Canexus board calls Chemtrade’s offer ‘inadequate’
Canexus Corp. directors Wednesday blasted a hostile takeover offer as “inadequate,” setting the stage for a long proxy fight with Chemtrade Logistics Income Fund.
The Canexus board announced it had unanimously rejected Chemtrade’s all-cash takeover offer of $1.50 per share and the company’s president and CEO Doug Wonnacott said it was preparing for a “105-day marathon” proxy fight and search for other deals.
Chemtrade’s bid for Canexus marks the first hostile takeover offer in Canada since the Canadian Securities Administrators amended takeover rules, allowing target companies 105 days to search for alternatives.
Wonnacott said Canexus was in the process of opening a data room and inviting other would-be acquirers to propose a deal, though he said Canexus does not yet have other expressions of interest.
“We don’t think that this (Chemtrade) offer properly recognizes the value that Canexus has created over the course of the last couple of years,” he said of Chemtrade’s offer, which values the chemical company at $884 million, including assumed debt.
Wonnacott added that Chemtrade had offered Canexus $1.90 per share for control of the company in 2015, but would not say if Canexus had an internal price target for its own shares.
“We believe the shares of Canexus and Chemtrade will trade modestly higher and modestly lower, respectively, as expectations build for a higher offer from Chemtrade,” RBC Capital Markets analyst Nelson Ng said in a research note Wednesday.
Chemtrade president and CEO Mark Davis did not indicate if his company would increase its offer. He said in an email that Canexus’ board and management had destroyed shareholder value.
“After a series of disastrous investments, operational missteps and a failed M&A transaction, they want shareholders to trust their ability to achieve aspirational financial metrics,” he said.
Murray Edwards, a billionaire oil and gas investor and chairman of Canadian Natural Resources Ltd., is one Canexus shareholder who has been drawn into the fight.
Edwards announced after Chemtrade made its hostile bid that he had increased his stake in Canexus from 16.4 million shares to 17.7 million shares, giving him control of 9.5 per cent of the company.
Wonnacott said Edwards’ purchase of those shares is an indication he doesn’t support a deal at $1.50. Edwards did not respond to a request for comment.
“The fact that he’s bought shares at this higher level would certainly indicate that he’s got great confidence in this business and has confidence in our ability to generate cash, reduce debt and ultimately enhance the share price,” Wonnacott said.
Canexus did not rule out the possibility of accepting an amended offer, but Wonnacott said, “There is absolutely no shareholder that has an interest at $1.50.”
In an open letter to shareholders, Canexus board member Art Korpach wrote,“As demonstrated by past behaviour, your board is not opposed to a sale of the company as long as a sale reflects full and fair value for our assets and our growth potential. The Chemtrade offer simply doesn’t do that.”
Canexus had previously accepted an all-share offer a year ago from Superior Plus Corp. that valued Canexus shares at $1.70 each at the time. Objections from U.S. antitrust authorities caused that deal to fall apart in June.