Glencore has won the battle. Teck Resources (TSX: TECK.B) early this morning indicated that it has reached an agreement to sell a majority stake of its steelmaking coal business to the Swiss mining giant, with a minority stake to be sold to Nippon Steel.
The business unit will be sold at an implied enterprise value of US$9.0 billion, of which Glencore will take a 77% stake for US$6.9 billion in cash. Nippon Steel meanwhile will acquire a 20% stake for US$1.3 billion in cash, the 2.5% interest it holds in Teck’s Elkview operations, and US$0.4 billion paid in the form of cash flows from the coal operations. The remaining interest will be acquired by POSCO, in exchange for its current 2.5% stake in Elkview.
Teck will continue to run the operations of the Steelmaking unit until the closing of the Glencore transaction, and is expected to retain US$1.0 billion in cash flows from doing so. After the close, the company will no longer hold a financial interest in the coal unit.
Closing of the transaction is slated to occur in the third quarter of 2024.
Proceeds from the sale are to be used to improve Teck’s net leverage through debt reduction, for US$750 million in transaction-related transactions, and a potential “significant cash return to shareholders” following the close of the deal.
“This transaction will be a catalyst to re-focus Teck as a Canadian-based critical minerals champion with an extensive portfolio of copper growth projects, unlocking the full value potential of the company,” commented Jonathan Price, President and CEO of Teck.
Glencore meanwhile has committed that the coal unit will continue to operate in Canada via offices in Vancouver, BC, Calgary, AB and Sparwood, BC. No net reductions of employees are to occur in Canada, and capital expenditures over the next three years are to increase to $2.0 billion. The company has also committed to R&D spend, funding a regional hospital in Cranbrook, and a climate transition strategy.
The transaction follows a hostile takeover bid from Glencore earlier this year for $25 billion that was rejected by Teck.
Teck Resources last traded at $51.80 on the TSX.
Information for this briefing was found via Teck Resources and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.