After a brief lull in corporate takeovers, the market is seeing some renewed activity in mergers and acquisitions. One of the most contentious is a bid to buy out a major “potash” producer, which has given agriculture exchange traded funds (ETFs) a growth spurt.
Ultimately, BHP Billiton Ltd. (NYSE: BHP) failed to provide an adequate number to buy out Potash Corp. of Saskatchewan Inc. (NYSE: POT), but investors increased stakes in other fertilizer companies in hopes of another round of deals, reports Caitlin Nish for The Wall Street Journal.
Gleacher & Co. analyst Edlain Rodriguez believes that Mosaic Co. (MOS) is a potentially lucrative takeover target, and incidentally, the company was among the biggest gainers on the BHP news. [When In Drought, Agriculture ETFs Look Good.]
Rodriguez points out that Potash and Mosaic are both good candidates for BHP to provide the necessary scale in potash production.
KeyBanc analyst Douglas Chudy commented on the greater stability in the fertilizer sector in terms of demand and pricing. [Materials ETFs Move Ahead of Europe’s ‘Stress Tests’.]
For more related information, visit our materials category. The following ETFs have varying degrees of exposure to the companies at the center of the takeover battle. Naturally, those with the greatest allocations could move the most on the news.
- iShares MSCI-Australia (NYSEArca: EWA): BHP is 15.1%.
- Market Vectors Hard Assets Producers (NYSEArca: HAP): POT is 6%; BHP is 2%; MOS is 1.3%
- Market Vectors Global Agribusiness (NYSEArca: MOO): POT is 10%; MOS is 4.9%
- iShares S&P Global Materials Sector Index Fund (NYSEArca: MXI): BHP is 7.6%; POT is 2.1%.
- iShares MSCI Canada (NYSEArca: EWC): POT is 2.9%
- iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM): MOS is 2%
For full disclosure, Tom Lydon’s clients own MOO.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.