Through The Fly's Eyes: Rumor Mill
from Tedd Cohen of Theflyonthewall.com
The rumors keep on coming; these are notable this week:
Louisiana Pacific (LPX), Weyerhaeuser (WY)
Louisiana Pacific, the manufacturer and distributor of building products, saw its shares jump to their highest level in seven months based on speculation that it may be a takeover target after the housing slump hurt its sales and profit. The firm has seen its market value tumble 24% this year as the price of OSB, or oriented strand board, a less expensive alternative to plywood, fell by about half due to the slowing of new construction. On November 17, the Commerce Department reported that housing starts fell to an annual rate of about of 1.5M, the lowest level in over six years. But the firm has lots of cash on its books, $1.2B, and little debt, which is attractive to potential buyers.
Weyerhaeuser has been named as a potential suitor, as well as a private equity buyer. But, Weyerhaeuser has been rumored to be a potential buyer for the last 15 years, and could run into antitrust issues because both companies are big suppliers for home construction. In the OSB market, Louisiana Pacific’s 23% market share makes it the largest supplier in North America, followed by Weyerhaeuser’s 14%.
Highland Capital Management owns 6.43M shares of Louisiana Pacific, equal to about a 6% stake.
Mention Warren Buffett’s name in the same sentence with a takeover rumor, and it’ll gives anyone pause. Now comes word that Buffett’s Berkshire Hathaway (BRK.A), owner of 17.1M shares, or 19%, of USG Corp. since September, may want to buy the company. The chatter caused USG ‘s stock to take off almost 10% yesterday alone. USG, a maker of insulation and building materials, as well as owner of Benjamin Moore & Co, is the largest maker of gypsum wallboard. Just last June, the company emerged from bankruptcy. As one commentator recently quipped, it’s a rare occasion when Buffett buys so much of a particular company… so obviously he knows something that we don’t. Obviously.