Merger and acquisition activity tends occur in waves. By that, I just mean mergers are popular for a few months at a time, then are followed by a period of general disinterest in corporate acquisition. Take early 2005 as an example. M&A news was non-stop, especially in the telecom arena. There hasn’t been much merger news of late, but it looks like we may be entering another substantial M&A period. This time, it looks like it’s going to be led by the steel and mining industries.
For instance, Phelps-Dodge (NYSE: PD) recently made a move to buy Inco (NYSE: N) and Falconbridge (NYSE: FAL). Barring a regulatory setback, the acquisitions are probably going to happen, much to the delight of all involved parties. Mittal (NYSE: MT) has also initiated a merger with European steelmaker Acelor. Shareholders still need to vote on the matter, but odds are that it will be approved.
It goes without saying the smaller companies are the ones the bigger companies are looking to acquire, and the evidence of the current interest is clear. Now may be a good time to start finding some off-the-radar steel producers and miners that would be good buyout candidates. And even if a suspected acquisition doesn’t go through, you could do worse than a steel miner or producer. The steel stocks have really started to move higher again over the last few days -much more so than the rest of the market.
The offer from Phelps-Dodge essentially knocked Canadian company Teck Cominco (TEK-A:TO) and Swiss miner Xstrata (XSRAF.PK) out of the running for Inco and Falconbridge, respectively. However, it’s now obvious that Teck Cominco and Xstrata are shopping for growth, or at least considering it. Keep your ears and eyes open for hints from those two possible suitors, if you’re looking for a buyout play.
By the way, the symbol for Teck Cominco will be changing to ‘TCK-A’. It’s listed on the Toronto Stock Exchange, but the ticker change will affect stock quote retrieval sources in the U.S. as well.