Why Chemtrade Logistics Shares Leaped

Is this meaningful? Or just another movement?

| More on:
The Motley Fool

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of Chemtrade Logistics Income Fund (TSX: CHE.UN) popped as high as 10.4% today after the sulfuric-acid producer agreed to acquire peer General Chemical Holding Co. for $860 million.

So what: Chemtrade is making the move to add significant scale to its existing platform, and judging by today’s big rally, Bay Street is particularly pleased with the price — nearly 8 times EBITDA — that management is paying to do it. In fact, Chemtrade expects the transaction to generate operating cost synergies of about $10 million and to be roughly 17% accretive to its distributable cash per unit.

Now what: Chemtrade plans on financing the deal with $1 billion of credit facilities and a $300 equity raise. “General Chemical has strong portfolio alignment with our current business, enhancing our existing sulphuric acid geographic footprint and greatly expanding our water treatment business so it now extends across most of North America,” said Chemtrade CEO Mark Davis. “The acquisition of General Chemical also moves Chemtrade into new but related product categories and end markets, and positions Chemtrade to capitalize on new growth opportunities.” Of course, with Chemtrade shares now up more than 20% from their 52-week lows, much of that growth might already be baked into the valuation.

Canada has yielded its fair share of great companies. But unsuspecting Canadian investors could get ambushed by a glaring weakness in their portfolios. One basic investing principle holds the key to a rock-solid portfolio … and it starts with our neighbors to the south, America.

That’s why The Motley Fool has put together a Special FREE Report, “3 U.S. Stocks Every Canadian Should Own.” The funny thing is, these stocks might as well be Canadian … because you use them every day. Just click here now to receive a copy at no charge!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Pacampara does not own shares of any of the companies mentioned.  The Motley Fool does not own shares of any of the companies mentioned.

More on Investing

Redwood trees stretch up to the sunlight.
Investing

2 Stocks With Surprising Growth Potential

Alimentation Couche-Tard and Restaurant Brands International are stealthy growth stocks that are trading too cheap right now.

Read more »

potted green plant grows up in arrow shape
Investing

2 Incredible Growth Stocks With a Bright Outlook for 2023

Constellation Software (TSX:CSU) stock and another tech titan that may be too cheap to ignore, as it looks to power…

Read more »

analyze data
Dividend Stocks

3 Top Dividend Stocks to Buy and Hold Forever

These three dividend stocks on the TSX today have offered substantial gains in the last year and could prove strong…

Read more »

analyze data
Dividend Stocks

3 Surprising Stocks Trading Lower in 2023

Some of the weakest performers of 2023 (so far) may be powerful additions to your portfolio in the right market…

Read more »

Golden crown on a red velvet background
Dividend Stocks

3 Surefire Dividend Aristocrats That Are No-Brainer Buys in 2023

Cash flow-rich companies such as Fortis and Canadian Utilities should be part of your dividend portfolio in March 2023.

Read more »

Airport and plane
Dividend Stocks

Down by 20%: Is Air Canada Stock a Buy After its Earnings?

Air Canada stock continues trading for a significant discount after its earnings release, but it still might not be a…

Read more »

grow money, wealth build
Tech Stocks

$10,000 Invested in These Growth Stocks Could Make You a Fortune Over the Next 10 Years

Growth stocks such as Dollarama and Chewy are well poised to deliver outsized gains to long-term investors.

Read more »

Two seniors float in a pool.
Stocks for Beginners

2 Smart Stocks to Buy in 2023 That Could Help You Retire Richer

When it comes to investing in smart stocks on the TSX today, these two are some of the best that…

Read more »