Q4 2009 deal activity in metals sector shows improvement in number of deals, although deal value remains weak, according to PricewaterhouseCoopers

32 deals announced in the fourth quarter of 2009, 11 more than the third quarter

NEW YORK, February 11, 2009 – The pace of deal activity in the global metals sector showed improvement during the fourth quarter of 2009 with 32 announced deals, an increase of 11 deals from the third quarter, according to the PricewaterhouseCoopers LLP report, Forging ahead: Fourth-quarter 2009 global metals industry mergers and acquisitions analysis.

On an annualized basis, the number of deals announced during the fourth quarter exceeded the number announced during all of 2009 and falls only slightly short of the total announced in 2008. However, announced deal value remains mostly anemic. Although the $4.9 billion of total deal value announced during the fourth quarter increased from the $3.7 billion in deal value in Q3, it is still lower than any other quarter in the past three years.

“Conditions are in place for a brighter deal market in 2010. Metals deal activity has tended to increase coincident with economic recoveries and improvements in syndicated lending and corporate bond issuances indicate improving credit conditions,” said Robert W. McCutcheon, US metals leader at PricewaterhouseCoopers. “Risk premiums have narrowed and equity markets are recovering, providing better currency for future deals. Based on the probability of a sustained, albeit modest, economic recovery in key regions, higher commodity prices, and the capital market improvements, we are cautiously optimistic about the environment for metals deals in 2010.”

Based upon the trends in average deal values and range of deal values along with the rebound in the total number of announcements, it is clear that the metals deal market is recovering but that the focus of this activity remains on smaller deals. Large deal activity slowed during 2009, with five such deals announced during the year compared with 19 in 2008. In addition, none of the large deals in 2009 were announced during the most recent quarter.

"The outlook for large deal activity in 2010 is better. Higher commodity prices and stock valuations can provide better currency for large deals," said Jim Forbes, PricewaterhouseCoopers global metals leader. “In addition, a modest improvement in economic activity within developed markets, along with continued growth in developing markets, should help encourage potential acquirers to focus less on cost and liquidity improvements and more on growth opportunities available from large M&A transactions.”

In the fourth quarter of 2009, the majority of the 32 announced deals with values of at least $50 million were for targets in Asia & Oceania. When measured by value, targets in Asia accounted for approximately 63% of the deal activity in the fourth quarter. The resurgence in deal interest from US companies also contributed substantial deal activity. The relative level of cross-border to local-market deals indicates that acquirers demonstrated a greater preference for targets within their home nations during 2009. Asia & Oceania entities are likely to continue to account for a large amount of metals deal activity in 2010 because of interest in outbound resource deals by China, as well as the importance of Australia as a consolidator in the sector.

Innovative solutions to economic recovery

The fourth quarter Forging ahead report includes a special report on innovation and its potential for accelerating the economic recovery in the metals sector. As the economy recovers, companies hope to shrug off their "hunker down" mentality and find new ways to succeed. The question is: Which metals companies will be first to succeed, and how will they do it?

The winners will be those metals companies that optimize their recent acquisitions and look inward to achieve the efficiencies necessary to cut and sustain costs, improve performance, and compete in an increasingly automated business environment.

Metals companies that embrace and execute on the decades-old concepts of digital transformation and IT innovation, along with tried-and-true practices such as strengthening balance sheets and divesting noncore assets, will be the ones with the greatest opportunities for success.

For information on Forging ahead and to access the full report, including the special section on innovation and its potential for stimulating recovery in the metals industry, visit: www.pwc.com/us/industrialproducts.

About PricewaterhouseCoopers' Global Metals practice

PricewaterhouseCoopers' Global Metals practice is composed of a worldwide network of industry professionals serving metals clients and strategically located in more than 30 countries. PricewaterhouseCoopers services global clients involved in ferrous and nonferrous primary and secondary metals production by bringing experience, leading international industry practices, and a wealth of specialized resources to help solve business issues.

About PricewaterhouseCoopers

PricewaterhouseCoopers (http://www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

© 2010 PricewaterhouseCoopers LLP. All rights reserved

Brandon Brunson
Porter Novelli
Tel: +1(512) 241 2234