With stronger balance sheets, improved credit availability and stabilizing metal prices, PwC forecast the recovery in global metals M&A is expected to continue for this balance of this year.
Iron ore targets were the primary driver of global metals M&A activity during the first quarter of 2011, contributing almost 40% of the deals worth a total of USD 5.1 billion, a significant increase over full-year 2010 when iron ore represented only 20% of total deals.
Mr Jim Forbes PwC global materials leader said that "The focus on iron ore deals illustrates the need for companies to integrate reliable iron ore supplies into their organizational structures. Additionally, we''ve seen an uptick in these deals due to horizontal consolidation of some of the smaller players."
The iron ore M&A category was aided by the proposed USD 4.1 billion acquisition of Canadian miner Consolidated Thomson.
In their analysis, PwC noted that the number of mega deals with a disclosed value of at least USD 1 billion decreased slightly during the first quarter. During the first-quarter 2011, four mega deals were announced.
In the first quarter of this year, there were 26 deals with value greater than USD 50 million, accounting for USD 12.9 billion in total deal value, a 105% increase from the USD 6.3 billion in the first quarter of 2010, which had two fewer deal. Average deal size was USD 500 million during the first-quarter 2011, up 67% from the USD 300 million average deal size in the first quarter of 2010.
Meanwhile, PwC industrial products analysts found that metals companies are becoming better positioned to pay for new deals.
Increased cash balances, combined with improved credit availability and extremely low interest rates positioned companies to take advantage of M&A opportunities. PwC said that "These trends should lead to increased activity, at least in the near term.”
In their analysis, PwC also noted that financial investors are increasing their involvement in the metals sector. "Illustrating this most notably was the USD 1.95 billion bid for Companhia Brasileira de Mineração e Metalurgica by a group of Asian investor companies in the quarter''s third largest deal."
PwC concluded that "The recovery in the metals deal market, which began last year, is expected to continue.”
( Source: www.steelguru.com )