Alcoa Warrick Operations employee Fred Westbrook inspects the finished rolls of aluminum as they comes off the last stage of the production line in a file photo from April 7, 2006, at the Alcoa Warrick Operations in Newburgh, Indiana. A failed bid by Alcoa for Alcan was inclued in the PricewaterhouseCoopers study of deals in the metals industry. - AP

THE NUMBER of global metals industry deals remained steady in the first half of 2008, but their overall value declined as attractive takeover targets became scarcer following consolidation, according to a study released Tuesday.

PricewaterhouseCoopers said 68 deals had been announced in the first half of the year, compared with 70 in the first half of 2007.

But the total value of those deals dropped to US$42.9 billion in the first six months of 2008, from US$73.5 billion a year earlier.

The downward value trend can be attributed to the greater number of large deals - more than US$1 billion in value - announced in the first half of 2007 and the absence of significantly larger deals, with values of more than US$10 billion, unveiled between January and June this year.

Cause for decline

The decline could be attributed to metals industry consolidation in recent years that has left fewer attractively priced takeover candidates, as metals companies combine and acquire suppliers of key raw materials, such as iron ore.

It may also be a result of a greater industry emphasis on integrating those acquisitions, according to the report.

At the current rate, the 2008 total would fall short of the US$298.4 billion recorded in 2007 and the US$186.7 billion recorded in 2006.

After a prior two-year period that contained several announced deals exceeding $10 billion in valuation, no such agreements were unveiled during the first half of 2008, PricewaterhouseCoopers said.

Acquirers were mostly strategic players rather than financial investors, who all but abandoned the metals industry during the period. Interest from financial investors has slowly waned in recent years, the report said.

Using opportunity

"While financial investors have diminished their role in this sector, strategic investors are taking full advantage of strong balance sheets and ample liquidity to vertically integrate or expand their geo-graphic reach," Douglas Dean, United States metals leader at PricewaterhouseCoopers, said in a statement.

Steel companies accounted for 23 per cent of the total deal value and half of the large deals in the first half of 2008. In 2007, iron ore led in total deal value.

Robust global demand and prices have lifted the profits of steel-makers in recent months despite higher raw materials costs and economic troubles in the US and western Europe.

The results for the first half of 2007 include 48 completed deals, 16 pending deals and six withdrawn deals. For the first half of 2008, the results include 27 completed deals, 38 pending deals and three withdrawn deals.

Big deals

Among the large deals included for the first half of 2007 was a withdrawn bid by aluminum producer Alcoa Inc to buy Canadian rival Alcan Inc.

Large deals for the first half of 2008 are completed or pending.

The firm included six large deals that were withdrawn in its evaluation of transactions an-nounced in 2006.