U.S. Silica Has 'Growing' M&A Prospects, Cowen Says

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Cowen’s Marc Bianchi maintained an Outperform rating for U.S. Silica Holdings Inc SLCA after the company announced an 8.7 million share equity offering.

The equity offering is around 16 percent dilutive, excluding the green-shoe option of 1.33 million shares. Assuming an offer price of $20 per share, the offering is expected to generate gross proceeds of $174 million, analyst Marc Bianchi mentioned.

“We view this as an opportunistic equity offering in light of an open equity issuance window and a growing list of M&A opportunities, however nothing specific appears to be identified for these proceeds,” Bianchi wrote.

Acquisition Plans

U. S. Silica raised its term loan by $115 million in July 2013 and acquired Cadre Services in July 2014. Although U. S. Silica’s near-term acquisition plans could include “non-traditional frac sands, logistics assets, or something within ISP,” over the long-term, the company is committed to making a transformation acquisition, the analyst said.

A transformation deal of public or large private companies is likely to require more capital. Following this offering U. S. Silica will have $470 million cash and cash equivalents, Bianchi pointed out. The company’s net debt is also expected to be reduced to $20 million.

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Posted In: Analyst ColorLong IdeasReiterationAnalyst RatingsTrading IdeasCowenMarc Bianchi
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