Concordia Healthcare could bring big returns to a private equity player, says Laurentian

A transaction may or may not occur, but Laurentian Bank Securities analyst Joseph Walewicz says the upside for a private equity player who acquires Concordia Healthcare (Concordia Healthcare Stock Quote, Chart, News: TSX:CXR, Nasdaq:CXRX) would be more than worthwhile.

Yesterday, shares of Concordia Healthcare rose sharply after rumours swirled that U.S. private equity firm Blackstone Group LP was considering a takeover of the company.

After the stock was halted, the company issued a press release confirming that it had formed a special committee made up of independent members of the board of directors of the company who will consider various strategic alternatives potentially available to it.

Walewicz says there are, of course, no guarantees that anything will happen, but thinks Concordia is clearly an attractive asset for private equity because of its strong cash flows, high margins and diversified business, all of which are made more appealing by the recent slide in the company’s share price, a result that is part of a sector-wide slide.

“Overall, CXRX has been in “show me” mode for a few months, but yesterday’s developments should shine a spotlight on a company that had become far too cheap vs. the cash flow potential for the business,” says the analyst. “In particular, we believe a Private Equity opportunity is significant and supports a higher valuation. Despite yesterday’s move investors should be buying CXRX at current levels.”

In a research update to client today, Walewicz maintained his “Buy” rating and one-year price target of (U.S.) $55.00 on Concordia Healthcare.

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