Concordia International Corp (CXR.TO)

The main thing keeping the stock down is the growth by acquisition model, which is under assault. Also, management has put them under a strategic review, which does not appear to be going all that well. Has a heavy debt load. Survivability is potentially at risk.

There was a press release that they were up for sale. Usually they would typically keep that quiet. He’s been leery about this largely because he didn’t think they had sufficient scale with a limited number of drugs. He doesn’t like to take drug specific risks in a medical stock. They made a very large acquisition last fall with a large financing associated with it. The timing couldn’t have been worse. He wants to see them absorb that very large acquisition. Doesn’t like serial acquirers, so if they just make the acquisition, integrate it and grow the business organically, he would be a lot more interested. There is no rush to get into this.

A very unusual situation. Normally when companies want to be sold, they are usually quiet about it and there is not a lot of information. The process usually proceeds quietly until something happens, or it doesn’t. Don’t read too much into any of the rumours. He would tend to avoid this because of the balance sheet leverage. Has a very significant amount of financial leverage.

This is a tough environment for them. Believes there are still talks about being bought. Thinks it is going to continue being a bit of an issue, and it is not the kind of stock he is interested in owning.

This has been a real challenge for the street. Unfortunately, it has become somewhat un-investable because the swings are so dramatic. The challenge is, if there is a deal you could see this in the high to mid $40s, but if there is no deal, they have a lot of debt and it is a very volatile stock and not generating the kind of earnings that support the cash flow for their debt.

This is not the kind of thing he would spend too much time doing technical analysis on. It is more news driven and is just waiting for something to happen. If he were going to play it, he would play it from the Long side. However, it is not something he would want to hold very long.

An acquiring company, but hasn’t gone through the same level of scrutiny that Valeant (VRX-T) has. Any company that used too much debt, rather than shares, to do acquiring last summer, had too much debt on its balance sheet. The good news with all these pharma companies is that they are very different than resource companies, etc. They generate huge amounts of free cash flow, and their businesses don’t fall apart right away when they stop reinvesting. It is very likely the stock is worth more than what it is trading at.

Have made a tremendous number of acquisitions in the past. It is now generating a high return on equity and free cash flow. 4^th quarter results were excellent. All this looks great, but at the same time they have put the company up for sale. There are some regulatory concerns in the whole industry, and anything can happen. However, they have a good profile of products. He questions why they have put this up for sale if it such a great business. Feels there is downside protection, but in terms of the upside we just don’t know what will happen.

Has owned this in the past. Just released their numbers, and he would have liked to have seen stronger numbers out of AMCo. However, it has been fairly steady and they did do another acquisition. From about a year ago until recently, the wind was blowing in their face and no one liked the sector. It appears some of that is now starting to come off. It looks like it might be a little more fairly valued now from a valuation standpoint. He is watching this fairly closely, and it has been improving a fair bit.

It was falling because of the VRX-T story. It is at 3-4 times earnings. They can start to pay down their debt. The acquisition gave them a diversified foot print. They are delivering results. They are doing it right. You are compensated for any risk with a low multiple.

This stock is cheap. The Valeant (VRX-T) situation changed everything, the debt is so high and people just don’t know what is going on. Had a big drop today because Endo Pharma, in the US, had a really bad forecast and fell 40%, and Concordia fell in sympathy. Technically the company is up for sale. An offer is going to take a while. It is worth keeping.

The rumours of a takeover have helped the stock. He believes in the stock, but does not know about the rumour situation. He would not invest just on the basis of a rumoured takeover.

DHX Media (DHX.B-T) or Concordia (CXR-T)? With rumours of a possible takeover of this company, it has moved about $10. You have downside risks of back to $7-$8 if nothing happens, even though it is a very cheap stock at $38. The takeover value was $55-$60, but he can’t assess the risks of whether it goes up or not.

Heard that a fund was kicking the tires to buy them out. It kind of makes sense, because they have cash flow. Also, they should be private, because they have things nobody wants to hear about. He would stay on the sidelines.

The issue is that we had this great run alongside Valeant (VRX-T), and then went down in the concerns with the whole Valeant collapse. It became too much headline risk. The stock spiked Thursday on news that they may be doing something. He would be inclined to stay away at the moment.