Norbord Jumps 11% On West Fraser Takeover; Analyst Upgrades To Hold

Shares of Norbord Inc. spiked 11.4% on Thursday after the Canada-based oriented strand board (OSB) producer announced that it will be acquired by its rival West Fraser Timber Co. Ltd.

Norbord (OSB) announced that West Fraser will acquire it in an all-stock transaction valued at nearly C$4.0 billion ($3.1 billion). The deal’s value reflects a 13.6% premium to the closing price of the former’s shares on the Toronto Stock Exchange on Nov. 18.

The companies expect the transaction to be completed in the first quarter of 2021, after which West Fraser shareholders will own a 56% stake in the combined company, while Norbord shareholders will own the remaining stake. (See OSB stock analysis on TipRanks)

Norbord’s CEO Peter Wijnbergen said, “This Transaction recognizes Norbord’s global OSB position and is a very exciting opportunity for our customers, our employees and our shareholders.” He added, “Joining West Fraser will allow us to expand our profile with our core new home construction customers, and provides a stronger platform to pursue our industrial OSB products strategy.”

Following the company’s announcement, Credit Suisse analyst Andrew Kuske upgraded Norbord stock to Hold from Sell and raised the price target to C$49.35 or $37.69 (1.9% upside potential) from C$38 ($29.08). In a note to investors, Kuske said that his rating upgrade and upward price target revision reflect the takeover offer from West Fraser.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 4 Buys and 2 Holds. The average price target stands at $41.26 and implies upside potential of about 11.5% to current levels. Shares are up by 38.4% year-to-date.