SPB - comments from conference callThe call was interesting for certain and overall positive, I think.
Q1 was better than anticipated as the company was able to maintain margins. This allows them to guide to mid-point fo AOCF target vs. low end at Q4. Still, market is volatile. Current forward pricing for oil is positive. Overall margins in 2016 should be similar to 2015.
Negotiations with the FTC are ongoing and they have nearly daily communication. They can't go into details as discussions are confidential, but also the FTC isn't setting hard targets for marketshare, pricing, etc. They want the new entities North America capacity to be lower and they have several factors they are considering (without details on what they are). What is clear is that it doesn't have to do with plant locations (Canada or US) but rather is NA capacity and they favour structural remedies (sales) over behavioural (e.g. price increase contraints).
Mgm't indicates that over 80% of the merger synergies relate to corporate overlap, so any asset sales would have a small impact on anticipated cost savings. Also they note there is interest from multiple outside parties to acquire any assets for sales, and these could easily occur co-terminous with the merger timeline.
From my perspective, assuming an attractive multiple on sold assets, the debt reduction from selling the assets (and lowered debt service) should offset the marginal lost synergy savings. Although they didn't mention on the call, there is the possibility of shutting smaller or less efficient facilities as well. This worked in the lumber industry and I think that is a bit of a template for this situation.
There was also some discussion about the June 30th deadline and how/if the $25 mm reverse termination fee could become due. It seems that if no progress is made and they haven't accomodated HSR (anti-trust) and competitive bureau requirements by then it could be owed.
Not sure how to handicap this except that, if there is a holdup, a further extension is the mostly likely outcome. Despite what some on this board have noted, no one wins if the deal is scuttled (CUS goes CCAA and forced liquidation sale of assets, SPB pays fee, wastes millions on legals). Creditors would sue CUS and equity holders would be wiped out. That's why shareholders would vote for extension IMHO.
Good luck.