Chemtrade ramps up hostile takeover talk

Unsolicited bid claims Canexus has ‘no credible plan for growth’

Chemtrade Logistics Income Fund renewed its war of words with Canexus Corp., as the chemical company pushes its unsolicited takeover offer on Canexus shareholders.

Chemtrade president and CEO Mark Davis issued a statement Monday that said Canexus management “has repeatedly failed their shareholders and have no credible plan for growth.”

Davis released a list of reasons why Canexus shareholders should accept his company’s hostile takeover offer less than a week after the Calgary-based company released its own list of reasons for ignoring Chemtrade.

Last week, Canexus president and CEO Doug Wonnacott said that Chemtrade had previously been willing to offer $1.90 per share for control of Canexus compared with its current offer of $1.50 per share, which values Canexus at $884 million including debt.

Chemtrade dismissed that $1.90 figure, however, as “a desperate attempt to confuse shareholders” since that value was a nonbinding expression of interest and subject to Chemtrade accessing more Canexus data. Canexus management was not available for comment.

“After they sold (their oil-byrail terminal business), we actually said ‘here’s an indicative bid based on public information’ because that was all we had.”

“That was $1.90,” Davis said in an interview, adding, “Then we went in and did our diligence and promptly lowered our offer to $1.45.”

He said the company lowered its offer because he found there were a number of operational deficiencies and “catch up costs” that Canexus would need to pay. Davis said some Canexus assets “need significant tender loving care going forward and that costs dollars.”

Chemtrade’s expression of interest was made in 2015, when Toronto-based Superior Plus Corp. was also weighing a bid for Canexus.

Superior Plus did offer, and Canexus accepted, an all-share offer worth $1.70 per share at the time, but U.S. antitrust authorities objected to the deal because it would give the combined company too much control of the sodium chlorate market in the U.S. Sodium chlorate is used to bleach wood products like tissue paper.

“As demonstrated by past behaviour, your board is not opposed to a sale of the company as long as the sale reflects full and fair value for our assets and our growth potential.

“The Chemtrade offer simply doesn’t do that,” Canexus board member Art Korpach wrote in an open letter to shareholders last week. Chemtrade’s statement Monday re-iterates the Torontobased company’s view that its $1.50 per share bid “fairly reflects the composition and expected performance of Canexus’ portfolio of assets,” but some analysts expect the company may raise its bid to close the deal.