April 9, 2013 / 11:33 AM / 4 years ago

European corporate M&A not yet ripe for revival - S&P

LONDON, April 9 (IFR) - A subdued economic outlook for the eurozone region will keep corporate M&A activity broadly muted over the coming months, according to a report published by Standard & Poor's on Tuesday.

The ratings agency said that in contrast to their North American counterparts, European companies are still unsettled by volatile markets and, despite a surge in corporate bond issuance throughout 2012, they still lack appetite for M&A.

The total value of European corporate M&A deals to mid-March was just USD49.2bn, 51% lower by value than over the same period in 2012, and 74% lower than North America's USD188.6bn in the same time frame, the agency's data shows.

"Economists continue to slash forecasts for growth, which creates uncertainty for companies forecasting their own growth," S&P's corporate research analyst Taron Wade said.

S&P's most recent economic forecast sees a decline in eurozone GDP of 0.5% this year and a modest bounce back to 0.8% in 2014, so until the European economic environment becomes clearer, companies will focus on refinancing debt maturities and protecting credit ratings, the agency said.

Despite this, however, S&P points to the prospect of selective M&A activity picking up in some industries as companies have divested non-core assets in recent months, which the agency says could attract private equity buyers.

"We believe the sectors most ripe for buying or selling assets will be cable, telecoms, pharmaceuticals, consumer products and gaming," S&P said.

Late last month, Liberty Global said it was buying a 12.65% stake in Dutch cable communications company Ziggo, just weeks after the company announced its acquisition of Virgin Media.

Elsewhere, Telecom Italia has made headlines in recent days on reports the debt-laden telco could be weighing the option of merging with Hutchison Whampoa's Italian wireless unit H3G.

Market talk has also repeatedly surfaced that Vivendi is considering splitting off its biggest unit, French mobile telecoms operator SFR, and that the France Telecom and Deutsche Telekom joint venture Everything Everywhere could be sold or floated.

In the same sector, Vodafone has also been linked to potential deals with cable companies ONO, Kabel Deutschland and Yoigo. (Reporting by Josie Cox; Editing by Alex Chambers)

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