Canexus reports before the merger

        On May5 Canexus, a chemical producer, reported before being acquired by Superior Plus.On October 6,2015 Canexus (CUS) announced that it had agreed to be acquired by Superior Plus,another Canadian chemical and energy producer.The deal is supposed to be carried out by the end of the first half, that is, by the end of June.It is a cash and stock deal.But Canexus refers to it as an all stock deal.The proposal is .1531 shares of Superior Plus for every Canexus share.This would mean that an additional 27 million shares must be issued to buy all Canexus shares.
                                              

      Highlights of the Quarter
   Canexus reported cash operating profit (COP) of $31 million compared to $27 million in Q4 of 2015 and $32 million in the first quarter of 2015.This is an unusual term and should be equal to EBITDA with interest and tax expenses removed so EBITDA would be $41 million.Canexus says their performance is because of the strong performance from North American sodium chlorate and the Brazil business units. Sodium Chlorate COP made up $22 million or about 70% of the total. Sodium chlorate sales were 5% higher than 2015 and there was a positive effect from the  weaker Canadian dollar.North American chlor alkali had a COP of only $2.5 million which was down from  the same quarter in 2015 and Q4 2015.Their Brazilian operations generated a COP of $8 million compared to $7 million in 2015 and $6 million in the fourth quarter.
    The Upcoming Transaction
 Canexus refers to the merger or acquisition as "the transaction".Superior Plus estimates that it is valued at about $316 million;they intend to acquire all issued and outstanding shares of Canexus. SPB had excellent timing in it's offer as Canexus had just taken a hit on unloading it's oil transshipment operation called NATO.In fact, CUS took a further writeoff on NATO in this quarter.So Canexus had a short term liquidity problem and SPB made it's offer.                                                                                                   It was intended to be carried out by the end of the first half of 2016.That means it would be done by the end of June.But that will add another almost 20% of new shares to Superior Plus.So in effect that would dilute earnings by about 20% if done all at once.This blog calls for only a third to a half of the Canexus shares to be converted by the end of the third quarter.Perhaps then Superior Plus will re evaluate and buy only 50 to 75% of the total outstanding shares.Either way this blog does not see all of Canexus shares being acquired by December 2016.However on the positive side this does look like an accretive acquisition based on this quarterly report by Canexus.               see evaluation of Canexus merger  ;see analysis of two Cdn. chemical cos.