All the Recent M&A Activity Points to a Continued Commodity Boom

There has been much speculation as to whether the recent price pullback for both commodities and the shares of stocks that produce them is a breather or the beginning of the end of the bull run. The action of the producers themselves suggest they believe the boom has legs.

For the second time in as many business days, a commodity producer has announced it will buy not one but two of its rivals. On Friday it was in the oil patch, where Anadarko Petroleum (APC) bid for both Kerr-McGee and Western Gas. Today, Phelps Dodge (PD) said it would acquire Inco (N) for C$80.13 per share in cash and stock. Inco in turn raised its existing offer to buy Falconbridge (FAL) to an implied value of C$62.11 per share. Throw in the long-awaited deal between Mittal (MT) and Arcelor (steel) and you have a broad-based commodity stock M&A boom.

Having covered basic materials in the late 1990’s, when the only way to get investors to show up at a conference was to bill it as a B2B play, we can tell you there are more than a few long-suffering analysts who are finally getting their day in the sun.