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11/13/2008



Rail News: M&A

Global transportation/logistics industry's M&A activity off 2007's pace, PricewaterhouseCoopers says


During the third quarter, only 37 merger and acquisition deals valued at $50 million or more were announced in the global transportation and logistics (T&L) industry, slowing the pace of M&A deals in the year's latter half, according to PricewaterhouseCoopers L.L.P.'s quarterly M&A activity report.

Through 2008's first nine months, M&A deals valued at $50 million or more totaled 125, meaning the year's total likely won't match 2007's 193 deals, the report states.
 
However, a significant number of large deals (those valued at $1 billion or more) were announced in 2008's first three quarters. Fourteen large deals contributed a total deal value of $66 billion. Yet, only one of the 14 deals was announced in the third quarter, when deal value totaled a low $11 billion, PricewaterhouseCoopers said.

"Given the current economic and credit environment, deal activity in the fourth quarter will likely not exceed the levels seen in the third quarter, and may even decline," the report states. "Accordingly, deal value in 2008 is not expected to match the levels of the previous two years."
 
M&A deal activity outside of the United States slowed in the third quarter — a major change from previous quarters, when deals that didn't include U.S. entities remained ahead of overall deal activity, PricewaterhouseCoopers said.

"It is apparent that the decline of the global banking sector and tightening global credit markets have caused a slowdown in deal activity beyond those transactions that involve U.S. parties," the report states.
 
Since 2006, interest in deals involving passenger air targets has declined dramatically in favor of passenger ground and rail targets. Only 12 percent of deal value was attributed to passenger air targets during 2008's first three quarters compared with 29 percent in the same 2007 period and 48 percent in the same 2006 period. Rail targets accounted for 23 percent of deal value in 2008's first nine months, PricewaterhouseCoopers said.
 
"Passenger ground public-to-private deals are attractive for investors due to their stable returns and cash flows, resulting from relatively low competition," the report states. "Passenger air targets are perceived to be riskier investments, due to underperforming stocks and general anxiety about the industry as a whole."


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