Great Pacific's take-private offer a win for shareholders

We assess the probability of the deal going through at 75%

Charles Gross 12 August, 2019 | 12:32PM

On Aug. 11, Great Pacific Capital Corporation made an offer to take Canfor Corp (CFP) private at a share price of $16, just slightly above our prior fair value estimate of $15 per share. Given that the takeout offer stands slightly above our stand-alone fair value estimate, we believe that Canfor's board should accept the offer and allow the deal to go through. We assess the probability of the deal going through at 75%, due to both the substantial premium offered relative to the market price and the 51% ownership stake that Great Pacific already has in Canfor. Accordingly, our fair value estimate rises to $15.75, based on the 75% likelihood that the deal goes through and a 25% change that Canfor remains a standalone business.

We are also reducing our uncertainty on Canfor from high to low, based on our high assessed probability that the deal will go through. Our bull-case valuation now reflects a 75/25 split of $16 and $21, while our bear-case valuation now reflects a 75/25 split of $16 and $10.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canfor Corp12.59 CAD-4.69

About Author

Charles Gross  Morningstar Equity Analyst