It’s hard not to notice that all the recent M&A activity included some pretty hefty premiums.
Just today Cleveland Cliffs announced it would acquire Alpha Natural Resources for $10 billion in cash and stock. They’re paying a premium of about 35 percent.
Of course over the week-end InBev acquired Anheuser-Bush for $52 billion to create the world’s largest beer maker. The Belgian brewer paid a 27 percent premium to Anheuser's record-high stock price in October 2002.
And don’t forget Dow Chemical just bought Rohm & Haas for $15 billion, paying a premium of almost 75%.
Do all these premiums suggest that stocks are undervalued?
"I think a fair value is being paid in most of these deals and that’s why you’re seeing the deal premiums being as large as they are,” says Frank Aquila, a partner at Sullivan & Cromwell on Fast Money. (His firm was the lead counsel to InBev in the Anheuser-Busch bid.)
If you watch the show regularly you might remember Aquila told the traders earlier in the year that the weak dollar could trigger this kind of buying spree. In an nutshell, the weak dollar makes American companies relatively “cheap” for companies based overseas.
