Investors reacted positively on Tuesday to the news that London-listed miner Anglo American will merge with Canadian copper producer Teck Resources.
Shares in Anglo American rose more than 9% after the companies shared the announcement earlier in the day, confirming earlier media reports.
The merger will create a copper-mining giant worth more than $50 billion (€42.6bn), making the deal the biggest in the mining sector in over a decade.
Anglo investors will own 62.4% of the new firm, while Teck shareholders will hold the remaining 37.6%.
The deal is zero-premium, meaning Teck investors aren’t gaining significant extra value above the current market price.
Anglo will issue 1.3301 shares for each Teck share and pay its investors a $4.5bn (€3.8bn) special dividend.
Can the momentum last?
“Combining with Teck will give Anglo greater scale in copper, a commodity in strong demand thanks to its key role in the transition to clean energy,” said Russ Mould, investment director at AJ Bell.
“The big unknown is whether adding Teck’s assets to the portfolio is enough to revive Anglo’s share price beyond the initial jump amid excitement about the merger,” he added. “Anglo doesn’t have a perfect history of deal-making.”
In particular, Anglo has struggled with its business De Beers — the world’s biggest diamond miner — as lab-grown stones have increased supply and pushed down prices. Anglo took impairments of around $2.9bn (€2.5bn) on De Beers last year.
Whether or not the share lift is short-lived, the acquisition does send a message to markets that Anglo American is not a pushover, notably coming after the firm managed to fend off takeover attempts by rival BHP.
Australia’s BHP dropped its lengthy pursuit of Anglo American last year over disagreements about the company’s restructuring. BHP wanted to sell off some of Anglo’s South African assets, a proposal rejected by Anglo shareholders.
Teck has also been the subject of takeover interest from Glencore, who unsuccessfully sought to buy the firm two years ago. Glencore did, however, manage to buy Teck’s steelmaking coal business for around $6.9bn (€5.9bn).
Support from the Keevil family
Concerning the tie-up between Anglo and Teck, the boards of both companies have unanimously recommended the deal.
Even so, the firms underlined that they still have the power to review “unsolicited acquisition proposals” and terminate the current deal should they find a “superior” offer. In this circumstance, a break fee of $330 million (€280.9mn) has been agreed.
The regulatory approvals for the deal could take between 12 and 18 months, according to Teck’s CEO Jonathan Price. He added that Canada's Keevil family, which owns a majority of Teck's A-class shares, backed the deal.
Anglo's chief executive, Duncan Wanblad, will remain CEO of the new company — Anglo Teck —, while Teck's Jonathan Price will be deputy CEO.
Speaking to journalists from Vancouver, Wanblad branded the tie-up as a “true merger of equals”, stressing that the new board will be made up equally with existing directors from the two companies.
The new firm will be headquartered in Vancouver but retain its primary stock listing in London, with secondary listings in Johannesburg, Toronto and New York.
Anglo expects the consolidation to generate annual cost savings and efficiency gains of $800mn (€681mn) by the fourth year after completion.
