M&A binge? Not going by figures

PUBLISHED : Monday, 14 March, 2011, 12:00am
UPDATED : Monday, 14 March, 2011, 12:00am

China outbound acquisitions in the metals and minerals sector amounted to just 10.6 per cent of global deals by value last year, belying the nation's portrayal by the media as an aggressive resources buyer abroad.

But the mainland is set to become more acquisitive abroad, says accountant and tax consultancy PricewaterhouseCoopers (Pwc).

Mainland firms made 161 acquisitions in the sector last year worth a total of US$12 billion, out of 2,693 transactions worth US$113 billion, based on Pwc's tally. It had a 6 per cent share by number of deals in the global mergers and acquisition pie, or 10.6 per cent by transaction value.

The figures excluded the joint venture between Aluminium Corporation of China and Rio Tinto, to co-develop the Simandou iron ore project in Guinea. This was due to the uncertain legal status of the deal given that the Guinea government may raise the stake it gives itself, Pwc said.

The largest outbound deal was the purchase by Jiangsu-based East China Mineral Exploration & Development Bureau of Brazilian iron ore miner Itaminas Comercio de Minerios for US$1.2 billion.

'While China has been an extremely active investor in global mining projects, it has yet to produce a diversified mining market leader to rival the likes of a BHP Billiton or a Rio Tinto,' said the report. It quoted research house Raw Materials Group as having estimated that Chinese interests control only 1 per cent of metals and minerals production outside China.

But Pwc forecast this will change as mainland firms become more aggressive in outbound acquisitions this year.

The report cited Andrew Michelmore, chief executive of Minmetals Resources - the Hong Kong-listed unit of China's largest metals trader Minmetals Group - as saying that with the support of its parent, Minmetals Resources was looking to spend at least its own market capitalisation on overseas assets.

The opening of a Toronto office by the US$300 billion sovereign fund China Investment Corporation could signal a plan to ramp up investments in Canada, the report added.

Luo Bingsheng, the former vice-chairman of the government-affiliated China Iron and Steel Association, said last month Beijing hoped to more than double the percentage contribution of iron ore imports from overseas mines in which it had an investment, to improve the mainland steel industry's paltry profitability.