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

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »