An Impressive Run for Fording

Includes: FDG, TECK
by: FP Trading Desk

An impressive two-day run has Fording Canadian Coal Trust (FDG) units closing in once again on Teck Cominco's (TCK) offer price for the coal miner. 

Adding to Thursday's 9% gain, Fording units were up another 11% Friday, and now hover above C$84, largely thanks to the drastic actions of the SEC in the U.S. to shore up the collapsing financial markets. Teck's C$13.5-billion cash and stock offer is worth about C$91 per shares, based on Teck's current share price.

Investors in Fording have clearly been worried in recent days that Teck will have trouble finding financing for the takeover and amid the chaos that wreaked havoc on U.S. investment houses earlier this week, Fording units fell 27% from C$91.10 at close last Friday to C$66.03 in intraday Wednesday.

The units were also weighed down by the news Wednesday that cost estimates for the Fort Hills oil sands project have soared more than 50%. Teck owns 20% of that project.

However on Thursday, Teck Cominco said it was standing firm on its offer for Fording, despite the state of the financial markets.

The Teck statement gained support when a combined C$180-billion cash injection from several central banks was announced last Thursday followed by Friday's news of a government rescue plan to take sick mortgage assets off the books of financial firms to restore financial stability.