Does Canfor Corporation Represent Good Value Right Now?
Billionaire Jim Pattison seems to think so.
The share price of Canfor Corporation (TSX:CFP) has dipped in recent days, as negotiations between Pattison (who owns just over half of the outstanding shares of Canfor) and minority shareholders broke down.
Pattison offered $16 a share for the outstanding shares of Canfor, in a bid to take full control of the lumber giant. Some shareholders have indicated publicly they do not support the offer, and it now looks like a future deal may be increasingly unlikely.
The deal comes in the wake of a downturn in the Canadian lumber industry, with relatively low lumber and pulp prices. With Pattison believing the company has a brighter future than financial markets, which have subsequently bid down shares in Canfor after negotiations seemingly fell apart to less than $13 per share, investors in the
lumber giant may feel better about the long term outlook of an investment in this industry.
It appears to me that this is a business which is highly cyclical in nature, and investors wishing to play commodity price movements may have better luck in other sectors.
Strength or weakness in lumber prices is generally tied to expectations of economic growth – one of the key uses for lumber is housing, and a strong housing market in Canada and the U.S. is often linked to economic expectations; there are worse industries to bet on, but with a potential recession on the horizon, I would encourage investors to look elsewhere at this point in time.
Invest wisely, my friends.
