NEW YORK (TheStreet) -- Shares of Taminco Corp (TAM) are spiking, up 10.68% to $26.43 on extremely heavy trading volume, after the company announced it entered into a definitive agreement to be acquired by Eastman Chemical (EMN) for $26 per share of its common stock.
The total transaction is valued at $2.8 billion in cash, including $1 billion in debt.
Eastman Chemical said the acquisition will be funded with available cash and debt financing, and expects free cash flow in two years to be about $1.5 billion.
Shares of Eastman Chemical are up 1.51% to $84.48, trading on nearly twice its normal volume.
Separately, TheStreet Ratings team rates TAMINCO CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate TAMINCO CORP (TAM) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Currently the debt-to-equity ratio of 1.91 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, TAM maintains a poor quick ratio of 0.88, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for TAMINCO CORP is currently lower than what is desirable, coming in at 26.76%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.78% trails that of the industry average.
- Compared to other companies in the Chemicals industry and the overall market, TAMINCO CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- TAMINCO CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TAMINCO CORP continued to lose money by earning -$0.11 versus -$0.82 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus -$0.11).
- You can view the full analysis from the report here: TAM Ratings Report
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