Take Profits in Canadian Hydro, TransAlta Extension Aside

The extension of TransAlta Corp.'s (TAC) hostile bid to acquire Canadian Hydro Developers Inc. (CHDVF.PK) until September 11, offers more time for a competing offer to surface – only, investors in the alternative energy company shouldn't count on it, says Michael Goldberg, Blackmont Capital analyst.

"While the extension gives [Canadian Hydro] management extra time to locate a white knight, we believe that justifying an offer significantly above the current share price would be difficult and there is limited upside to holding the shares in hopes of another strategic bid."

Assuming they haven't already, Mr. Goldberg told clients to take profits on Canadian Hydro, and left his UNDERPERFORM rating unchanged.

If the TransAlta bid is successful at $4.55 per share, Canadian Hydro shares, which closed at $5.12 on Thursday, will "fall substantially from current levels," he said.

Comments

[nbeerman:]

I do hope Mr. Golderg is wrong and that his clients become very angry with him. Announcements like this play right into the hands of corportaions such as TransAlta. Sometimes what is right is more important than money. The executives of TransAlta clearly don't understand this.

Our financial system is completely out of whack. If one owned a house they felt was worth $500,000.00 and had no interest in selling, should he be forced to sell to a would be buyer for $400,000 just because the buyer evaluated his house at the $400,000? I think not.

This is exactly what TransAlta is trying to do.

Aug 31 11:37 AM

[powermarket...:]

KHD is worth 7$ under existing management and successful marketing of green credits and 3$ under TA's incompetent management. IMO, buy KHD on weakness as a play on carbon and leveraged natural gas. I believe the probability of a better bid is high given that KHD assets have a exceptional credit characteristics which is exactly what private equity and DB is looking for.

Aug 31 02:19 PM