However, deal volume for 2009 likely to fall short of 2008 by 50%
TORONTO, Sept. 8 /CNW/ - The number of deals announced in the global
metals industry during the second quarter of 2009 declined from the first
quarter and remained far below the pace seen in 2008. However, the value of
deals through the first half of 2009 is on track to be 85% higher by the end
of the year than the total deal value for all of 2008, according to a new
PricewaterhouseCoopers (PwC) report, Forging ahead: Second-quarter 2009 global
metals industry mergers and acquisitions analysis.
- During the first half of 2009, there were 34 deals announced worth US
$50 million or more, compared with 139 deals for all of 2008.
- Based on current deal volume, 2009 is on pace to fall short of 2008
numbers by 50%.
These findings contrast with a relatively high level of deal value
announced during the first half of 2009, almost equalling the deal value
announced during all of 2008. However, the primary contributor to this level
of value was the announcement of one large deal, a US$58 billion 50-50 iron
ore joint venture between BHP Billiton and Rio Tinto. The potential for
incremental large deal activity during the balance of 2009 remains limited,
though the debt market has become more accommodating for investment-grade and
high-yield corporate issuers compared with the first half of 2008.
"We expect that new announcements will continue to be strategic in
nature, including deals that enable the acquirer to vertically integrate or
gain exposure to attractive mining assets," said Jim Forbes, global metals
leader at PwC. "These drivers should provide something of a bright spot in
what has been an otherwise sluggish environment for metals deals."
Strategic investors continue to dominate the deal landscape for metals
targets, accounting for almost 99% of deal value announced during the first
half of 2009. This is an increase from 2008, when strategic investors
accounted for 75% of deals. It is likely that strategic investors will
continue to account for a large majority of announced deal value because of
restraints on credit and the rationale for building scale and consolidation
within the sector.
The Asia & Oceania region dominated activity during the first half of
2009, comprising 71% of total deal volume and 94% of value as M&A targets and
85% of total deal volume and 95% of value as acquirers. Cross-border deals are
on the decline as local-market deals take precedence. In the first half of
2009, total local-market deals comprised 62% of deals (for deals worth US$50
million or more), compared with 38% being cross-border deals.
The Rise of China
As the deal activity continues to increase in the AsiaPac Region, the
second quarter Forging ahead report takes a deeper look at China specifically,
including the country's continued impact on the global economy, as well as the
challenges and opportunities that exist for companies looking to initiate or
expand existing business with China.
"China's reported 7.9% growth for the second quarter of 2009 is creating
hope that the world recession may be easing," said Forbes. "In our experience,
often the companies that are best positioned to succeed are those that
understand China's strategic development priorities and approach Chinese
business relationships as partnerships, rather than the traditional
For U.S. companies struggling through the recession, China's gross
domestic product growth rate, which forecasters in China and the U.S. now
expect to approach or even exceed eight percent for 2009, is enticing. So,
too, are the hundreds of billions of dollars China has committed to bolster
its domestic demand and pursue investment in a multilayered economic stimulus
The influence of China's government can have important consequences both
for companies looking to do business with the Chinese and for companies whose
business overlaps with Chinese priorities, such as resource- and
For information on Forging ahead and to access the full report, including
the special section on China, visit: www.pwc.com/us/industrialproducts.
About PricewaterhouseCoopers' Global Metals practice
PricewaterhouseCoopers' Global Metals practice is composed of a worldwide
network of industry professionals serving metals clients and strategically
located in more than 30 countries. PricewaterhouseCoopers services global
clients involved in ferrous and nonferrous primary and secondary metals
production by bringing experience, leading international industry practices,
and a wealth of specialized resources to help solve business issues.
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