ShawCor sale will draw big crowd, high priceEwan Nicholson
The auction of Canadian pipe company ShawCor Ltd. is expected to be a fast one with a price that could approach $50 a share.
The sale will be a standard two-round auction, with any transaction that results announced this fall, say people familiar with the process. The company started the auction process last month after its controlling shareholder, Virginia Shaw, communicated that she would be interested in selling her shares. At that point, the company said it had not talked to any potential bidders.
Initially, there was an expectation that ShawCor could be a private equity target. A leveraged buyout could push the price to the high $40s from its current spot at about $42. The question, however, is whether a private equity firm would attempt a buyout fuelled by debt, in a cyclical industry such as natural gas.
Instead, the betting is increasingly that a more likely option is an industry buyer. Analysts have suggested that the roster of likely buyers may include General Electric Co., National Oilwell Varco, Halliburton Co. and Schlumberger Ltd. Those nosing about for clues suggest that most of the interest is coming from potential industry purchasers.
Catharine Sterritt, an analyst at Scotia Capital who follows takeovers, does not think a leveraged buyout is likely. She is focused on strategic buyers who can find synergies, or can benefit from locking up a supply of what ShawCor provides. That puts the price at "$50, tops."
"It is a consolidating industry and we are seeing still cost escalation and constraints on the energy services side," she said. She noted the stock hasn't reached some analysts' one-year target price, and often a buyout by a strategic purchaser takes place at a premium to that price. That means "you could buy it with some upside for the auction."