The Wall Street Journal
Although mining companies are becoming broadly less attractive as acquisition targets given sharply lower mineral commodity prices over the past year, the global M&A market will likely continue to expand in coming years, with Chinese companies likely to take an increasing bite out of the overall pie, according to a senior executive at PricewaterhouseCoopers.
The way Chinese companies structure mergers and acquisitions, however, is shifting from a strategy of taking majority stakes, says Ken Su, lead mining partner at PwC China.
Alternatives range from simply taking smaller stakes to engaging in deals that feature offtake agreements or multiyear agreements involving holding companies, he says.
Examples of evolving approaches to M&A, according to Mr. Su, include Wuhan Iron & Steel’s investment in Consolidated Thompson and Hebei Iron & Steel’s investment in Alderon, both of which were minority investments in publicly listed companies that also involved separate direct stake buys in project companies holding mine assets. These deal structures allow for effective interests in mine assets above tender-offer trigger thresholds without requiring tender offers.