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

woman looks at iPhone
Tech Stocks

Shopify, Lightspeed, and WELL Health: Are They Good Buys Today?

While broader markets have rallied, Shopify, Lightspeed, and WELL Health stocks haven't followed suit, showing weaker performance.

Read more »

dividends grow over time
Dividend Stocks

4 Top Canadian Stocks I’d Buy for Dividends and Capital Growth

If you want dividend income and capital growth, these four Canadian stocks are the kind of stocks you want to…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Retirement

How to Make Your $7,000 TFSA Contribution Work Harder This Year

Let's dive into three key tips for Canadian investors looking to win by putting $7,000 into their TFSA for the…

Read more »

A worker uses a double monitor computer screen in an office.
Bank Stocks

Where Will iA Financial Be in 10 Years?

With strong earnings growth and a rising market presence, iA Financial stock may just be getting started.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

3 Top Stocks to Buy With $7,000 and Hold for Decades in Your TFSA

These stocks pay good dividends that should continue to grow.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

3 New Red Flags the CRA is Watching for Old Age Security Pensioners

OAS payments can be an amazing income stream, but watch out for CRA warnings!

Read more »

dividends grow over time
Stocks for Beginners

3 TSX Stocks to Build Wealth Over the Next Decade

From logistics to construction supplies, these TSX stocks could quietly build real wealth in your portfolio over the next 10…

Read more »

investment research
Dividend Stocks

Where to Invest $5,000 in the TSX Today

Don't know where to put a $5,000 investment? Consider essential stocks like this one.

Read more »