Canada is about to be the home of a major critical minerals powerhouse. Teck Resources (TSX: TECK.B) and Anglo American are set to combine in what is being billed as a “merger of equals” to establish a giant within the copper market that is based in Canada.
The merger is set to see the establishment of the Anglo Teck group, which is to be headquartered in Vancouver, with the company pledging to invest at least C$4.5 billion in Canada over the next five years should the transaction be approved under the Investment Canada Act. Those funds are set to be spent expanding domestic processing capacity at Trail, advancing new mines in BC, extending the life of mine at the Highland Valley Copper Mine, and supporting the exploration of critical minerals within the country.
“This merger of two highly complementary portfolios will create a leading global critical minerals champion headquartered in Canada – a top five global copper producer with exceptional mining and processing assets located across Canada, the United States, Latin America, and Southern Africa. It is a natural progression of our strategy and portfolio simplification, which created a platform to enable exactly this sort of transformative transaction,” commented Teck CEO Jonathan Price on the announcement.
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The resulting company will see an estimated 70% of it’s production capacity attributed to copper, placing the company as a top five copper producer, with a wider portfolio that includes premium iron ore and zinc production as well as crop nutrients.
From a synergy perspective, the transaction is estimated to generate annual pre-tax synergies of US$800 million, 80% of which is to be realized on a run-rate basis within the second year following completion of the transaction. Up to US$1.4 billion in underlying EBITDA revenue synergies are expected to found as well at the neighbouring Collahuasi and Quebrada Blanca operations through operational integration and optimization, with those synergies expected to be in place from 2030 through to 2049.
Anglo American CEO Duncan Wanblad is expected to lead the resulting company, while Teck’s Jonathan Price will serve as deputy CEO. John Heasley will take on the role of CFO while Sheila Murray is expected to chair the company.
Under the terms of the arrangement, Teck shareholders are set to receive 1.3301 ordinary shares of Anglo American for each Class A or Class B share held of Teck. Prior to the transaction closing, Anglo American is expected to issue a special dividend of US$4.5 billion to its shareholders, or roughly US$4.19 per ordinary share, which will establish an “efficient” opening balance sheet and allows for more balanced participation for shareholders.
Post transaction, Teck shareholders are expected to own 37.6% of the resulting company, with the company to be listed on the LSE, JSE, TSX and NYSE.
The transaction is expected to close within 12 to 18 months, subject to regulatory, court, and shareholder approvals. 79.8% of the shares of Teck have already been secured under voting agreements.
Teck Resources Class B shares last traded at $48.80 on the TSX.
Information for this story was found via the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
