Goodreid Blog
On September 9 it was announced that Anglo American PLC has agreed to merge with Teck Resources, which is held in our Canadian equity portfolio. This transaction is one of the largest mining deals in over a decade, with the combined company valued at over $50 billion USD.
On September 9 it was announced that Anglo American PLC has agreed to merge with Teck Resources, which is held in our Canadian equity portfolio. This transaction is one of the largest mining deals in over a decade, with the combined company valued at over $50 billion USD.
The new combined entity, to be named Anglo Teck, will be a top five global copper producer with an additional portfolio zinc and iron ore assets. Both companies have highly complementary operations, particularly their adjacent copper mines in Chile, which have the potential to unlock significant synergies and increase production. Teck has struggled with the expansion of its Quebrada Blanca mine (QB2), including a delayed production ramp, increased costs, and tailing issues, which Anglo management may be able to assist. The deal also represents a move to capitalize on the growing demand for critical minerals like copper, which are essential for the global energy transition, including electric vehicles and renewable energy infrastructure. The merger is expected to yield annual pre-tax synergies of approximately $800 million annually, primarily from more efficient procurement and corporate costs.
In terms of deal specifics, Teck shareholders will receive 1.3301 Anglo American shares for each of their Teck shares. Upon completion, Anglo American shareholders would own approximately 62.4% of the new Anglo Teck, with Teck shareholders holding the remaining 37.6%. In a move sure to appease Canadian regulators, the new company will be headquartered in Canada, with key leadership roles including the CEO based in the country. The merged company’s main stock listing will be in London; however they will seek approval to retain both S&P/TSX and NYSE listings for the new entity.
We are closely monitoring this transaction as it moves toward completion, which is expected within the next 12 to 18 months, pending shareholder and regulatory approvals. As Teck shareholders, we find the timing of the transaction both unfortunate and opportunistic, as the stock has materially underperformed on the QB2 challenges mentioned above, despite a generally strong copper market. It was our expectation that Teck’s share price would rerate upon improvements at QB2, and this offer has the effect of capping the potential future upside as a shareholder. Since its assets are generally located in attractive regulatory jurisdictions, it remains possible that other global mining companies would have interest in acquiring Teck, namely Glencore, BHP and Barrick. With this in mind, we are holding onto our position in hopes of a superior offer from a competitor.
