Thursday’s close: $39, down 14 cents
52-week trading range: $27 - $46.75 a share
Annual dividend: 40 cents a share for a yield of 1 per cent
Analysts’ ratings: There were four buys, three holds and no sells, according to Bloomberg data. Target prices ranged from $42 to $54 a share.
Recent history: Shares of the oil field pipeline coating maker climbed steadily this year before going on a wild roller coaster ride more recently. ShawCor stock surged 20 per cent a day after it announced on Sept. 5 that it was setting up a strategic review because Virginia Shaw, its controlling shareholder with 63 per cent of the votes, was interested in selling. After three months of speculation on a potential buyer, the firm said on Dec. 5 that an acceptable sale for all of the shares of the company was “highly unlikely at this time. ” That news sent its shares plunging 14 per cent the next day, but they are still trading well above their price prior to the announcement of the sales process.
Outlook: The current price of ShawCor stock indicates that investors don’t believe the company is off the table for potential buyers. The decision to not go ahead with a sale now could be a tactic “to flush other potential bidders out of the woodwork, or get a higher offer,” said Robert Gill, a portfolio manager with Morrison Williams Investment Management Ltd. “The company will likely be sold. We don’t know when... It is likely that [bidders] did not hit the price that management was looking for.”
The company is by far the global leader in its niche, and the acquisition of ShawCor would be a “fantastic bolt-on investment for another industry player,” said Mr. Gill, who holds its shares. Some of the potential buyers are European pipe makers like Tenaris SA and Vallourec SA as well as U.S.-based Halliburton Co., Schlumberger Ltd., National Oilwell Varco Inc. and General Electric Co., he suggested.
ShawCor is very profitable, has a strong balance sheet, and is a technological leader in making protective coatings for pipes used in difficult places to find oil like the deep waters of the Gulf of Mexico and the North Sea, he said. “Until the company gets taken out, it will continue to operate very well... When you are the biggest player globally, it’s very difficult to compete against you.”
It’s a stock that investors still should consider because “you get into a great business at a very fair price,” said Mr. Gill. “It is a company that is buying back shares, and has increased dividends every year for the last decade. Meanwhile, you get exposure to a potential takeout catalyst... We feel a fair price is over $50 a share.”