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PERSPECTIVE: Hormones drive takeover fever to new heights

Last week an article in the Globe & Mail said University of British Columbia researchers from the Suder Sc...


Last week an article in the Globe & Mail said University of British Columbia researchers from the Suder School of Business have determined that a CEO’s testosterone level is key to a successful (or unsuccessful) takeover.

According to the newspaper, the UBC team studied 350 corporate deals completed between 1997 and 2007. The researchers determined that levels of testosterone, a hormone linked to aggression, directly affects a male CEO’s tendency to initiate a takeover or to walk away from an unfavourable deal.

(No word of what drives female executives.)

The collective level of men’s testosterone must be reaching a new high. PricewaterhouseCoopers says the volume of mining deals made this year is going to be even higher than in 2007 when 1,732 deals worth US$159 billion were completed. Gold, silver, iron ore, coal and copper targets are the most sought after.

PWC noted that many of the deals involving Asian-based corporations were strategic partnerships rather than outright acquisitions.

I also noted such a trend in some of the items crossing my desk in the last week. New Millennium Capital (NML) of Calgary said that India’s Tata Steel has agreed to acquire an 80% interest in NML’s Schefferville DSO iron ore project. Tata becomes a joint venture partner as soon as it reimburses NML for 80% of the cost of the project so far, arranges an additional C$300 million of funding, and agrees to take all of the output over the life of the mine. The DSO project will produce 4.0 million t/y of iron ore products beginning in 2012.

Rio Tinto, the British multi-national, is increasing its stake in Canadian Ivanhoe Mines to 34.9% from 29.6% with the purchase of 40.1 million Ivanhoe common shares. Ivanhoe discovered the massive Oyu Tolgoi copper-gold deposit along the Mongolia-China border. Resources contain 81 million lb of copper and 46 million oz of gold in all resource categories. Construction is underway.

Severstal Gold of Amsterdam has purchased Vancouver-based Endeavour Financial‘s entire stake in Crew Gold, giving Severstal a 93.38% interest in the British company. Endeavour received US$215 million in cash, changed its name to Endeavour Mining, and will concentrate on its 100%-owned Youga gold mine in Burkina Faso.

Time will tell whether it is wiser to forge a partnership or to take over a rival in its entirety.


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