THE RISE of China and India has sparked a renewed surge in aggressive deal-making in the resources sector, with more than $50 billion in proposed takeovers this week alone wagering on continued strong commodities demand.
BHP Billiton yesterday formally tabled its $39 billion hostile takeover for PotashCorp, the world’s largest listed fertiliser producer, ahead of comments from Sino chem, the Chinese state-owned chemical group.
In the first concrete signs of Beijing’s interest in the deal, Li Qiang, a spokesman for Sinochem, said it was paying “close attention” to the takeover battle, adding that it was “interested in overseas potash investment opportunities”.
The Canadian company told its shareholders “not to take any action regarding the offer” from the Australian mining group of $130 a share, with many bankers betting on a counterbid emerging from China.
The rise in deal activity is the clearest sign that executives believe that the “commodities supercycle”, driven by the industrialisation of emerging countries, is sustainable.
Raw materials prices have risen 35 per cent since the depths of the financial crisis in early 2009, led by a recovery in crude oil, copper and iron ore.
Natural resources companies, including miners, oil and fertiliser makers, have launched $316 billion so far this year in MA deals, the largest for the opening eight months of the year, according to Dealogic, a data provider, and on course to beat the annual record of $384 billion of 2006.
A senior industry executive said: “Companies with a strong balance sheet, coming out of the downturn one year ago, were frightened to act in case we still faced Armageddon. But an improved environment has led some companies to renew old ambitions. A lot of companies practised for these types of deals in 2008 . . . Now they are ready to move faster.” – (Copyright The Financial Times Limited 2010)
