NEW YORK — If stock investing is like playing the lottery, your odds of winning the jackpot just got a little better.
Companies are buying each other at the fastest pace since before the Great Recession. Investors lucky enough to own stock in a company being bought are pocketing big money.
Since November, U.S. companies have announced a dozen purchases worth $3 billion or more in mining, food, technology, airlines and other industries. Stocks of the acquired companies have soared 20 percent or more above where they were trading before the deals were announced.
On Thursday, billionaire Warren Buffett's Berkshire Hathaway added to the frenzy, joining another investment firm to buy all the stock of H.J. Heinz Co. for $23 billion, or $72.50 per share. That was 20 percent higher than the ketchup maker's share price a day earlier.
Another group of shareholders scored a week earlier. In an echo of the big leveraged buyouts of the boom years, Michael Dell and an investment firm offered to take his publicly traded computer company private for $24 billion, most of that borrowed money. That translates to $13.65 per share, a 25 percent gain for stock owners, but they may get more. Two big Dell investors are protesting that the offer is too low, raising the possibility of a bidding war.
Investors are watching this deal closely for another reason: They hope it inspires investment firms to attempt other big leveraged buyouts — risky takeovers that use lots of borrowed money from banks and bond markets. The Dell deal would be the first large leveraged buyout since before the recession.
“We're finally dusting off the cobwebs,” said R.J. Hottovy, a director at Morningstar, a research firm. “It shows that banks are willing to take risks.”
Most deals have been companies buying each other in the same or similar businesses, with investment firms, and their heaps of borrowed money, playing no role. The companies often tap banks for money but usually use more of their own cash and are considered safer.
Still, CEOs have hesitated to strike deals because they were unsure they could count on the economy to help lift profits and absorb the costs of combining companies. That fear apparently is ebbing.
“It's a sign that corporate America believes that the expansion is going to accelerate,” said Peter Cardillo, chief market economist at Rockwell Global Capital.
The deals follow other signs of confidence returning. So far this year, initial public offerings of stocks have raised the most cash in two decades; small investors are putting money into U.S. stock mutual funds at the fastest pace in five years; and professional investors are borrowing more to finance trades because they are not as fearful of losing money.
The last time so many companies paired off, in 2006 and 2007, stocks were surging and investors were pocketing big gains on takeover news.
Now a few lucky investors are reliving the boom years. Here are some recent deals raining riches on shareholders, from data provider Dealogic:
ConAgra Foods Inc., maker of Chef Boyardee, announces a $5 billion deal to buy private-label food maker Ralcorp Holdings. Ralcorp shares rise 26 percent to $88.80.
IntercontinentalExchange Inc. offers to buy NYSE Euronext, owner of the iconic stock exchange on Wall Street, for $8 billion. Premium to NYSE shareholders: 43 percent.
Freeport-McMoRan Copper & Gold says it is buying oil and natural gas explorer Plains Exploration & Production Co. for $17 billion, handing Plains shareholders a 44 percent premium.
Deals totaling $219 billion have been announced so far this year, more than double the level over the same time last year, Dealogic reported. The value of deals is slightly above the same period in 2007. And that turned into a record year, with the value of deals reaching $1.6 trillion.
Those looking to profit on deals by picking companies before they're taken over should know it's not easy. But there are guidelines for choosing possible targets. One is a reasonably valued stock. Other signs are low debt and a history of generating lots of cash. Those are key for buyers who borrow heavily to finance deals, said Hottovy, the Morningstar analyst. Their debt can be repaid with the money coming out of target companies.
Hottovy warned that, despite the good signs, CEOs can sour on mergers and acquisitions if their confidence evaporates. He said a flood of deals a year ago turned into a trickle on fears the European debt crisis would hurt U.S. companies.
“We thought we were back,” he said. “But then Europe put a halt to all that.”