squeezing out some money from this lemon, and have started a very slow process to rebuilding shareholder value."
Comment: A smart decision? This was desperation....plain and simple. And they have not started rebuilding shareholder value. Maybe they've started rebuilding enterprise value, but shareholder value - after dilution (which is a real possibility) could further get THRASHED. A smart decision would've been realizing this was a pig and selling it when he took over the reigns......at $100 oil.
For those in Toronto, you'll recall the SkyDome was built for close to $500M ($900M in 2015 dollars), only to be sold to Rogers Communications (NYSE:RCI) for $25M, given the cost to operate the facility.
Comment: I agree, if you absolutely ignore all the revenues and profits generated from the Skydome in the last 25 years - selling out at 50,000 capacity, it looks like a terrible investment. What profits has NATO had? Zero. Dumb comparison degrades the validity of anything else he says. And he says he's an "accountant by trade"?
" the chlor-alkali business, which is also up for sale and nearing the final bid stage."
Comment: Really, like NATO? Talking about the final bid stage dates or progress is what they did with NATO....for 10 months....still trust those statements?. The only relevant info that we have is NO SALE.
Let's get specific on the analysis:
He picks an EBITDA of $31M based on some hokey-pokey analysis and truly random weighting.
Comment: The EBIDTA has been $26M in the last 2 years. Use that. There is no reason not to. And those are likely based on higher product prices than there are today.....$26M is liberal, but let's stick with it.
"$14M in corporate overheads of roughly $14 million that are attributable to the Vancouver site. His base case assumes that $8.5M can be wiped out as "synergies"?
Comments: As if any acquiring company doesn't have similar overheads? I think $5M or less is more appropriate, let's assume $5M. The corporate towers of the new owners still have to be made of ivory, after all.
"While most analyst estimates assume a range of $150-230M for chlor-alkali", which equates to a 5x to 7x multiple.
Comment: Recent assets sales of similar quality were sold for 5.5 to 6x. Look it up. The other analysts are right. Let's pick 6x, that puts NATO, excluding the "synergies".
That puts the Value of N. Van at $26M x 6.0 = $156M + synergies.
Synergies are $5M x 6.0 = $30M
Total, $186M.....guess what, RIGHT in the middle of the range of what analysts say N. Van is worth.
On top of that he references that CUS has "renewed negotiating power"?
Comment: Really? They are sitting on nearly $600M worth of debt that's a ticking time-bomb with N.Van for sale that has a very limited set of suitors. What negotiating power is that?
When he does the sale/no sale analysis, he uses a bushleague value of $22.5M of Cash Flow and the $280M sale price. I disagree with both of those. Strip out the (EB)"ITDA" and your cash flow will be $10-15M tops. I already stated why I think N. Van is worth $100M less than he said.
All the stock price estimates after that are flawed.....will value for the Enterprise increase?
Certainly, but shareholder value could get slaughtered if there's a dilution.
That's it.
I hope that's useful to people.