Why Louisiana-Pacific's Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of home construction company Louisiana-Pacific (NYSE: LPX  ) jumped 11% today after announcing an acquisition.

So what: The company is buying Ainsworth Lumber for $1.1 billion, including assumed debt. This will give the company an expanded product line to offer to customers in North America and Asia.  

Now what: Brookfield Asset Management, who owns 54% of Ainsworth, said that it would vote for the deal, which was also unanimously approved by Ainsworth's board of directors. Now Louisiana-Pacific needs housing starts to continue to improve, something that's not guaranteed given rising interest rates. I think this is a solid move, but paying 52% of the deal in cash will weaken the balance sheet, so keep an eye on financial performance closely in coming quarters.

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9/28/2016 4:02 PM
LPX $19.12 Up +0.17 +0.90%
Louisiana-Pacific CAPS Rating: **