interesting article

These foreign takeovers are making Canadians rich
When we sell an Inco, money is recycled into other companies' stock


Gary Lamphier, The Edmonton Journal
Published: Saturday, August 19, 2006
Canada's most celebrated corporate behemoths are going down faster than weenies at a speed-eating contest.

With Brazil's CVRD poised to snap up Inco for $19.4 billion, and Anglo-Swiss mining giant Xstrata set to digest Falconbridge in a $20.9 billion deal, two of this country's top mining companies are about to be swallowed whole.

Together, Inco and Falconbridge account for nearly half of the Toronto Stock Exchange's metals and mining index. Their departure will leave brokers, analysts, corporate financiers and investors with two big holes to fill.

Among Canada's shrinking lineup of mining heavyweights, only Vancouver's Teck-Cominco -- the biggest loser in the Inco battle -- and Toronto's Barrick Gold rival Inco and Falconbridge in size and symbolic heft.

The mining sector isn't unique, either. Whether you're talking steel, beer, utilities, real estate, hotels or high-tech, a massive wave of foreign buying is reshaping Canada's corporate landscape.

Major players like Intrawest, ATI Technologies, Terasen, Fairmont Hotels, CP Ships, Molson, Sleeman, MacMillan Bloedel, Dofasco, Future Shop and Westcoast Energy are going or gone. Although Calgary's oil and gas heavyweights haven't been targeted in the latest wave, their day will come.

That isn't to say such deals are bad for Canada. Far from it. In fact, past foreign takeovers have often triggered more domestic hiring and capital spending, not less, while setting the stage for a new crop of Canadian players.

Moreover, the wave of megadeals is making Canadian investors rich, with foreign buyers typically paying fat premiums to acquire their prey. Eventually, much of that cash windfall will find a home in other Canadian stocks.

"Interest is now turning elsewhere in the base metals sector. Between Inco and Falconbridge, approximately $37 billion in cash should be coming available for reinvestment in the coming weeks," notes Canaccord Capital.

"Some of the capital can be expected to rotate into the mid-tier and junior producers, with companies such as LionOre Mining, Inmet Mining, HudBay Minerals, First Quantum, Aur Resources, Anvil Mining, FNX Mining and Dynatec likely to attract investor interest."

That should be good new for stock prices. And with Inco and Falconbridge set to disappear, it will also encourage more consolidation among small-cap and mid-sized players, in both base metals and gold mining.

Again, investors will reap the benefits