Replies to post #4120 on The Rising Influence of Rising Affluence

[DewDiligence]

Bloomberg says CLF has buyout vig—I couldn’t agree more:

http://www.bloomberg.com/news/2012-02-07/cliffs-becomes-easy-target-with-cheapest-mining-value-in-america-real-m-a.html

For all the acquisitions being struck in the mining industry, no company in North America is a cheaper takeover candidate than Cliffs Natural Resources Inc. The biggest North American iron-ore producer yesterday sold for 6.4 times its cash from operations, after deducting capital expenses, according to data compiled by Bloomberg. That was less than every other metals or mining company in the U.S. or Canada exceeding $5 billion in market value, and a 70 percent discount to the median. Cleveland-based Cliffs, which analysts say will generate record sales in 2012, was also the least expensive relative to its estimated net income this year and next.

… Cliffs may attract interest from BHP Billiton Ltd. (BHP) or Rio Tinto Group, Lutetia Capital said. An acquirer could pay a 30 percent premium and still get Cliffs for less than any comparable publicly traded mining company versus its free cash flow, the data show.

…BHP and Rio Tinto, which both get more than a quarter of their revenue from China, may now want Cliffs’ iron-ore business to increase exports to the world’s fastest-growing major economy, according to Confluence’s Keller and Jean-Francois Comte, co-founder of Paris-based Lutetia… Buying Cliffs, which produced about 40 million metric tons of iron ore in the past 12 months, could boost BHP’s total output by almost 30 percent and Rio Tinto’s by about 20 percent…

These are exactly the reasons I own a large position in CLF.