M&A slowdown in the coal industry
After multinational commodity trading and mining company Glencore broke under shareholder pressure earlier this year and the organisation has announced plans to reduce debt by $10 billion, it is expected to limit the amount of M&A deals that can be completed in this industry.
A trader at the mining company revealed to Reuters that if Glencore had been financially powerful, it “would have accelerated the consolidation of the thermal coal industry,” but the establishment declined to comment on this.
This overhaul in order to reduce debt is expected to prevent Glencore and other large players in the industry from making even the more attractive deals and in turn, will cut back on the number of buyers, as Reuters reports was already in turmoil because of environmentally conscious investors.
CEO of corporate finance advisory firm Hannam & Partners, Neil Passmore, explained at the Coaltrans world coal conference in Barcelona that at Glencore, they are more focused on re-establishing the company. “It’s good news for anyone else who is a buyer, it’s one less significant natural buyer in the market,” Passmore said.
Reuters also explained that prior to the decision to cut debt, Glencore was competing with the private equity fund X2 Resources, set up by former Xstrata boss Mick Davis for coal assets.