Flip This Fording

Recs

8

Ah, strategic alternatives. This euphemistic phrase, which so often heralds merger and acquisition activity, is magic to the ears of short-term traders everywhere.

Through Wednesday's close, Fording Canadian Coal (NYSE: FDG) shares had badly lagged those of most other North American coal companies over the past three months. Peabody Energy (NYSE: BTU), Foundation Coal (NYSE: FCL), and Alpha Natural Resources (NYSE: ANR) were all up more than 30%, while Fording was flat. This is exactly the kind of situation that induces a board of directors to hire an investment bank -- in this case, Royal Bank of Canada subsidiary RBC Capital.

I noted the positive outlook for metallurgical coal back in late October, and that hasn't changed a whit. The clue to Fording's flimsy returns, despite a strong market, was made quite clear during partner Teck Cominco's (NYSE: TCK) quarterly conference call. It's all about the lightning-hot Loonie.

Here's the puzzling thing. With its near-20% ownership stake in Fording, Teck would be the most natural suitor in the case of a sale. That monster miner is having exactly the same foreign exchange issues, and its full ownership of Fording wouldn't appear to change much about the way the operation is run. Teck is, after all, the managing partner.

Will someone please explain to me why this announcement is such great news for Fording shareholders?

Closed for 15 months – opening 10 days only! Get notified ahead of time as our expert portfolio manager invests $1 MILLION in the best opportunities from across The Motley Fool’s premium investment services. This is the first open since August 2008, by invitation only. Enter email below.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

TD AMERITRADE
more info
ShareBuilder
more info
Power E*Trade

more info
Scottrade
more info
Fool Disclosure

DocumentId: 549035, ~/Articles/ArticleHandler.aspx, 11/9/2009 9:45:46 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

The Must-Read Story on Fool.com
Health-Care Reform: A Tale of Two Chambers

Related Tickers

11/9/2009 4:02 PM
ANR $39.06 Up +1.20 +3.17%
Alpha Natural Reso… CAPS Rating: ****
BTU $44.50 Up +2.29 +5.43%
Peabody Energy Cor… CAPS Rating: ****
FCL $35.93 Down +0.00 +0.00%
Foundation Coal Ho… CAPS Rating: ***
FDG $74.51 Down +0.00 +0.00%
Fording Canadian C… CAPS Rating: ***
TCK $32.39 Up +1.54 +4.99%
Teck Resources Lim… CAPS Rating: ****

Community: Investing Wiki

Term Of The Hour

Milton Friedman: Milton Friedman was a well respected popular Monetarist economist and Nobel prize winner.

Want to learn more or edit this definition?
Click here to read more!