Post by
Tobuyornot on Mar 14, 2016 2:39pm
TD Tenderly
Canexus Corporation (CUS-T) C$1.24 Q4/15
Results:
Market Fundamentals Largely Unchanged Event Canexus Corp. reported Q4/15 adjusted EBITDA of $23.7mm ($27.1mm excluding one-time costs largely related to the acquisition by Superior Plus), versus our estimate of $25.0mm and consensus of $24.3mm.
Impact: MIXED
Excluding the one-time items, results in the quarter exceeded our forecast, with material q/q improvement seen at the North American chlor-alkali business, despite an ongoing compressor issue limiting production capacity. The sodium chlorate and Brazil businesses remain relatively stable
Canexus noted that although it is currently in compliance with its covenants, management believes that potential exists for a covenant breach in 2016, which may cast significant doubt with the respect to company as a going concern. Management has requested an amendment to its current bank facility to provide covenant relief. However, we believe that a breach is not imminent and that, rather, the company is just seeking additional breathing room in case chemical market fundamentals further deteriorate or it experiences unforeseen issues.
Management remains of the view that the proposed acquisition of the company by Superior Plus Corp. (SPB-T) will close in H1/16. We have revised our estimates on the quarterly results. Our target price has decreased to $1.40 (from $1.60), based on Superior Plus' current share price and the proposed exchange ratio. We reiterate our TENDER recommendation.
TD Investment Conclusion
We view the acquisition of Canexus by Superior Plus as a positive for Canexus shareholders, who are able to obtain a significant premium to the shares' trading range prior to the deal announcement and to our view of fair value of the company. Given our view that the transaction will close in the coming months, we are not overly concerned with the potential liquidity