By David Berman
The news has been fairly quiet from TimberWest Forest Corp. (OTC:TMWEF) since two pension funds put together a $1-billion takeover offer for the timberlands owner in April. Will the company’s strong first-quarter results change that?
On Friday, TimberWest reported that a combination of higher prices and volumes in Asia sent its earnings jumping to $16.2-million after accounting for interest, taxes, depreciation and amortization (or EBITDA) – a $12.8-million bounce from last year and ahead of analysts’ expectations.
When British Columbia Investment Management Corp. and the Public Sector Pension Investment Board bid $6.16 a share for TimberWest, the offer came with a 60-day “go shop” period, giving TimberWest time to seek out higher bids. Since then, the units have rarely traded much above the existing takeover offer, which suggests that the market thinks the chances of a better offer are slim.
Now, though, investors must weigh these better-than-expected quarterly financial results which could make the company more attractive to bidders. According to Sean Steuart, an analyst at TD Newcrest, the results were driven partly by unsustainably high log volumes, meaning that these levels can’t persist over the longer term. Still, they were encouraging given the context of a high Canadian dollar and a lack of land sales during the quarter.
“Management noted that five qualified parties have been granted access to TimberWest’s data room,” he said in a note. “First-quarter results could prompt last-minute interest, but time is short. We suggest that current unitholders sit tight for the next few weeks....”
Meanwhile, he believes that the first nations group that opposes the sale of the company will not pose a threat to any deal. That puts him at odds with Richard Kelertas of Dundee Securities, who argued recently that the native group could scuttle any deal. Two weeks ago, he lowered his recommendation on the stock to “neutral” from “buy” and cut his target price to $6.35 a unit from $6.66.
Before the two pension funds made their offer for the company, TimberWest shares traded at $5.15.