PFB Corp (TSX: PFB) is Canadian based firm which is in the business of delivering products and solutions in the areas of manufacturing insulating building products made from expanded polystyrene materials. The company is operating in two business segments based on geographical location namely, Canada where it produces expanded polystyrene (EPS) products and structural insulating panels; and United States of America segment which includes production and sales of EPS, building systems, and structures, design services, and installations.

Key highlights

• The company recently entered into an agreement under which an affiliate of The Riverside Company (" Riverside ") agreed to indirectly acquire all of PFB's outstanding common shares for a cash payment of CAD 24.10 per share, or CAD 178 million on a fully diluted basis.

• After the transaction is completed, the company will be administered by its current management team, led by Mr. Robert Graham, CEO.

Transaction Details

• The purchase price of CAD 24.10 per share represents a 7% premium over the Shares' closing price on November 4, 2021, on the Toronto Stock Exchange, the last trading day prior to this merger announcement and a 15% premium to the volume-weighted average trading price of the shares on the TSX over the last 20 trading day period ending November 4, 2021.

• The above acquisition is expected to close on December 17, 2021, subject to shareholder and court approvals.
  

Special Cash Dividend 

PFB's board of directors has also approved a special cash dividend of CAD 2.00 per share, which will be paid on November 30, 2021, to shareholders having a record date of November 16, 2021. 

Stock recommendation 

The PFB Corp. went through a comprehensive sale process and reviewed various offers from possible buyers before deciding that the Riverside transaction is the greatest option for realizing the company's full potential. We believe that this agreement with Riverside provides shareholders with an attractive valuation and premium above the stock's recent trading price, as well as the potential to pursue the Company’s long-term investment and expansion strategy more effectively across North America. Furthermore, the company has seen a significant surge on the daily price chart as a result of this merger announcement and factoring in the special dividend and has moved above the upper band of the Bollinger band, indicating the stock is possibly overbought and due for a price correction or consolidation. Hence, based on the rationales described above we propose a “Sell” rating on stock at the closing price of CAD 26.60 on November 5, 2021. 

One-Year Technical Price Chart (as on November 5, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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