M&A

in the global steel industry

2015-2020
M&A in the global steel industry
In 2015–2019, global merges and acquisitions in the steel
industry were estimated at $47 billion in total, or $10 billion
per annum. In 2019, M&A transactions amounted to $6.2
billion, 40% down an average and more than half as much as
in 2018.
The number of transactions in the sector is small, up to
$47 bln - amount of M&A
transaction in 2015-2019
10 per annum. Therefore, one or two major deals could
considerably increase the overall annual ‘price list’. Without
regard for ‘mega deals’ exceeding $2 billion, M&A transactions
in the industry average $6–7 billion per annum.

Trends in global metals M&A deals, $ billion*

$ bln share of Iron&Steel Industry in total amount of global M&A transactions, %

Source: EY, PWC, media

*data were collected from media and therefore may be incomplete

As for global M&A activity, the value of deals in the steel industry
is miserable, 0.4% of the total global deals on average, much lower
than the industry’s 0.7% share in global GDP (with regard to direct
effect only).
Parties to transactions are specialized companies only. There
are virtually no speculative transactions, new players enter the
market in very rare cases. One of the recent examples is Liberty
House Limited.
M&A trends in the industry in 2018–2020:
• Deals with troubled companies on deep markets;
• Deals to consolidate the industry in China;
• Deals to diversify U.S. companies’ portfolios.

2 M&A in the global steel industry 2015-2020

Industry concentration
M&A activity in the industry is historically low
notwithstanding the low level of concentration. The level
of concentration in the industry has not changed since the
1970s.

Trends in the concentration level in the steel industry (HHI index)

Source: EY

Factors that may facilitate M&A activity in the industry:

1. Protectionism may prompt companies to M&A deals to enter
the market.
2. Changes in technologies may encourage the creation of
consortia and alliances. HHI Index in 2014,
3. Aiming to further improve the product portfolio, deepen
metal conversion.
1,29% the same as in 1970s
4. Expansion of Chinese companies.
5. Response to expansion of Chinese companies.
No significant change in M&A activity in the industry is anticipated.
The above risks will reduce companies’ appetite for concentration.
In the current difficult market conditions, the industry sets other
priorities.
Alternatively, an increase in the number of M&A deals may be
due to troubled assets, but this will not affect their value. The only
exception may be ‘mega deals’ in China where market players seek
to dominate the industry.

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Key drivers of M&A success and reasons for weak M&A activity
in the steel industry

23%
The steel market is stagnating. The World Steel Association’s long-term forecast for
global steel consumption growth is 1% per annum. Therefore, companies’ development
strategies are targeted at increasing competitiveness, not growth.
Given excess capacity, it makes no sense to buy additional capacities when buyer`s
of respondents of a survey capacities aren`t enough unutilized. This does not cancel transactions aimed at entering
by JP Morgan deem effective
integration of acquired new markets, expanding the range of products or deepening metal conversion, but
businesses to be the most narrows down the M&A market possibilities.
important driver of M&A success
Companies do not seek to take risks. Their balance sheets show huge debts. A Net Debt
to EBITDA ratio in the industry has been exceeding 4.0 for a number of years, whereas the
maximum acceptable value is 3.0. Furthermore, the industry badly needs investment in
the wake of the decarbonization and digitalization trends. Purchase of obsolete assets
means additional needs for investments.

19%
of respondents ranked economic
certainty second by importance
Uncertainty in the global economy is growing. The current economic cycle has been
lasting for 11 years. A recession is expected every year, with a likelihood growing every
year. The sector is critically dependent on economic cycles.
for M&A success

18%
High price volatility in the markets for metal products complicates the assessment.
Meanwhile, company valuations seem adequate. Average EBITDA multiples are 5.0–5.5.
At the same time, most M&A transactions over the past few years have been concluded
with companies with troubled assets from large steel markets where buyers see a sales
of respondents highlighted
adequacy of valuation as most potential. Such transactions are concluded at the lowest price, often on conditions of
significant debt repayments or investment liability.

16%
Regulatory policies vary by region. M&A deals in Europe are impeded by antitrust
authorities. A striking example is the blocked steel merger between Tata Steel and
ThyssenKrupp. ArcelorMittal had to sell 3 plants to receive the right to buy Ilva. Approval
from trade unions is also needed for M&A deals. Liberty House had some difficulties in
of respondents share the opinion
that M&A success depends on negotiating the purchase of ArcelorMittal’s plants.
obstacles in the rules of the Stimulative regulation policy is not a guarantee of M&A activity either. Mergers
regulator
and acquisitions in China’s steel industry are being encouraged by the government to
restructure the sector and fight excess capacity. The Chinese government set a target —
the top 10 companies should hold a 60% stake of the market by 2025 — thus encouraging
consolidation. Although Chinese companies closed 40% of a total of global M&A deals in
the steel industry, their number is still small. As a rule, transactions of Chinese companies
were focused on domestic businesses. Still, it is important to note that in the past year or
two, China targeted a number of European companies (British Steel, Huta Czestochowa).

4 M&A in the global steel industry 2015-2020

List of largest M&A deals in the sector

Target Acquirer Deal value, $

Data Target name Acquirer name Source
region region million

2020Е British Steel United Kingdom Jingye Group China 65 СМИ

2020Е Huta Czechtohova Poland Sunningwell International China 60 СМИ

2020Е Magang China Baowu Steel Group China N/A СМИ

2020Е COS Târgoviște Romania Sunningwell International China 42 СМИ

2020Е Ahmsa Mexico Techint Group Italy/Argentina 3500 СМИ

2019 Galati, Skopje, Piombino EU GFG Alliance United Kingdom 841 PWC

2019 Maashan Iron&Steel China Baosteel China 660 PWC

2019 Al Ezz Dekheila Steel Egypt Al Ezz Flat Steel Egypt 425 PWC

2019 Ipsco Tubulars United States Tenaris Luxemburg 1200 PWC

2019 AK Steel Holdings United States Cleveland Cliffs United States 1100 PWC

2019 Shougang Jingtang Iron & Steel Corp China Investor Group China 711 PWC

2019 Big River Steel United States US Steel United States 700 PWC
Jiangyin Xingcheng Special Steel
2019 China CITIC Pacific Special Steel Group China 520 PWC
Works
2019 Bayou Steel United States GFG Alliance United Kingdom 28 СМИ

2018 Nisshin Steel Co Japan NSSMC Japan 867 Deloitte

2018 Essar Steel India India AcrelorMittal&NSSMC N/A 6829 PWC

2018 Bhushan Steel India Tata Steel India 5216 PWC

2018 Electrosteel Steels Co India Vedanta Ltd India 813 PWC

2018 Angang Group Chaoyang Iron&Steel China Angang Steel Co China 883 PWC

2017 Thyssenkrupp Companhia Siderurgica Brazil Ternium SA Argentina 1648 Deloitte

2017 Independence Tube Corporation United States Nucor Corp United States 435 Deloitte

2017 Jindal Stainless Limited India Investor Group N/A 132 Deloitte

2017 Tata Steel UK United Kingdom Liberty House Limited N/A 125 Deloitte

2017 Thyssenkrupp AG Germany Tata Steel India N/A PWC

2017 Ilva SpA Italy ArcelorMittal Luxemburg 2031 PWC

2017 Thyssenkrupp Slab International Brazil Ternium SA Argentina 1805 PWC

2017 Dongbei Special Steel Group China Investor Group China 842 PWC

2017 Nanjing Nangang Industry China Investor Group China 546 PWC

2016 Wuhan Iron&Steel Co China Baoshan Iron&Steel Co China 4157 PWC

2016 Ultimate Century Investments China Shougang Holdings China 2456 PWC

gmk.center 5
Список крупнейших M&A сделок в отрасли

Target Acquirer Deal value, $

Data Target name Acquirer name Source
region region million

2016 Shandong Iron&Steel China Shandong Iron&Steel Group China 2313 PWC

2016 TF Holdings Dem Rep Congo Investor Group China 1187 PWC

2016 Solb Misr Co Egypt National Service Prokect Organization Egypt 1135 PWC

2016 Xinjiang Bagang Nanjiang Iron&Steel China Xinjiang Ba Yi Iron&Steel China 445 Deloitte

2016 Vallourec (13,85%) France NSSMC Japan 390 Deloitte

2016 Republic Conduit United States Nucor Corp United States 335 Deloitte

2016 ArcelorMittal Zaragoza Spain Bipadosa SA Spain 90 Deloitte

2016 Železara Smederevo Serbia HBIS Group China 46 СМИ

2015 Hyundai Hysco Co Ltd South Korea Hyundai Steel Co South Korea 1148 PWC

2015 North Star Bluescope Steel United States BlueScoope Steel Ltd Australia 760 PWC

2015 Shangai Krupp Stainless Co Ltd China Lujiazui International Trust Corp Ltd China 420 PWC
Shangai Zhongneng Enterprise
2015 Ningxia Xinri Hengli Steel Wire China China 210 PWC
Development
2015 Shougang Jingtang Iron & Steel Corp China Beijing Shougang Co Ltd China 1652 PWC

2015 Xining Special Steel Co Ltd China Investor Group China 1974 PWC

6 M&A in the global steel industry 2015-2020

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gmk.center 7