By Adriano Marchese
Shares in Teck Resources rose in early trading Tuesday after the Canadian mining giant said has agreed to sell its coal assets to a group led by mining and trading giant Glencore in a deal set to conclude a lengthy pursuit.
At 9:51 a.m. ET shares were trading 2.4% higher at 51.51 Canadian dollars ($37.31).
Under the terms of the deal, Switzerland-based Glencore would pay $6.93 billion for a 77% stake, which places a value on the business of around $9 billion. Meanwhile, Japanese steelmaker Nippon will hold a 20% stake and South Korean steelmaker Posco will hold a 3% position.
The deal concludes a near-yearlong process in which Teck sought to figure out the best course of action for its coal business. In February, it announced plans to split the company into two, with one focused on base metals and the other on metallurgical coal, used in steelmaking.
Glencore has long expressed interest in Teck’s business, proposing an all-out merger between the companies worth $23 billion. The offer came with the proposal to form two separate companies for Glencore and Teck’s merged metals and coal businesses, and then later spinning off the combined coal business.
On Tuesday, Glencore reiterated its plans to spin off a combined coal company once Glencore reduces its debt, aiming for a timeline of about two years after the transaction closes.
Glencore ultimately intends to list the combined business in New York, with secondary listings in Toronto and Johannesburg, Chief Executive Gary Nagle said Tuesday.
Scotiabank analyst Orest Wowkodaw said in a note that the proposed deal offers a fair value for the business.
“We view the proposed transaction as positive for the shares given the structure achieves full business separation at fair value. Moreover, given the prolonged uncertainty with respect to the future of the coal business, this transaction also serves to remove a meaningful overhang on the shares.”
Write to Adriano Marchese at [email protected]
Read the full article here
