Bad Time For “Texas” Polluters Fuels Rumors of Takeovers

by jim on November 24, 2011


While there may be some signs of life in the national economic picture, it seems to be a terrible time to have the Lone Star State's name attached to your business. As the Thanksgiving holiday began, the stock price of TXI, aka Texas industries, aka the owners of a brand new permit to burn industrial wastes at its Midlothian cement plant, reached a 52-week low of about $22 per share, compared to more than twice that earlier in the year. That decline could have something to do with its "EBITDA to sales ration," basically an earnings to revenue formula that's supposed to tell you how financially healthy a company is supposed to be.  It's estimate of how many years of earnings would be necessary to pay back all the debt a company has. This ratio is considered to be alarming when it is greater than 3.0. TXI's is 146. It's next closest competitor in the construction materials market is Headwaters at 11. It's numbers like these that consistently land TXI on a list of companies ripe for takeover, especially in an industry that's been consolidating at a record pace the last twenty years. It's also what's motivating the company to turn itself back into a waste incinerator. By this time next year, TXI headquarters could be overseas. Meanwhile Energy Future Holdings, aka, the old Texas Utilities, is also swimming in debt thanks to ill-timed gambling on aging coal plants and hitching its fate to natural gas prices."It's kind of like Greece — by any cold, sober analysis, the math doesn't work,' said one power investment banker," according to Reuters lengthy analysis. The once mighty giant could hit a wall as soon as 2014 when it faces a $4 billion loan payment. Markets put the chance of EFH going into default at 91%. Changes in ownership mean changes in operation at the large polluting facilities of these companies. Could be good – jettisoning those old coal plants for example, or bad – cranking up the kiln to burn even more wastes to cut fuel costs. Stay tuned.  

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