Global Mining, Metals M&A Deal Subdued in 3Q -Study
October 27 2016 - 10:08AM
Dow Jones News
By Alex MacDonald
LONDON--Mergers and acquisition activity in the global mining
sector was subdued in the third quarter, Ernst & Young said
Thursday, as companies continue to streamline operations following
a protracted fall in the price of commodities.
A quarterly study produced by the consultancy and accountancy
firm showed deal value unchanged at $7.9 billion, while the number
of deals rose to 121 in the three months ended Sep 30. Capital
raised by mining and metals companies fell 17% to $49.9 billion in
the third quarter compared with $60 billion in the second
quarter.
"The priority for miners continues to be portfolio realignment
rather than acquisitions for future growth. These divestment
strategies are driving activity rather than a rush to consolidate
as we saw at the peak of the super cycle," said Lee Downham, global
lead partner, mining & metals transaction advisory services at
Ernst & Young.
China was the highest value dealmaker in the third quarter both
as an acquirer and target due to frenzied consolidation activity
within the country. Chinese companies were the targets for $2.4
billion worth of transactions, and it was the acquirer in $3.8
billion worth of transactions, representing 29% and 48% of the
global deal value respectively.
Within those Chinese deals, 89% took place domestically. An
exception was China Molybdenum Co. Ltd's $1.5 billion acquisition
of Anglo American PLC's (AAL.LN) niobium and phosphate assets in
Brazil in September.
Mr. Downham said a number of high-value mergers on the horizon
may drive some momentum across the global mining and metals sector
in the near future, including a $27 billion proposed merger between
Canada's Potash Corporation of Saskatchewan Inc. (POT) and Agrium
Inc (AGU) and the restructuring deal between Baosteel Group Corp
and Wuhan Iron & Steel Co. Ltd.(600005.SH). Portfolio
realignment programs are also likely to be a key driver of M&A
activity, including disposal programs announced by Anglo American
and Freeport-McMoRan Inc. (FCX), Mr. Downham noted.
"As the sector becomes increasingly adept at managing
volatility, we will see corporates begin to consider strategies
that are more focused on future growth," said Mr. Downham. "This
may be in the form of all-share mergers to create synergies and
scale or transactions focused on creating regional diversification
among the single-asset producers," he added.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
October 27, 2016 09:53 ET (13:53 GMT)
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