TORONTO, April 7 /CNW/ - After forging ahead in previous years, metals
industry deal-making fell away sharply in 2008 as world demand fell and prices
plummeted according to Metals Deals(*) 2008, PricewaterhouseCoopers' (PwC)
annual review of the metals industry. Average deal value in the first half of
2008 was US$301 million compared to US$318 million in first half of 2007. In
the second half of the year, average deal value plummeted to US$125 million
and total deal value fell from a high of US$51.1bn in Q3 2007 to a tenth of
this level a year later.
The report is the latest edition of a range of deals publications from
PwC, covering sectors including mining, aerospace & defence, renewable energy,
power and oil and gas. Together the mix of deals reports provides a
comprehensive analysis of M&A activity across industries worldwide.
"The year in metals M&A deal-making saw a dramatic and sudden
about-turn," says Jim Forbes, global metals leader at PwC. "Optimism that
China would continue to compensate for downturns elsewhere was replaced by
increasing concern about a weakening in global demand, including China. A
steep rise in commodity prices in the first half of the year was followed by a
The big deals worth over US$10bn plus were nowhere to be seen despite
dominating metals deal activity in 2006 and 2007. This led to total deal value
plunging from the record US$144.7bn in 2007 to US$60.6bn in 2008.
North America metal M&A activity fell sharply with the number of steel
and aluminum deals being halved and the total value of deals dropped steeply
from US$76.7bn in 2007 to US$15.8bn in 2008. Three quarters of North American
metals deal value came from cross-border transactions, 83% of it for steel
targets. The largest North American deal was Russian steelmaker Evraz's US$4bn
purchase of the North American tubular operations arm of IPSCO from Swedish
steel producer SSAB.
Similar record increases were recorded in South America, spurred by a
flurry of deals for Brazilian iron ore assets. Although only accounting for 8%
of all deals, they contributed to 24% of worldwide metals deal value. Total
deal value in the region reached US$14.8bn up 54% on 2007's US$9.7bn.
Chinese and Russian companies played a central role in world M&A
activity. Asia Pacific deals reached record highs with total value more than
doubling to US$16.4bn in 2008 from US$7.2bn in 2007.
Deal activity slowed considerably in Western Europe with deal numbers
down from 104 in 2007 to 65 in 2008 with the deal list headed by three US$1bn
plus deals. The largest was the completion of the US$3.7bn all-Austrian merger
of steelmaker Bohler-Uddeholm and Voestalpine, Austria's biggest steel group.
The other two both featured London-listed targets with production and mining
assets in Russia and Kazakhstan.
There is no doubt that the balance sheet landscape of the metals sector
is varied. Some companies face distress with weak share prices and problems in
refinancing and in contrast, others have relatively healthy balance sheets
having achieved record results.
According to Forbes, "Consolidation has left the larger metals players in
the industry in a more flexible position to shut down production and manage
capacity across the globe. The pressure to restructure will intensify the
longer the downturn continues and the outlook for demand is uncertain."
For more information please visit www.pwc.com/metals/deals
Methodology: Metals Deals 2008 is based on published transactions from
the Thomson Financial M&A database, January 2009. Analysis encompasses only
those deals which are completed in the calendar year. Deal values are the
consideration value announced or reported including any assumption of debt and
liabilities. Figures relate to actual stake purchased and are not extrapolated
up to 100%. The geographical split of the deals refers to the location of the
target company or assets. Deals located in the territory of the Russian
Federation are included in the totals for central and Eastern Europe. The
analysis relates to the supply chain for metals and basic metal products,
inducing recycling. The sector and subsectors analysed include base metal
mining (e.g. iron ore, aluminum), metal extraction, processing, the production
of basic metal products (e.g. strip, tube) and metal recycling. Comparative
data for prior years may differ to that appearing in previous editions of our
annual analysis or other current year deals publications as a result of fresh
information, methodological differences or refinements in methodology and
consequent restatement of the input database. A full list of transactions
throughout 2008 is available by visiting the Metals Deals website at
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