Deal ends months of speculation and negotiations
Teck Resources Ltd., Canada’s largest diversified miner, announced on Tuesday that it has agreed to sell a 77% stake in its coal business to Glencore Plc, the world’s largest commodity trader, for $8.9 billion. The deal, which values Teck’s coal unit at $11.6 billion, ends months of speculation and negotiations after Glencore made an unsolicited offer to buy the whole of Teck earlier this year.
Teck’s coal business is the second-largest producer of seaborne metallurgical coal, which is used to make steel. The business operates six mines in British Columbia and Alberta, and has a 20% interest in the Fort Hills oil sands project. Teck said the sale will allow it to focus on its core copper, zinc and energy businesses, and reduce its debt and environmental liabilities.
Glencore, which already owns a 25% stake in Teck’s coal unit, said the acquisition will strengthen its position as a leading supplier of high-quality coal to the global steel industry. Glencore also said it plans to spin off its own coal operations and combine them with Teck’s assets, creating a new publicly traded company that will be the world’s largest producer of seaborne metallurgical coal.
Shareholders and regulators to approve the deal
The deal, which is expected to close in the first quarter of 2024, is subject to approval by Teck’s shareholders and regulators in Canada and other jurisdictions. Teck said it will hold a special meeting of shareholders in January to vote on the transaction, and that its board of directors unanimously recommends the deal.
Teck’s largest shareholder, the Keevil family, which owns about 40% of the company’s voting shares, has already agreed to support the deal. Teck also said it has received support from some of its major institutional shareholders, including RBC Global Asset Management and Fidelity Investments.
Glencore said it has secured financing for the deal, and that it expects to generate significant synergies and cost savings from the integration of the coal businesses. Glencore also said it will work with Teck to ensure a smooth transition and continuity of operations, and that it is committed to maintaining high standards of environmental and social performance.
Reaction from analysts and market
Analysts and market participants welcomed the deal, saying it creates value for both Teck and Glencore shareholders, and reflects the strong demand and outlook for metallurgical coal. The deal also reduces Teck’s exposure to the volatile and carbon-intensive coal sector, and allows it to invest in its growth projects and dividends.
Teck’s shares rose 7.3% to $38.65 on the Toronto Stock Exchange on Tuesday, while Glencore’s shares gained 4.2% to 415.8 pence on the London Stock Exchange. The deal also boosted the shares of other coal producers, such as Arch Resources Inc. and Warrior Met Coal Inc., which rose 6.5% and 5.2%, respectively, on the New York Stock Exchange.
