(Adds context, analyst comment in fourth through ninth
paragraphs, updates stock movement in third paragraph.)
Enerflex Systems Income Fund (EFXFF, EFX.UN.T) closed up nearly
38% Monday, well above a proposed bid from Toromont Industries Ltd.
(TMTNF, TIH.T) that values Enerflex at C$13.50 a unit.
Toromont said late Friday that it would pay at least 50% cash in
the proposed transaction, with the balance in Toromont common
shares, adding that the proposal represents a premium of about 33%
to the volume-weighted average trading price of Enerflex units in
the 20 trading days up to and including Friday.
Enerflex shares closed up C$4.08 to C$14.15 Monday. Its American
shares closed up US$3.76, or 37.9%, to US$13.68.
Investors may be bidding Enerflex shares higher than the offer
price in anticipation that Toromont will have to raise its bid, or
that a higher, rival offer may emerge.
An analyst familiar with the deal said Toromont's bid would
likely need to be higher, or have a greater weighting of cash than
50%, because Enerflex's international position in the natural gas
compression is relatively unique.
"Enerflex has really transformed itself into an international
player in gas compression, and that's a hard business to grow," he
said.
Desjardins Securities told its clients Monday that acquiring
Enerflex would allow Toromont to grow internationally because about
60% of Calgary-based Enerflex's revenue comes from outside
Canada.
Desjardins rated the C$13.50 offer as fair, but said scrutiny
from antitrust regulators may become a factor since Toromont and
Enerflex are the two largest gas compression manufacturers in
Canada.
Toromont, based in Toronto, is the largest natural gas
compression manufacturer in Canada and also operates one of the
world's largest dealerships for Caterpillar Inc. (CAT) construction
equipment.
Enerflex said Monday that a special committee of independent
directors of its administrator will consider Toromont's proposal.
But it noted that Toromont has yet to make a formal offer and also
said it "takes issue" with certain statements in Toromont's press
release Friday.
In that release, Toromont said it had held talks with Enerflex
over the past several years about the possibility of combining
their gas-compression businesses, but that Enerflex's top
management and board had "thwarted" any possible transaction in
their "desire to maintain control" of Enerflex.
-By Edward Welsch, Dow Jones Newswires; 613-237-0669;
edward.welsch@dowjones.com
(Carolyn King in Toronto contributed to this report.)