Anglo-Australian mining group BHP Billiton led the charge last week with a £35 billion (US$54.4 billion) bid for Potash Corp of Canada.
Analysts say British companies in the takeover frame include television company ITV, targeted by NBC; BG, the gas and exploration group, which is being stalked by oil majors such as Shell; insurance company Prudential, a possible target for a break-up bid by Aviva and Resolution; miner Xstrata, which is being eyed by Swiss commodities group Glencore; AstraZeneca, the drugs company, which could attract interest from GlaxoSmithKline or European rivals; and the supermarket group Sainsbury, where the Qataris have built up a minority stake.
Potential counter-bidders for PotashCorp, such as Vale of Brazil and Chinese companies such as CIC (中國投資公司) and Sinochem (中國中化) were this weekend reviewing their options.
Banking sources say PotashCorp executives are “actively courting possible white knights” to save the firm from the clutches of BHP, headed by Marius Kloppers. Another option is to persuade a Middle Eastern sovereign wealth fund to buy a blocking stake.
The mining and resources sector is attracting a flurry of activity as firms seek to cash in on demand from Asia and South America.
“Predators are seeking to secure potentially lucrative supplies of minerals and oil as industrialization continues apace in emerging countries,” Charles Kernot at Evolution Securities said.
On Friday, British oil explorer Dana Petroleum found itself at the receiving end of a hostile £1.9 billion offer from South Korea’s state-owned KNOC.
Bloomberg published research showing that this month could be one of the busiest months for mergers and acquisitions (M&A) since the financial meltdown in the autumn of 2008. By the end of last week, proposed deals tabled over recent weeks topped US$175 billion.
Ian Richards, head of European equities strategy at RBS, said companies that had been hoarding cash during the recession were now willing to spend because “corporate cash flow is very high.”
Richards said attractive targets were likely to be firms with strong export potential and with exposure to emerging markets. He added that “the sweet spots” were mining and resources; industrial goods and services; personal household goods; and food and beverages.
However, Royal London Asset Management chief investment officer Robert Talbut said there was wariness about the ability of banks to provide credit lines and that doubts lingered about the strength of the recovery.
However, Andrew Milligan, head of global strategy at Standard Life, told Bloomberg he thought there would “another wave of M&A” and that “a robust trend” was beginning to emerge. Milligan does not believe there will be a double dip recession.
Paul Parker, head of global acquisitions at Barclays Capital, said cash on corporate balance sheets was at “historically high levels,” while other analysts point out that stock market valuations are relatively low, making target companies look cheap.
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