September 6, 2012 / 2:22 PM / 5 years ago

ShawCor stock soars; sale set to tempt strategic, financial buyers

* ShawCor retains Credit Suisse to explore a possible sale

* ShawCor shares surge more than 24 pct in early trading

* Analysts see co attracting interest from a range of buyers

By Euan Rocha

TORONTO, Sept 6 (Reuters) - Shares in energy services company ShawCor Ltd soared on Thursday after the company said it was exploring a possible sale, with interest now expected from strategic buyers and private equity players seeking to take advantages of the company’s dominant position in a specialized market.

Toronto-based ShawCor owns some seven business units that provide pipeline coating, corrosion protection, pipe inspection, tubing and other services to offshore oil and gas drillers and a range of other players across the energy industry spectrum. Demand for these specialty products has been strong.

ShawCor said on Wednesday it engaged Credit Suisse Canada to explore a possible sale of the company after Virginia Shaw, the company’s chair and controlling shareholder, told the board that she is prepared to consider a sale of her shares of ShawCor as part of a sale of the company.

Shaw owns over 90 percent of the company’s Class B shares, giving her over 60 percent of the voting interest in the company.

ShawCor, whose Class A and Class B shares closed at C$35.08 on the Toronto Stock Exchange on Wednesday, was valued about C$2.5 billion.

Its shares surged more than 24 percent to C$43.53 by midmorning on Thursday, as investors bet that a sale could fetch over C$3 billion.

“We expect interest in the company to be high given its exposure to subsea infrastructure and ShawCor’s global leadership position in offshore pipe-coating,” said RBC Capital Markets analyst Dan MacDonald in a note to clients.

MacDonald sees ShawCor catching the eye of large oilfield services companies, pipe manufacturers, companies involved in the offshore engineering, procurement and construction space, along with private equity players tempted by ShawCor’s clean balance sheet and strong free cash flows.

ShawCor ended the second-quarter with about $3.30 per share in cash on its balance sheet and no bank debt, leaving a clean slate for any acquirer to potentially lever, noted MacDonald.

TD Securities analyst Scott Treadwell said he sees a greater than 50 percent chance of the sale process succeeding and he raised his price target on shares of ShawCor to C$47.

“We believe that any successful bid would not only put a premium on short-term growth, but would also likely be driven by ShawCor’s strong competitive position in a lucrative and growing market segment,” said Treadwell in a note to clients. (Reporting by Euan Rocha; Editing by Janet Guttsman)

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