Cramer offered up two more M&A deals he’d like to see now that stocks are so low. Commodities, the disappearance of China, hedge and mutual fund redemptions, the overall market mess – these have all hurt share prices across the board, making certain companies too cheap to ignore.
But not for investors. Cramer thinks cash-rich firms with an eye for growth should start buying. Market values have dropped so precipitously that there are even some two-for-one deals out there.
Take BHP Billiton . The company tried to take over minerals giant Rio Tinto in 2007, but to no avail. So instead Cramer’s recommending BHP go for gold, as well as copper and molybdenum, through a purchase of Freeport-McMoRan. FCX has taken such a beating that it can be had for just $16.6 billion. That’s a huge discount when you factor in that FCX bought Phelps Dodge and its copper business back in 2006 for $25.9 billion. BHP would be getting Phelps for free and then some.
Going back to Rio Tinto. This company paid $38.1 billion for number-two alumina player Alcan in 2007 after a bidding war with Alcoa, the number one. Well, now Alcoa’s enterprise value, the cost at which the company can be acquired, has dropped to just $15.8 billion. So if Rio Tinto wants, it can get the better company for just one-sixth of the price for Alcan. The move would give Rio a virtual monopoly on aluminum. Cramer suggested moving quickly before Obama is sworn in.
Jim's charitable trust owns Freeport-McMoRan.
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