Market Overview

ETFs For A Prowling BHP Billiton


Perhaps comments from CEO Marius Kloppers in 2011 that his company, BHP Billiton (NYSE: BHP), would spend $80 billion to develop and invest in its own mines and oil and gas fields made investors think the world's largest mining company was taking a breather from large-scale mergers and acquisitions.

Last week, Deutsche Bank put a note out that said BHP could sell $10 billion in non-core assets and maybe that was interpreted as another sign the company was going to stay away from big deals for a little while.

Think again. This is Marius Kloppers and BHP Billiton we're talking about. Twice-bitten when it comes to big-time mergers and acquisitions, but never shy, Kloppers told Australian Broadcasting Corp. over the weekend "I have absolutely no doubt that over time we will do more transactions," Bloomberg reported.

Nearly $100 billion in international mining deals took place last year and BHP could help lead the mining sector to even higher M&A figures over the next couple of years. Rather than engage in the burdensome act of finding specific targets for BHP, it might be easier to spot the ETFs that have multiple constituents that could appeal to the Anglo-Australian mining giant. Here are some to consider.

Market Vectors Coal ETF (NYSE: KOL) Coal prices are up this year, but U.S. companies have announced production cuts and that could lead some to believe demand is waning. BHP remains committed to its coal operations over the long haul and the Market Vectors Coal ETF is home to multiple companies that BHP could easily acquire. Top-10 holdings Alpha Natural Resources (NYSE: ANR) and Walter Energy (NYSE: WLT) could be possibilities, though Walter might be more likely than Alpha Natural.

iShares MSCI Global Select Metals & Mining Producers Fund (NYSE: PICK) The newly minted PICK hasn't been getting much attention until recently and BHP accounts for almost 18% of the ETF's weight. That said, PICK is home to over 300 more stocks in addition to BHP and that means there are plentiful pickings in PICK when it comes to potential objects of BHP's desire.

Market Vectors Agribusiness ETF (NYSE: MOO) Remember when BHP wanted to buy Potash (NYSE: POT) for $39 billion? Remember when the Canadian government and Potash itself were less than receptive to the deal? Chances are Kloppers remembers and while that may keep him from making another run at Potash, it does NOT mean BHP won't consider another fertilizer acquisition should the opportunity become available. MOO is up more than 10% year-to-date, but there's nothing like some M&A rumors to light an ETF's fire for more returns.

Market Vectors RVE Hard Assets Producers ETF (NYSE: HAP) HAP's top-10 holdings, BHP included, represent about a third of the ETF's weight and the other nine probably aren't legitimate takeover targets for BHP. However, HAP is home to another 333 stocks from the mining, fertilizer and oil and gas sectors. Put another way, HAP's lineup is a cornucopia of potential takeover targets for BHP.

First Trust ISE-Revere Natural Gas Index Fund (NYSE: FCG) A lot of people know that BHP is the world's largest mining company, but they may not realize the company is the world's seventh-largest upstream oil company. Fresh off the 2011 acquisition of Petrohawk Energy and a $4.75 billion deal for shale assets previously owned by Chesapeake Energy (NYSE: CHK), BHP remains an acquirer to watch in the energy sector.

Maybe that means a run at Chesapeake. Maybe it doesn't, but FCG is chock full of companies BHP could easily afford to buy to bolster its oil and gas production.

Posted-In: Long Ideas M&A News Sector ETFs Short Ideas New ETFs Rumors Futures Best of Benzinga


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