London-listed miners Anglo-American and Canada’s Teck Resources Plan marked the sector’s second-largest merger and acquisition deal, building a new global, copper-focused heavyweight.
Under the proposed deal announced Tuesday, requiring regulatory approval, Anglo American shareholders own Anglo Teck, 62.4% of the new company, while Teck’s shareholders hold 37.6%.
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Anglo Teck, headquartered in Canada, said it has a major stock list in London, and the two companies with a total market capitalization of over $530 billion.
The deal to form the world’s fifth largest copper company is also a big bet on copper by Anglo. Glencore’s $90 billion merger with XStrata in 2013 is the largest mining deal in history.
Copper used in the electricity and construction sectors is set to benefit from the rapidly growing demand spurred by electric vehicles and artificial intelligence.
Miners competed to develop new projects, and while major acquisitions have not been successful so far, there has been a surge in buyback bids.
Both Anglo and Tech have undergone major restructuring in recent years, driven by external acquisition attempts and strategic changes within the mining industry.
Regarding the potential bid war on the deal, Teck CEO Jonathan Price told Reuters that the outcome was out of the company’s control.
Anglo faced a $53 billion purchase bid from BHP last year, but was ultimately rejected by the board. Teck rejected a $22.5 billion acquisition offer from Glencore in 2023, but sold Steelmaking Coal Business to Glencore for $6.933 billion.
“We can’t speculate about it (the bid war). It’s not something we have control over. We’re focused on getting approval to bring together Anglo and Tech,” Tech’s Price said.
He said the deal creates “a much larger, much better, higher quality copper, iron ore and zinc businesses” for shareholders.
“I think the deal itself is a very strong defence,” said a source with knowledge of negotiations between Anglo and Tech.
Transactions have a zero premium, all-share structure.
The lack of premium could open the door to rival bidding, but Anglo shareholders will receive a special dividend of $4.5 billion.
“The risk of interlopers will be a major problem for the market for this transaction,” a Belenberg analyst wrote in a memo, adding that Glencore and BHP could still intervene.
Anglo and Teck can still consider unsolicited acquisition proposals, but will cost a $330 million break fee.
“It’s a synthesis that makes sense, makes sense, and complementary cultures,” said Adam Matthews of the Church of England’s annual board of directors, Anglo shareholder.
“Both companies are companies we respect, and the industry in this movement will be stronger,” he said.
Anglo CEO Duncan Wanblood will retain the post at the new company, with Tech’s Jonathan Price becoming the assistant CEO.
Wanblood spoke to Vancouver journalists, calling the deal a “true merger of equality,” adding that Anglo Tech’s board will be pulled equally from existing directors of both companies.
“We have a stronger and more resilient financial platform with the advantages of scale, including the flexibility to dynamically redistribute capital to the most sophisticated return opportunities,” he said.
Cost reduction
The partnership is expected to generate $800 million annual cost reductions and increased efficiency by the fourth year of completion, Anglo said.
“As a merger, we can absolutely bring out the best of both. We don’t have to pay anything on either side in terms of premium to get a full profit,” Wanblood said.
The companies operate adjacent copper mines in Chile: Quebrada Blanca and Kolahashi.
Quebrada Blanca is Teck’s flagship mine, but tailing issues related to the disposal of waste in the mine missed production guidance and reduced the company’s shares.
Teck’s prices said it would take 12 to 18 months to ensure regulatory approval for the transaction. He added that the Canadian Keevil family, which owns most of Teck’s A-Class stake, supported the deal.
“We have irrevocable support from Dr. (Norman) Keeville and other A-Share voters,” he said.
Sources close to the deal said the decision to maintain the headquarters of the new Canadian company said protecting Tech’s “Canadian heritage” would likely facilitate the path for regulatory approval by authorities.
Canadian officials have expressed hostility towards previous bids to win Glencore’s previous Teck, and sources said such concessions in such new contracts would help dodge rival bids from businesses that do not wish to include similar proposals.
