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M&A activity in the global metals industry 2007.

Article Excerpt
MERGER AND ACQUISITION ACTIVITY in the metals industry has risen steadily [in the past few years], with a record amount of money changing hands in 2007. In total, there were 411 deals for which values were disclosed, compared with 385 the previous year. The aggregate value of those deals soared to $144.7 billion, a 67 percent increase over the $86.4 billion that was traded in 2006.

Domestic deals accounted for most of the activity, as in preceding years. But cross-border deals accounted for the lion's share of the value, with 143 transactions collectively worth $98.3 billion--68 percent of the industry's aggregate expenditure on M&As.

The steel sector normally dominates the deal-making scene, but in 2007 it was relegated to second place. In the steel market, there were 249 deals collectively worth $60.9 billion--$16.4 billion less than the value that changed hands in the aluminum sector and an overall drop of 23 percent from the previous year's high.

ArcelorMittal seems to have altered its M&A strategy. In 2006, there was considerable speculation that the company would buy a large steelmaker, such as Russia's Magnitogorsk Iron and Steel Works (MMK) or South Korea's POSCO, to reach its stated goal of becoming a 160 million metric tons per year producer within five years. But ArcelorMittal spent most of 2007 focusing on small manufacturers in emerging markets and driving increased value from within--a change of approach that may well stem from concerns about potential government intervention.

Conversely, a number of global producers based in emerging economies purchased North American and European steelmakers as a means of moving up the value chain and earning higher margins. Tata Steel's acquisition of Corus is one such instance; the deal gives the Indian steelmaker much better access to the markets of Europe and North America, where its presence was previously limited. Fellow Indian manufacturer Essar Steel also bought two North American steel producers, Algoma Steel and Minnesota Steel, and the Russian Evraz...

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