This Kronospan / CVC Capital leak is just part of the M&A game.

Is Kronospan really interested in acquiring WFG?  I think they are, but they want to get it at the lowest price and the Ketcham family who controls the Class B shares has likely indicated they won’t sell unless it’s at a very favourable premium.

Dual class share structures do have their negative aspects, but I believe the Ketcham family has displayed good stewardship over the history of the company and made decisions in the best interests of the company’s stakeholders.

I think Kronospan/CVC leaked this to Reuters.  This way it notifies the other shareholders, and those shareholders may then pressure the Ketcham family to agree to a sale, at what Kronospan/CFC thinks is a reasonable price.

If the buyer thinks there will be friction to a takeover, then sometimes they will leak the sale to the press.

I believe Kronospan/CVC has, unwittingly to Reuters or not, used Reuters in their M&A strategy. 

The Reuters article stated that a joint proposal was “submitted” which would imply that a formal indication of interest and request to start formal talks was made from Kronospan/CVC to WFG.

That same day, WFG refuted the article and responded that they had “not received a proposal and there are no ongoing discussions regarding the terms of any transaction”.

I feel the word “submitted” in the Reuters article and Reuter’s refusal to date to correct their article given WFG’s response is questionable.  Why is Reuters playing along with this game of semantics? 

Either way, the timing of this leak is very suspicious.  It’s right on the eve of WFG’s earnings announcement (July 27th after the close).  WFG will be forced to reconfirm whether they received any joint proposal from Kronospan/CVC in their earnings release or at least on their earnings conference call.

I don’t think Kronospan/CVC will formally submit anything until after the earnings.  This will possibly result in the reversal of the share’s recent price gain.  This will accomplish Kronospan/CVC’s objective though - it will likely force some shareholders to pressure the company/the Ketcham family to enter into talks with Kronospan/CVC when the share price drops.

I think this strategy was poorly devised by Kronosplan/CVC though.  It looks like the shareholders of WFG besides the Ketcham family and Jimmy Pattison are mainly financial institutions who will likely hold out for a good premium (similar to if not higher than the premium paid by Paper Excellence to Resolute of 65%) which would be $178/ CAD or $137 USD.  WFG is by far way superior to Resolute so the premium should be higher than that.

The only other reason Kronospan/CVC Capital would leak this news is if they were aware WFG was in talks with another potential acquirer and therefore the leak could have been designed to potentially derail that deal by forcing WFG to go shop it to the broader market.  I don’t think this is the case though.

I think Kronospan/CVC leaked this and I find their M&A strategy dubious.  Also, the fact that kronospan has been reported that they are still operating their Russian facilities while Vladimir Putin is waging war against innocent Ukraine, makes me very suspect of Kronospan/CVC.  Being a Canadian, I’d rather one of the great Canadian/American companies stay in North American hands. 
The Ketcham family along with Jimmy Pattison and the fund companies should tell Kronospan/CVC/Reuters to go F themselves.

The share price might drop next week given all of the events next week (US interest rate decision, housing effect, earnings) but I’ll continue to hold WFG for the long-term and will add on a pull-back.
WFG is the industry leader in North America.
  1. Largest lumber (10%) and OSB producer (31%) in North America
  2. 12% market share of OSB market in Europe
  3. Company has no debt
  4. Approximately $800 million in US duties on deposit which could be refunded at some point
  5. Mills are located in all the key areas of North America
Instead of selling out to Kronospan/CVC they should take on some debt, and takeout Interfor and keep buying back their own shares.  By acquiring Interfor, WFG’s resulting market share, synergies to be gained, and demographic span in North America would make them unbeatable.