BHP Billitons $40-billion hostile bid for Potash of Saskatchewan puts this year on course to be the busiest for natural resources deals.
Commodities companies,including miners,oil producers and chemical makers,have announced $362 billion of takeovers so far this year. If they maintain that pace,they will eclipse the record $576 billion of deals announced in 2007,according to data compiled by Bloomberg. Resources deals constitute 28% of this years $1.26-trillion merger market,double their average share during the previous 10 years.
BHP,Vedanta Resources and Apache are taking advantage of low interest rates to finance all-cash deals that allow them to add reserves more cheaply than exploration. In addition,valuations havent rebounded as fast as commodity prices. The energy segment of the Morgan Stanley World Index has risen 39% from its 2009 low as the price of crude oil more than doubled.
Commodity prices have recovered and natural resource producers are feeling confident again, said Philip Keevil,a partner at Compass Advisers.In many cases it makes more sense to buy something someone else has already found. This hasnt happened in two years when the financing dried up,but that appears to be changing.