London-listed miner Anglo American and Canada’s Teck Resources plan to merge, marking the sector’s second-biggest mergers and acquisitions deal ever and forging a new global copper-focused heavyweight.
Under the proposed deal, which will require regulatory approvals and was announced on Tuesday, Anglo American shareholders will own 62.4 percent of the new company, Anglo Teck, while shareholders in Teck would hold 37.6 percent.
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Anglo Teck will be headquartered in Canada but have a primary stock listing in London, said the two companies whose combined market capitalisation exceeds $53bn.
The deal to form the world’s fifth-largest copper company is also a big bet on copper by Anglo. Glencore’s $90bn merger with Xstrata in 2013 remains the largest mining deal in history.
Copper, used in the power and construction sectors, is set to benefit from burgeoning demand spurred by electric vehicles and artificial intelligence.
Miners have raced to develop new projects, and there has been a flurry of takeover bids, though no major acquisition has so far succeeded.
Both Anglo and Teck have undergone significant restructuring in recent years, driven by external takeover attempts and strategic shifts within the mining industry.
On the potential of a bidding war for this deal, Teck CEO Jonathan Price told the Reuters news agency that the outcome was out of the company’s control.
Anglo faced a $53bn takeover bid from BHP last year that was ultimately rejected by its board. Teck rejected a $22.5bn takeover offer from Glencore in 2023, though it sold its steelmaking coal business to Glencore for $6.93bn.
“We cannot speculate on that [bidding war], and that is not something we can control. We are focused on getting approval for bringing Anglo and Teck together,” Teck’s Price said.
He said the deal creates “a much larger and much better, higher-quality copper, iron ore, and zinc business”, for shareholders.
“I think the deal itself is a very strong defence,” said one source with knowledge of the negotiations between Anglo and Teck.
The transaction has a zero-premium, all-share structure.
That lack of a premium could open the door to rival bids, but Anglo’s shareholders will receive a $4.5bn special dividend.
“Interloper risk will be a big question for the market on this deal,” Berenberg analysts wrote in a note, adding that Glencore and BHP, notably, could still step in.
While Anglo and Teck can still consider unsolicited acquisition proposals, a $330m break fee would apply.
“This is a consolidation that makes sense and brings complementary cultures together,” said Adam Matthews of the Church of England Pensions Board, an Anglo shareholder.
“Both companies are ones we hold high regard for, and the industry will be stronger for this move,” he said.
Anglo CEO Duncan Wanblad will retain that post in the new company, while Teck’s Jonathan Price will be deputy CEO.
Wanblad, speaking to journalists from Vancouver, called the deal a “true merger of equals”, adding that Anglo Teck’s board would be drawn equally from the two companies’ existing directors.
“We will have a stronger, more resilient financial platform with scale advantages, including greater flexibility to reallocate capital dynamically to the highest returning opportunities,” he said.
Cost savings
The tie-up is expected to generate annual cost savings and efficiency gains of $800m by the fourth year after completion, Anglo said.
“As a merger, we absolutely get to draw on the best of both, and we don’t really need to pay away anything on either side in terms of premium to get the full benefit,” Wanblad said.
The two companies operate adjacent copper mines in Chile – Quebrada Blanca and Collahuasi – which is expected to deliver further operational benefits.
Quebrada Blanca is Teck’s flagship mine, but a tailings issue that relates to the disposal of mine waste has seen it miss production guidance, dragging down the company’s shares.
Teck’s Price said securing the regulatory approvals for the deal could take between 12 and 18 months. He added that Canada’s Keevil family, which owns a majority of Teck’s A-class shares, backed the deal.
“We have irrevocable support from Dr. [Norman] Keevil and the other A-share voters,” he said.
A source close to the deal said that the decision to maintain the new company’s headquarters in Canada, safeguarding Teck’s “Canadian legacy”, would likely help ease the way for regulatory approval by authorities there.
Canadian officials had shown hostility to Glencore’s previous bid to acquire Teck, and the source said such concessions in the new deal could help fend off rival bids from companies unwilling to include similar proposals.
