Added to YB: 2026-01-14
Pitch date: 2026-01-12
MERC [bullish]
Mercer International Inc.
+1.97%
current return
Author Info
Dismissed & Asset Backed has their heads stuck in 10Ks and 10Qs of 'old world' businesses trading below tangible book value. Sign up for the newsletter.
Company Info
Mercer International Inc., together with its subsidiaries, manufactures and sells northern bleached softwood kraft (NBSK) and northern bleached hardwood kraft (NBHK) pulp in the United States, Germany, China, and internationally.
Market Cap
$170.5M
Pitch Price
$2.54
Price Target
7.50 (+194%)
Dividend
N/A
EV/EBITDA
15.76
P/E
-0.99
EV/Sales
0.86
Sector
Paper and Forest Products
Category
turnaround
Mercer International (MERC) – A Highly Leveraged Pulp Producer with Significant Upside if it can Navigate the Next Few Years
MERC: NBSK pulp producer trading at 0.43x P/TB (vs 1.15x avg) due to weak markets & $1.45B debt (473% net gearing). Billionaire Kellogg owns 36.5%, PE firm Atlas 4.7%. Potential asset sales (Peace River $285M) could cut debt, boost equity 37%. Bear cases include the binary nature due to high leverage, potential dilutive equity raises (S-3 filing in August), and continued weak market conditions with 86% capacity utilization. Bull cases center on survival without dilution and cyclical recovery, with consensus forecasting 2028 EBITDA of $357 million that at a 5x multiple would yield $7.50 per share (3.75x current price, 56% CAGR), representing 1.5x tangible book value in a normalized environment, though the investment carries significant binary risk given the debt burden.
Read full article (14 min)