BHP's Potash Raid May Make Record Year for Resource Deals
BHP’s Potash Bid May Augur Record for Resource 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 thePhotographer: Derick E. Hingle/Bloomberg
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 thePhotographer: Derick E. Hingle/Bloomberg
Aug. 19 (Bloomberg) -- Mark Gulley, an analyst at Soleil Securities Corp., talks about BHP Billiton Ltd.'s $40 billion bid for Potash Corp. of Saskatchewan Inc. and the outlook for further merger and acquisition activity in the commodities industry. BHP, the world’s biggest miner, got $45 billion of funding to back its hostile takeover bid for Potash in the largest debt issue since it agreed to a $55 billion loan to acquire Rio Tinto Group. The Melbourne-based miner will seek to refinance the loans in the corporate bond market, in which U.S. investment-grade yields have fallen to a record low. Gulley speaks from New York with Bloomberg's Phillip Yin. (Source: Bloomberg)
Aug. 19 (Bloomberg) -- Peter McGuire, managing director at CWA Global Markets Pty, talks about BHP Billiton Ltd.'s hostile $40 billion takeover offer for Potash Corp. of Saskatchewan Inc. and the prospect of rival bids. He speaks with Maryam Nemazee on Bloomberg Television's "Start Up." (Source: Bloomberg)
Aug. 19 (Bloomberg) -- Christian Blaabjerg, chief equity strategist at Saxo Bank A/S, talks from Copenhagen about BHP Billiton Ltd.'s hostile $40 billion takeover offer for Potash Corp. of Saskatchewan Inc. BHP, the world’s biggest mining company, arranged $45 billion of credit for its bid of Potash Corp., the largest since it agreed to a $55 billion loan in the unsuccessful acquisition of Rio Tinto Group. Blaabjerg talks with Bloomberg's Maryam Nemazee. (Source: Bloomberg)
Aug. 19 (Bloomberg) -- Greg Smith, managing director at Fat Prophets, talks about BHP Billiton Ltd.'s hostile $40 billion takeover offer for Potash Corp. of Saskatchewan Inc. He speaks with Maryam Nemazee on Bloomberg Television's "Countdown." (Source: Bloomberg)
Aug. 19 (Bloomberg) -- Glyn Lawcock, an analyst at UBS AG, talks about BHP Billiton Ltd.'s $40 billion bid for Potash Corp. of Saskatchewan Inc. BHP, the world’s biggest miner, got $45 billion of funding to back its hostile takeover bid for Potash in the largest debt issue since it agreed to a $55 billion loan to acquire Rio Tinto Group. The Melbourne-based miner will seek to refinance the loans in the corporate bond market, in which U.S. investment-grade yields have fallen to a record low. Lawcock talks with Bloomberg's Rishaad Salamat from Sydney. (Source: Bloomberg)
Aug. 19 (Bloomberg) -- John Meyer, head of research at Fairfax I.S. Plc, talks about the financing for BHP Billiton Ltd.'s takeover bid for Potash Corp. of Saskatchewan Inc. He speaks with Francine Lacqua on Bloomberg Television's "Countdown." (Source: Bloomberg)
BHP Billiton Ltd.’s $40 billion hostile bid for Potash Corp. of Saskatchewan Inc. 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 percent of this year’s $1.26 trillion merger market, double their average share during the previous 10 years.
BHP, Vedanta Resources Plc and Apache Corp. 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 haven’t rebounded as fast as commodity prices. The energy segment of the Morgan Stanley World Index has risen 39 percent 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 former Lazard Ltd. banker and now a senior partner at Compass Advisers LLP, in an interview from New York. “In many cases it makes more sense to buy something someone else has already found. This hasn’t happened in the last two years when the financing dried up, but that appears to be changing.”
‘Large Discoveries’
BHP rose as much as 23.5 pence, or 1.3 percent, to 1,873.5 pence in London today. The shares traded at 1,859.5 pence at 9:09 a.m. local time. Potash shares rose 3.3 percent in New York yesterday following a 28 percent jump on Aug. 17.
BHP, based in Melbourne, has lined up $43 billion in loans to finance its bid for Potash Corp. Miner Vedanta last week agreed to pay $8.4 billion in cash for a controlling stake in oil driller Cairn India Ltd., using a $5 billion loan arranged by Standard Chartered Plc.
“The deals potentially signal the start of an upturn in natural resources,” said David Hart, an analyst at Westhouse Securities Ltd. in London. “Oil and gas companies are looking for access to potentially large discoveries. Access is one of the key challenges for oil majors.”
BP Plc, which said it will sell up to $30 billion of assets worldwide to help pay for the Gulf of Mexico spill, agreed to hand over fields in the U.S., Canada at Egypt for $7 billion to Apache in July. The London-based company has agreed to the disposal of $1.9 billion assets in Colombia and said operations in Pakistan and Vietnam are for sale.
‘Attractive Targets’
The biggest mining deals this year are KazakhGold Group Ltd.’s acquisition of OAO Polyus Gold, valued at $9.4 billion when it was announced in June, and Newcrest Mining Ltd.’s $9 billion purchase of Lihir Gold Ltd., according to Bloomberg data.
“You can expand specific product areas that you’ve been looking at for a long time at reasonable rates right now, and that’s why targets are attractive,” said Nancy Havens-Hasty, president of Havens Advisors LLC, a merger arbitrage fund manager. She spoke on Bloomberg Television yesterday.
Traders are speculating about which companies may be bought next. Fertilizer makers Mosaic Co., CF Industries Holdings Inc., Intrepid Potash Inc., and Agrium Inc. rose Aug. 17 after BHP’s bid for Potash Corp.
U.S. Steel Corp. rose 4.8 percent to $49.59 on the New York Stock Exchange yesterday after the trading website Benzinga reported on speculation that ArcelorMittal was seeking to buy the Pittsburgh-based company for about $80 a share. Giles Read, a spokesman for ArcelorMittal in London, and Erin DiPietro, a spokeswoman for U.S. Steel, declined to comment.
Goldman Sachs Group Inc. is the biggest adviser on natural resources deals this year, working on $125 billion of transactions, followed by JPMorgan Chase & Co., Bank of America Corp., and Barclays Plc.
To contact the reporters on this story: Brett Foley in London at bfoley8@bloomberg.net; Zachary R. Mider in New York at zmider1@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.
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