Global Mining, Metals M&A Activity Continues to Shrink
May 11 2016 - 11:36AM
Dow Jones News
By Alex MacDonald
LONDON--Mergers and acquisitions activity in the global mining
and metals market continued to shrink in the first quarter compared
with the same period last year as buyers continued to fret over
whether commodity prices will stay low for longer or fall further,
a report published by consultancy firm Ernst & Young showed
Wednesday.
Deal value in the three months ended March 31 plummeted 45% from
the same period last year to $3.3 billion. Meanwhile, deal volume
dropped 17% to just 72 deals. The top three deals were all
divestments such as Barrick Gold Corp.'s (ABX) $610 million
divestment of Bald Mountain and associated assets, and Rio Tinto
PLC's (RIO) $617 million sale of its 40% stake in the Bengalla Coal
joint venture.
"Prolonged commodity price volatility, widespread financial
distress and subdued investment appetite continues to take its toll
on transaction activity in the mining and metals industry," said
Lee Downham, EY's global mining and metals transactions leader.
"These forces aren't driving the value or volume of deals
expected at the outset of the year. Instead, we're seeing greater
restraint as companies wait to see whether we've finally reached
the bottom of the market."
Gold deals comprised over half of the first quarter's deal value
at $1.7 billion and 46% of the volume at 31 deals. Coal and steel
were the next biggest deal sectors, accounting for $735 million and
$568 million of the deal value, respectively.
The global mining and metals market raised over $60 billion in
capital during the first quarter, unchanged year-over-year but down
24% compared with the fourth quarter of last year.
Market volatility, wider concerns about U.S. monetary policy and
the pace of economic slowdown in China significantly reduced equity
listings, with first-quarter follow-on offerings declining 59%
year-over-year to $3.4 billion and primary listing activity
remaining stagnant at a low level of around $70 million.
Loans picked up 38% from a year earlier to $26 billion while
bond issues dropped 5% to $32.8 billion in the first quarter.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
May 11, 2016 11:21 ET (15:21 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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