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 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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The article Why Louisiana-Pacific's Shares Popped originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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