Consolidated Thompson stock up on takeover bid

Shares in Montreal-based Consolidated Thompson Iron Mines surged Wednesday, the day after Cliffs Natural Resources announced it was making a $4.9-billion bid for the iron ore mining firm.

Consolidated Thompson closed up $3.97, or 30 per cent, at $17.35 on the Toronto Stock Exchange.

The American iron and coal producer said Tuesday that the deal would give it greater access to Asian markets.

Cliffs is offering $17.25 per share in cash, which was a 30 per cent premium to Consolidated Thompson's share price of $13.38 on Tuesday.

Consolidated Thompson operates the Bloom Lake open-pit iron mine in Quebec, near the border with Labrador, and two adjacent development properties.

"The very fact is, a company's survival is through growth and at this point in time, it's cheaper to buy a company on Bay Street than to drill a hole in the ground," observed Irwin Michael, president of I.A. Michael Investment Counsel Ltd. and manager of three ABC funds.

Michael expected to see more of this activity since there are so many companies sitting on large amounts of cash.

Offer buoys loonie

"You're going to see more and more [mergers and acquisitions] just because there are a number of companies that are relatively cheap," he said.

The all-cash deal also supported the Canadian dollar, which closed up 0.29 of a cent to 101.33 cents US.

That's because "invariably, [Cliffs] is going to have to pay in Canadian dollars, they have to convert from U.S. to Canadian," added Michael.