Reuters Summit-UBS sees metals, mining M&A but IPOs stall

(For other news from the Reuters Global Mining Summit, click here)

LONDON, March 12 (Reuters) - The outlook for mergers and acquisitions in the metals and mining industry is strong as emerging market players bulk up and competition for the earth's dwindling resources intensifies, a top sector banker said on Wednesday.

"On the M&A front, generally speaking, the credit situation looks pretty awful but there seems to be money for mining companies and partly that is because commodities prices are high and there is growing acceptance of the super-cycle theory," UBS's (UBSN.VX: Quote, Profile, Research) joint global head of metals and mining Paul Knight said.

Miners could also borrow more easily than other companies because they had high earnings before interest, tax, depreciation and amortisation and low net debt, Knight told the Reuters global mining summit in London.

His view on the initial public offering market was more cautious. While plenty of companies are studying plans for share sales, particularly in Russia and China, they are on hold until equity markets stabilise.

Despite a global credit crunch that has decimated banks' ability to fund M&A, the metals and mining industry is in upheaval. In the forefront is the world's biggest miner, BHP Billiton (BLT.L: Quote, Profile, Research) (BHP.AX: Quote, Profile, Research), with its hostile bid for rival Rio Tinto (RIO.L: Quote, Profile, Research) (RIO.AX: Quote, Profile, Research), an offer valued at $147.4 billion when launched last month.

On Wednesday, Kazakh mining group Eurasian Natural Resources (ENRC.L: Quote, Profile, Research) said it is considering buying rival Kazakhmys (KAZ.L: Quote, Profile, Research). [ID:nL12721507]

The credit crisis may help spur consolidation because companies struggling with financing projects planned last year when liquidity was better may now need to find co-financing, or may become vulnerable to takeovers, Knight said.

As with other industries, companies were seeking financing from alternative lenders, such as local banks in large emerging markets or Middle Eastern investors, he said.