West Fraser Timber Co. Ltd.’s share price went on a roller-coaster ride on Tuesday as investors speculated about a potential takeover of the producer of lumber and wood-based panels.
West Fraser’s stock price jumped as much as 23 per cent on the Toronto Stock Exchange in the morning, shortly after Reuters reported that two European-based firms are interested in acquiring the Vancouver-based forestry company.
The takeover fever later subsided as shares in West Fraser closed at $123.83, up $15.89 on the day, or a 15-per-cent gain. In a statement issued four hours after the TSX opened, West Fraser said it “is aware of recent market and media speculation,” and added that it previously met with Kronospan, an existing shareholder, and CVC Capital Partners, a private equity firm.
Wales-based Kronospan is a major manufacturer of wood-based panels in Europe. Kronospan, through Banasino Investments Ltd., recently owned 8.2 million West Fraser common shares, or a 9.4-per-cent stake.
West Fraser, Canada’s largest lumber producer, said it “has not received a proposal and there are no ongoing discussions regarding the terms of any transaction. The company is focused on executing on its business strategy to create shareholder value.”
In late 2020, West Fraser announced a friendly deal to buy Norbord Inc. in a $4-billion transaction that added Norbord’s global manufacturing of panels used for construction sheathing and flooring. Norbord is the world’s largest producer of oriented strand board (OSB), an engineered panel product.
B.C. billionaire Jim Pattison owns more than 8.9 million West Fraser common shares, or a 10.2-per-cent interest. Mr. Pattison, who supported West Fraser’s purchase of Norbord, also owns 52 per cent of Canada’s second-largest lumber producer, Canfor Corp.
“Lumber is a commodity and it goes up and it goes down, and they’ve had big swings in the lumber business,” Mr. Pattison said in a phone interview on Tuesday from his Vancouver office. “Over all, we are happy with our investment in Canfor and with West Fraser.”
Two-by-fours made from Western spruce, pine and fir sold for an average of US$625 for 1,000 board feet last month, compared with US$1,617.50 in May, 2021, when record highs were set, according to Vancouver-based industry newsletter Madison’s Lumber Reporter.
After completing a buyback of 11.9 million shares last month, West Fraser now has 87.5 million common shares and there are also 2.3 million class B shares. Based on Tuesday’s close on the TSX, the forestry company now boasts a market capitalization of more than $11-billion.
A major shareholder in West Fraser is Seattle-based Ketcham Investments Inc., controlled by the family of Hank Ketcham, West Fraser’s chairman and former chief executive officer.
Ketcham Investments recently owned 3.9 million West Fraser common shares and 1.7 million class B shares.