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Global Metals M&A


Deals Insights Q2 2016

Executive summary

The Metals deals market remained


sluggish in the second quarter of
2016. While some metals
commodity prices rebounded,
metals prices, global demand, and
production all generally remained
low, and companies continued to
be challenged by global economic
uncertainty and volatility.

Deal activity in the Metals industry was down in Q2 2016 when


compared annually and sequentially. Total number of deals
decreased to 17 (lowest since Q2 2014), from 31 in Q2 2015 and
18 in Q1 2016. Total deal value was recorded at $2.8 billion,
down 69% and 73% compared to Q2 2015 and Q1 2016,
respectively.
Of 17 deals announced in the quarter, only five were closed. The
remaining deals were pending, comprising 71% of the total deal
volume and 74% of the total deal value ($2.0 billion).
There were no megadeals announced during the quarter,
compared to two megadeals each in Q2 2015 and Q1 2016. The
top deal recorded in the quarter, which was in the Aluminum
sub-sector, occurred in China at a value of $347 million.
Average deal size in Q2 2016 was relatively low ($162 million)
compared to all quarters over the past two years, and declined by
43% and 71% compared to Q2 2015 and Q1 2016, respectively.
Major categories such as Steel and Aluminum witnessed a
decline in M&A activity during the quarter, compared to Q2
2015 and Q1 2016. However, Aluminums deal value increased
by 19%, even though the number of deals decreased by 33%
compared to Q2 2015, and saw the top two deals in the quarter,
with a combined value of $669 million.

Brian Kelly,
US Metals Deals Leader

Key trends/highlights

Global Metals deal volume was sluggish in Q2 2016


decreasing to 17 deals, valued at $2.8 billion.

There were no megadeals announced during this


quarter. The largest deal was JiaoZuo WanFang
Aluminum Manufacturings acquisition by
Hangzhou Jintou Jinzhong Investment Enterprise
LP for $347 million.

Aluminum constituted the major share, at 32% in


total deal value, followed by Steel and Iron Ore with
22% share and 8% share, respectively. A larger
share (38%) was constituted by Other Metals
(valued at more than $1 billion) compared to these
premium metals.

Financial buyers formed more than half of total deal


value, while Corporate buyers constituted a similar
proportion in total deal volume during the quarter.

Local deals dominated the deal activity during the


quarter, led by China. Nearly 60% of total deal
volume were local deals in China (ten deals), valued
around $2.0 billion (72% of the total deal value).

Value by the numbers

$2.8B

69%
Decrease in
deal value
versus Q2 2015

73%
Decrease in
deal value
versus Q1 2016

Volume by the numbers

17

45%
Decrease in
deal volume
versus Q2 2015

Source: Thomson Reuters

24%
6%
Decrease in
deal volume
versus Q1 2016

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Deals Insights
Q2 2016 update

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Highlights of Q2 2016 deal activity


Global Metals M&A Deal Volume and Value
45.0

33

31

24

22

30.0

30

26

25

35.0

25

20

21

18

25.0

20

17

14

20.0

15

15.0

10

10.0
5

Source: Thomson Reuters and other publicly available sources

Disclosed Deal Value

$10

$3

2Q16

$6

1Q16

$43

4Q15

$9

3Q15

$7

2Q15

$13

1Q15

$10

4Q14

$9

3Q14

$3

2Q14

3Q13

0.0

$15
4Q13

$11

1Q14

5.0

Largest transaction

35

28

40.0

Disclosed Deal Value ($bn)

Deal activity was slow in Q2 2016 compared to annual


and sequential figures (both value and volume). Total
deal value was down 69% to $2.8 billion, from Q2 2015.
Seventeen deals were announced during Q2 2016, down
45% from the same quarter. Of the 17 deals, 12 deals
were pending (forming 71% share) valued at around $2
billion during the quarter. Completed deals were valued
at only $0.7 billion in Q2 2016, the lowest observed of
all quarters in the last two years.

Deal Volume

M&A market activity slows

Deal Volume (R-Axis)

Global Metals M&A Deals by Disclosed Value


$1,523

1000
$725

$407

$560

$418

$384

20

400
$286

$246

2Q16

2Q15

1Q15

4Q14

3Q14

<$50 mn
$250 mn to $1,000 mn
Average Deal Size (R-Axis)

Source: Thomson Reuters and other publicly available sources

200

$238
$162

2Q14

600

$351

1Q16

40

800

$474

3Q15

60

Average Disclosed Deal Value ($mn)

1200
80

1Q14

There were no transactions in Q2 2016 exceeding $1.0


billion (compared to two megadeals each in Q2 2015
and Q1 2016).

1400

4Q13

Megadeals

1600

100

3Q13

Deal Volume of Disclosed Deal Value

120

4Q15

Hangzhou Jintou Jinzhong Investment Enterprise LP


announced that it would acquire JiaoZuo WanFang
Aluminum Manufacturing Co. Ltd. for $0.3 billion.
This deal accounted for around 13% of the total
disclosed deal value in Q2 2016.

$50 mn to $250 mn
>$1,000 mn

Subsector category analysis


All premium Metals categories (Steel, Aluminum and Iron Ore) saw weaker deal activity in the quarter while Other Metals
category surged its share to 38% in total deal value (recording the highest share). Aluminum and Steel together constituted
more than half of total deal value and volume. On an annual basis, only Aluminums deal value increased by 19% while Steel
and Iron Ore witnessed a significant decline of 85% and 90%, respectively. On sequential basis, only Other Metals recorded a
significant increase in both value and volume65% and 50%, respectively while Steel and Aluminum witnessed a
considerable drop.
Deal Value ($bn)

Steel

Aluminum

Iron Ore

Other Metals

40.0
30.0
20.0
10.0
0.0

Deal Volume
20
15
10
5

Source: Thomson Reuters and other publicly available sources

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

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Global Metals M&A
Deals Insights
Q2 2016 update

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Key trends and insights

Financial vs. Trade buyers


Financial buyers were the prime contributors to the quarters total deal value with a 56% share, contradicting the trend
where Trade buyers had dominated the sectors deal value since Q3 2013. M&A activities by both Financial and Trade buyers
declined in the quarter compared to Q2 2015 and Q1 2016 (except where Trade buyers realized a growth of one deal in Q2
2016 compared to Q1 2016).
Trade Buyers

Financial Buyers

Financial Buyer Share of M&A Activity

40.0
35.0

Deal Value ($bn)

60%

56%
30.0
50%

47%

25.0
20.0

40%

15.0
10.0
2.7

1.5

1.9

5.5

1.8

4.0

6.0

3.3

3.5

1.8

0.0

0.5

5.2

7.4

1.2

37.1

4.3

4.9

6.7

5.2

7.2

3.0

5.5

6.2

13.5

5.0

30%

20%

30

Deal Volume

10%

20

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

1Q14

4Q13

3Q13

4Q13

8
2Q16

3Q13

10

2Q14

1Q16

1Q14

12

4Q13

11

3Q13

4Q15

2Q16

3Q15

17

8
1Q16

2Q15

14
4Q15

17
3Q15

1Q15

14
2Q15

16

13
1Q15

4Q14

17
4Q14

20
3Q14

0%

3Q14

15

10

2Q14

19

16

10

Financial Buyer Share of Total Value


Financial Buyer Share of Total Volume

Source: Thomson Reuters and other publicly available sources

Regional analysis
M&A activity was dominated by local deals (transactions by targets and acquirers within the same borders) with a 90% share
in total deal value. However, local deals value declined significantly by 62% and 73% compared to Q2 2015 and Q1 2016,
respectively. Cross-border deal activity also declined considerably (by volume and value) on both sequential and year-overyear basis. Local deal activities in Asia & Oceania have dominated the quarters total deal activity, with major deals occurring
in Chinarecorded 59% share of overall deal volume (ten deals) and 72% share of overall deal value ($2.0 billion).

89%

82%
2Q16

75%
3Q15

1Q16

87%
2Q15

81%

70%
1Q15

4Q15

61%
4Q14

64%
2Q14

76%

71%
1Q14

3Q14

76%
4Q13

10%

71%

84%

98%

68%

20%

10%

20%

30%

20%

91%

40%

30%
59%

50%

40%

44%

60%

50%

67%

70%

60%

45%

80%

70%

68%

90%

80%

65%

100%

90%

53%

100%

3Q13

Share of Deal Value by Acquirer Region

Share of Deal Volume by Acquirer Region

0%
2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

0%

Asia & Oceania

North America

South America

Asia & Oceania

North America

South America

UK & Eurozone

Europe ex-UK & Eurozone

Africa/Undisclosed

UK & Eurozone

Europe ex-UK & Eurozone

Africa/Undisclosed

Source: Thomson Reuters and other publicly available sources


.

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Global Metals M&A
Deals Insights
Q2 2016 update

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Key trends and insights

Regional analysis (continued)

58%

65%

90%

68%

77%

89%

76%

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

64%
2Q14

68%

50%
1Q14

3Q14

57%

10%

Asia & Oceania


UK & Eurozone

North America
Europe ex-UK & Eurozone

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

0%
3Q13

0%

4Q13

82%

92%

56%

20%

10%

18%

30%

20%

95%

40%

30%
57%

50%

40%

49%

60%

50%

51%

70%

60%

45%

80%

70%

68%

90%

80%

65%

100%

90%

53%

100%

58%

Share of Disclosed Deal Value by Target Region

3Q13

Share of Disclosed Deal Volume by Target Region

South America
Africa/Undisclosed

Asia & Oceania


UK & Eurozone

North America
Europe ex-UK & Eurozone

South America
Africa/Undisclosed

Source: Thomson Reuters and other publicly available sources

Metals deals by region

North America
Local: 0 deals
Inbound: 0 deals
Outbound: 1 deal, $0.2 billion

UK & Eurozone
Local: 2 deals, $0.3 billion
Inbound: 1 deal, $0.2 billion
Outbound: 0 deals

South America
Local: 0 deals
Inbound: 0 deals
Outbound: 0 deals

Europe ex-UK & Eurozone


Local: 0 deals
Inbound: 1 deal, $0.1 billion
Outbound: 0 deals

Asia & Oceania


Local: 13 deals, $2.3 billion
Inbound: 0 deals
Outbound: 1 deal, 0.1 billion

Africa/Undisclosed
Local: 0 deals
Inbound: 0 deals
Outbound: 0 deals

Source: Thomson Reuters and other publicly available sources

Outlook for Metals M&A


The second quarter of 2016 saw the continuation of the
recent trending decline in deal activity in the Metals
industry, as pricing and demand remained low, and macroeconomic factors continued to challenge growth and drive
uncertainty. However, our cautious optimism remains that
improvement will be seen in the second half of 2016.
Growth in the United States GDP and continued
improvement in relevant end use sectors like automotive,
aerospace, and construction, are expected to begin to drive
increased demand for metals, and in turn, increased
production and stabilization in the industry.

While global overcapacity concerns persist, particularly in


China, we are optimistic about the potential for an improved
deal environment in the short term, but look for only a modest
increase in the coming months.
Key factors we predict will spark Metals M&A growth:
High levels of liquidity on corporate balance sheets
Strong economic recovery and pent-up demand in
developed countries such as the US
Confidence of stabilization and sustained recovery in China
Optimize Deals
Global Metals M&A
Deals Insights
Q2 2016 update

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Key trends and insights

Top 10 Metals deals 2016 (YTD)


Announced Target name

Target nation Acquirer name

Acquirer nation Status

01/04/16

Liaoning Zhongwang Group Co. Ltd.

China

CRED Holding Co. Ltd.

China

Pending

4,656

Aluminum

01/09/16
02/01/16
02/01/16
02/25/16

China
Japan
France
China

Shandong Nanshan Aluminium Co. Ltd.


Nippon Steel & Sumitomo Metal Corp.
Investor Group
Merit Stand Inc.

China
Japan
Japan
China

Pending
Intended
Completed
Completed

1,129
697
652
555

Aluminum
Steel
Steel
Aluminum

China

China Tungsten & Hightech Materials Co. Ltd.

China

Pending

537

02/05/16

Shandong Yili Electric Power Co. Ltd.


Nisshin Steel Co. Ltd.
Vallourec SA
XinRen Aluminum Holdings Ltd.
Hunan Nonferrous Metals Xintianling Wolfram Mine Co.
Ltd.
Hyundai Steel Co.

South Korea

NH Investment & Securities Co. Ltd.

South Korea

Completed

372

Steel

06/01/16

JiaoZuo WanFang Aluminum Manufacturing Co. Ltd.

China

Hangzhou Jintou Jinzhong Investment Enterprise LP

China

Pending

347

Aluminum

06/24/16
06/18/16

Binzhou Municipal Beihai Xinhe New Material Co Ltd


Tianjin Xinmao Science & Technology Co Ltd

China
China

Binzhou Beihai Huihong New Aluminum Co Ltd


Xizang Jinzhang Investment Co Ltd

China
China

Complete
Pending

322
317

Aluminum
Other Metals

02/02/16

Deal value* Category

Steel

Top 10 Metals deals 2015


Announced Target name

Target nation

Acquirer name

Acquirer nation Status

08/10/15

Precision Castparts Corp.

United States

Berkshire Hathaway Inc.

United States

Deal value*

05/12/15

Iron Mining International (Mongolia) Ltd.

Mongolia

Zhongrun Resources Investment Corp.

China

Pending

1,935

Iron Ore

03/31/15

Zhejiang Deqing Hanggang Fuchun Renewable


Technology Co. Ltd.

China

Hangzhou Iron & Steel Co. Ltd.

China

Completed

1,664

Other Metals

Completed

31,595

Category
Iron Ore

08/04/15

Shougang Jingtang Iron & Steel Corp.

China

Beijing Shougang Co. Ltd.

China

Completed

1,652

Steel

02/23/15

Globe Specialty Metals Inc.

United States

Grupo Ferroatlantica SA

Spain

Completed

1,333

Other Metals

03/09/15

RTI International Metals Inc.

United States

Alcoa Inc.

United States

Completed

1,268

Other Metals

07/30/15

Mineracoes Brasileiras Reunidas SA MBR

Brazil

Fundo de Investimento em Participacoes Multisetorial


Brazil
Plus II

Completed

1,185

Iron Ore

09/08/15

Beijing Shougang Co. Ltd.

China

Investor Group

China

Pending

1,163

Steel

04/08/15

Hyundai Hysco Co. Ltd.

South Korea

Hyundai Steel Co.

South Korea

Completed

1,148

Steel

05/19/15

Xining Special Steel Co. Ltd.

China

Investor Group

China

Pending

974

Steel

Target nation

Acquirer name

Top 10 Metals deals 2014


Announced Target name
06/26/14

Firth Rixson Ltd.

Acquirer nation Status

Deal value*

Category

United Kingdom Alcoa Inc.

United States

Completed

3,000

Aluminum

07/12/14

Shenyang Coking Coal Co. Ltd.

China

Investor Group

China

Completed

2,826

Other Metals

11/24/14

Nacional Minerios SA

Brazil

Cia Siderurgica Nacional-Iron Ore & Logistics Assets Brazil

Completed

2,520

Iron Ore

05/14/14

CITIC Pacific Ltd.

Hong Kong

National Social Security Fund (China)

China

Pending

2,167

Steel

01/04/14

Minmetals Hanxing Mining Industry Co. Ltd.

China

Minmetals Development Co. Ltd.

China

Withdrawn

1,780

Other Metals

07/21/14

Severstal Columbus LLC

United States

Steel Dynamics Inc.

United States

Completed

1,625

Other Metals

08/19/14

Waupaca Foundry Holdings Inc.

United States

Hitachi Metals Ltd.

Japan

Completed

1,300

Iron Ore

12/16/14

Dynacast International Inc.

United States

Partners Group AG

Switzerland

Completed

1,100

09/15/14

Gallatin Steel Co.

United States

Nucor Corp.

United States

Completed

770

Steel

12/11/14

Hunan Nonferrous Metals Corp. Ltd.

China

Hunan Nonferrous Metals Jinsheng Development Co.


China
Ltd.

Completed

754

Other Metals

Aluminum

* In $US millions
Source: Thomson Reuters and other publicly available sources

Optimize Deals
Global Metals M&A
Deals Insights
Q2 2016 update

About PwC
Authors
Brian Kelly
Optimize
deals
US Metals Deals Leader
Cleveland, Ohio
brian.kelly@pwc.com
(216) 875 3121
Mike Tomera
US Metals Leader
Pittsburgh, Pennsylvania
michael.tomera@pwc.com
(412) 355 6095
Jock OCallaghan
Global Metals Leader
Melbourne, Australia
jock.ocallaghan@au.pwc.com
61 (3) 8603 6137

Smart deal makers are perceptive enough to see value others have
missed, flexible enough to adjust for the unexpected, aggressive enough
to win favorable terms in a competitive environment, and circumspect
enough to envision the challenges they will face from the moment the
contract is signed. But in a business environment where information can
quickly overwhelm, the smartest deal makers look to experienced
advisors to help them fashion a deal that works.
PwCs Deals group can advise metals companies and metals-focused
private equity firms on key M&A decisions, from identifying acquisition or
divestiture candidates and performing detailed buy-side diligence, to
developing strategies for capturing post-deal profits and exiting a deal
through a sale, carve-out, or IPO. With more than 9,800 deals
professionals in 75 countries, we can deploy seasoned teams that combine
metals industry skills with local market knowledge virtually anywhere and
everywhere your company operates or executes transactions.
Although every deal is unique, most will benefit from the broad experience
we bring to delivering strategic M&A advice, due diligence, transaction
structuring, M&A tax, merger integration, valuation, and post-deal
services.
In short, we offer integrated solutions, tailored to your particular deal
situation and designed to help you extract peak value within your risk
profile. Whether your focus is deploying capital through an acquisition or
joint venture, raising capital through an IPO or private placement, or
harvesting an investment through the divesture process, we can help.
For more information about M&A and related services in the global metals
industry, please visit www.pwc.com/us/deals/ or www.pwc.com/us/

About the data


The information presented in this report is an analysis of deals in the global
metals industry. Deal information was sourced from Thomson Reuters and
includes deals for which targets have an SIC code that falls into one of the 30
metals industry groups. Certain adjustments have been made to the
information to exclude transactions which are not specific to metals or
incorporate relevant transactions that were omitted from the SIC industry
codes.
This analysis includes all individual mergers, acquisitions, and divestitures for
disclosed or undisclosed values, leveraged buyouts, privatizations, minority
stake purchases, and acquisitions of remaining interest announced between
January 1, 2013 and June 30, 2016, with a deal status of completed, intended,
partially completed, pending, pending regulatory, pending completion,
withdrawn and unconditional (i.e., initial conditions set forth by the buyer
have been met but deal has not been withdrawn and excludes all rumors and
seeking buyers). Additionally, transactions that are spin-offs through
distribution to existing shareholders are included.
Percentages and values are rounded to the nearest whole number which may
result in minor differences when summing totals.
2016 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or
affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity.
Please see www.pwc.com/structure for further details. This content is for general information purposes
only, and should not be used as a substitute for consultation with professional advisors.