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PwC report says metals sector M&A decline 30% last year

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(Credit: Reuters) A worker welds a metal table at a scrap yard at an industrial area in Mumbai April 12, 2013.
Metals Sector
February 21
11:26 AM 2014

There wasn't much in the way of deal making in the metals sector last year. A PwC report showed that mergers and acquisitions activity in the segment fell 30% in 2013, the lowest it has gone in eight years, the Financial Times reported. Buyers and sellers had difficulty agreeing on valuations due to factors like slow growth experienced in the sector worldwide, declining prices and excessive production.

The PwC report showed that 357 M&A metal deals were closed in 2013, which was substantially lower than the 507 deals made the year before. Deal value also went down 24% to $34.8 billion compared to that in 2012. This is definitely a huge drop when seen in light of the peak of the commodities boom in 2007 when overall deal value reached $144.7 billion, FT reported.

World Bank data also showed that last year, the average price of base metals went down 6% while that of precious metals suffered a much larger decline at 17%, the report said.

The FT report quoted PwC Global Metals Leader Jim Forbes as saying, "Deal activity fell away in 2013 and, while there is some greater economic optimism, we conclude that overall low gear growth combined with continued worldwide production overcapacity doesn't augur well for a strong recovery in metals M&A in 2014."  

There were more local deals than international deals in 2013. Cross-border M&A activity declined to 11% from 39% of the overall value, representing the lowest since 2003, the first year that such data was gathered for the report.

Last year, seven of the ten largest completed deals were valued at over $1 billion. However, only two of these were started in 2013 and the others were only carryovers from prior years. The $7.5 billion merger which created Emirates Global Aluminium was last year's biggest completed transaction, the report said.

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