Although Anglo Americans are worth no more than double box office, the companies have proposed the deal as an “equal merger” as the plan includes purchasing senior management and board representatives between the two.
The deal will also see company headquarters about Anglo Teck’s move to Vancouver’s headquarters as supporters hope to sell Canada in the interest of attracting regulatory scrutiny.
“We think this is a very compelling opportunity for Canada,” Teck CEO Jonathan Price said in an interview Tuesday. “We will create the largest headquarters in Vancouver and it is really unprecedented to see an Anglo American move to a global headquarters.”
Price will become the deputy CEO of the merged company, while Anglo U.S. CEO Duncan Wanblad and CFO John Heasley will move to Vancouver to maintain their role in Anglo Teck. Tektronix Chairman Sheila Murray will serve as Anglo Teck chair, and the board seats will be evenly distributed between the two companies.
Merger faces Ottawa’s review of Canada bill
The transaction will be under review under the Canadian Investment Act, which can be used to block transactions deemed to be inequality in the national interest. BHP Billiton attempted to take over potassium fertilizer (now Nutrien) in 2010 after the government discovered that this was not a net income. Canadian Minister of Industry Melanie Joly said in a statement that the federal government will address several issues when considering the merger, including the commitment of the merged company, whose senior leadership is based on its senior leadership and lives in Canada.
The deal also includes a five-year commitment to spending on Canada for about CAD 4.5 billion. It is not clear how much spending is new, but Price said the combined company will also open up to the potential for further development of the country. “As a larger company with a larger balance sheet and greater financial resilience, we will be able to invest in some of the larger projects in Canada, such as Galore Creek, which will be very difficult to deal with.”
Anglo Teck will retain its listing on the London and Johannesburg Soptanges and apply for listing on the Toronto and New York Stock Exchanges. The plan is to merge the company into London, which means the S&P/TSX composite index will lose Teck due to its listings, as the company needs to be located in the country.
Wanblad said in an interview that the merger of the company to London was for technical reasons and allowed for wider capital exposure, but should not stand out from the deal. “No doubt, you know, this is definitely a Canadian company,” he said.
The article continues with the following advertisement
x
Compare the best TFSA rates in Canada
Tektronix investors leave 37.6% without acquisition premium
There have long been concerns that Canadian mining giants would be snapped up by larger foreign competitors, including Xstrata’s purchase of Falconbridge in 2006, and Vale’s purchase of Inco and Rio Tinto’s purchase of Alcan in the second year.
Tektronix itself was acquired by Glencore for $23 billion in 2023, but the company eventually bought Tektronix’s coal business for $7.3 billion after a lasting battle. Anglo Americans are no strangers to their takeover goals, as BHP Group ended up receiving a $49 billion offer last year.
Anglo-Teck’s proposed deal will give Teck shareholders a share of 1.3301 A-Class A and B-Class A shares. Anglo also plans to bring about $4.5 billion in dividends to its shareholders to balance its value compared to Teck, but Anglo shareholders will still own about 62.4% of the combined company, while existing Teck shareholders will hold 37.6% in a fully diluted manner.
The deal didn’t offer a premium to Teck shareholders and with the company struggling with operational issues in Chile’s massive Quebrada Blanca (QB) project, Price said it still makes sense for investors. “Tek shareholders will receive one of the largest and highest quality copper companies in the world.”
Combining the two companies could also mean about $800 million in pre-tax annual synergy, plus the value of QB, as it can operate in partnership with nearby Collahuasi mines.
National Bank analyst Shane Nagle said QB’s problems further outlined the short-term pressure on the company’s share price last week. “At the current price, the stock price of the near-term operating outlook is greatly reduced, and given the quality of Tektronix’s underlying portfolio, we think that’s too penalized.” He said he was not surprised given Teck’s challenge, but with the company now playing a role, it’s likely that several interested people are willing to pay a premium for the company’s portfolio.
Teck and Anglo share rally in merge news
So far, shareholders of both companies seem to be happy with the deal. Teck’s share price rose more than 14% in midday trading on the Toronto Stock Exchange, while Anglo Americans’ share price rose more than 8% on the London Exchange. The deal costs $330 million, and the company said it expects the merger to be completed in the next 12 to 18 months pending approval and shareholder approval.
Teck’s A and B shareholders voted in a two-thirds majority of the votes in separate classes to approve the deal, while Anglo U.S. shareholders need a majority.
