Anglo American agrees to buy Teck in deal reshaping mining

[TORONTO] Anglo American has agreed to acquire Canada’s Teck Resources, creating a more than US$50 billion company in one of the biggest mining deals in over a decade.

Anglo will pay 1.3301 shares for each Teck share, in a deal that would represent a 17 per cent premium to the Canadian miner’s closing share price on Monday, according to Bloomberg calculations. But Anglo will also pay its investors a US$4.5 billion special dividend ahead of the combination, meaning that the effective premium would be just 1 per cent. The companies on Tuesday presented it as a zero-premium transaction.

Anglo’s shares jumped 9.2 per cent on news of the combination, which confirmed a Bloomberg News report that a deal was imminent. The deal gives Anglo access to Teck’s much-coveted portfolio of copper mines after a period when it has itself been an acquisition target and has faced pressure from its shareholders.

“This looks like a significant coup for Anglo American and if they are successful is a great move as they’re locking up high-quality copper assets that the industry has been coveting,” said Duncan Hay, a mining analyst at Panmure Liberum.

The boards of both companies unanimously recommend the deal. Anglo’s chief executive officer Duncan Wanblad will head the new company, while Teck’s CEO Jonathan Price will be deputy. The combined company, called Anglo Teck, will be headquartered in Vancouver, while its primary listing will be in London.

Anglo has secured the support of the Keevil family, which controls Teck through “supervoting” Class A shares and whose opposition previously scuppered Glencore’s attempt to buy the company in 2023. 

Still, the deal requires the approval of two-thirds of Teck’s Class B shareholders – of which the largest is China Investment – and the announcement could yet spur fresh bids for Teck or Anglo. In their statement announcing the deal, the companies said their agreement includes provisions that would allow either firm to consider unsolicited proposals and for the deal to be terminated in the event of a superior proposal.

“Getting the Keevil approval is key, given their class A shareholding,” said Hay at Panmure Liberum. “But the other shareholders may be less happy given the zero premium and the poor recent share price performance.”

Teck, which had fallen roughly 20 per cent in Toronto trading over the 12 months through Monday, has a market value of about US$17.2 billion. The shares were up 16 per cent at US$40.65 as of 7.20 am in New York in pre-market trading.

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Anglo surged in London trading on Tuesday, boosting its market value to US$40 billion. That implied a value for the combined company of about US$55 billion before synergies.

Both companies have been pursued by bigger miners in recent years: Anglo fought off a US$49 billion approach from BHP Group last year, while Glencore unsuccessfully tried to buy Teck two years ago. 

Those failed bids kicked off a dealmaking frenzy, with executives across the industry spending much of the past two years running the numbers on their rivals to assess potential transactions. The increased activity has largely been driven by the desire to expand production of copper – a metal essential to the global energy transition – as well as a fear of missing out after BHP’s bid for Anglo sent shock waves through the sector. 

A Teck-Anglo combination has long been discussed behind the scenes. Both companies have been seeking to simplify their businesses – Teck sold a majority stake in its coal division to Glencore, while Anglo has exited platinum mining and is in the process of trying to sell its own coal mines and offload its De Beers diamond unit.

Teck’s flagship mine is the Quebrada Blanca 2 copper project in Chile. Anglo owns a stake in the neighbouring Collahuasi mine, which could offer opportunities to increase production and profits by combining the two operations.

The companies said they expected US$800 million of pretax annual synergies from the deal. A further US$1.4 billion of annual synergies could be realised by integrating the two Chilean copper mines, they added.

“It’s a deal that makes a lot of sense,” said George Cheveley, a portfolio manager at Ninety One UK, which holds shares in both companies. “The industrial logic has always been there to combine Collahuasi and QB2: there’s huge synergy there.”

The deal will need the approval of regulators in countries including China, the US and Canada. If approved by regulators, the acquisition is expected to be completed in 12 to 18 months.

Canada said last year that it would only approve foreign takeovers of large Canadian mining companies involved in critical minerals production “in the most exceptional of circumstances.”

In a statement, Canada’s Industry Minister Melanie Joly said that the deal would trigger a review, but that the government “welcomes new investments in our mining sector.”

Both Teck and Anglo have faced setbacks in recent months. Teck began a review of the QB2 operation last week after being dogged by setbacks for years. Anglo, meanwhile, recently saw its plans to sell its coal mines collapse and now faces the challenge of finding a new buyer. It is also trying to sell De Beers during one of the diamond industry’s deepest-ever crises. BLOOMBERG