On May 1, 2014, it was announced that Berkshire Hathaway Energy would buy SNC-Lavalin’s AltaLink unit for $3.2 billion in cash. As indicated at Bloomberg.com (found here), “…the deal adds 280 substations and about 12,000 kilometers (7,500 miles) of transmission lines…”
On April 2, 2012 (found here), we said the following of SNC-Lavalin (SNC.TO):
“Our next stock is SNC-Lavalin (SNC.TO). According to Yahoo!Finance, SNC.TO “provides engineering and construction, and operations and maintenance services worldwide.” Edson Gould’s Altimeter, as applied to SNC-Lavalin Group (SNC.TO) presents a pattern that is quite unique. Again, Edson Gould’s Altimeter compares the current stock price as it relates to the quarterly dividend that is currently being paid. SNC.TO has a descending Altimeter with the normal undervalued range at $43.60. The next upside target for SNC.TO is at $55, however, we’re waiting for resolution on the potential downside action.
“Our worst case scenario is that SNC.TO will continues on the declining trend and reach our downside target of $30.80. In our assumption, the worst case downside target continues to slide as time passes until proven otherwise. Again, while there are major upside targets at $55 and $69, we’d rather wait for the final verdict on retracing back above $43.60 or falling to $30.80.”
At the time, we believed that SNC-Lavalin was undervalued but with some room to decline further. Unfortunately, the lowest SNC-Lavalin declined was to $35.04 on September 4, 2012. We had projected that SNC-Lavalin, in the worst case scenario, could decline –24.41% instead of –14%. We were wrong about the extent of the worst case on the downside.
As we fast forward to May 2, 2014, we see that Warren Buffett and company are finding value in the purchase of the AltaLink unit of SNC-Lavalin. However, this interest in AltaLink comes after SNC-Lavalin’s stock price has risen +27% since our 2012 coverage.