- Deal to create $50 billion mining giant
- Big bet on copper
- Estimated $800 million cost savings
Global miner Anglo American (AAL) leapt more than 9% to top of the FTSE leaderboard after announcing a merger of equals with Canadian copper miner Teck Resources (TECK.B:TSE), in one of the biggest mining deals in a decade.
If initial gains hold, they will take the 12-month advance in Anglo American shares to 23% compared with a 12% gain in the FTSE 100 index.
The news sent shares in fellow miners Glencore (GLEN) and Antofagasta (ANTO) up around 3%, while shares in Teck Resources jumped more than 20% in aftermarket trading in Toronto.
BIG BET ON COPPER
Under the terms of the deal Anglo shareholders will own 62.4% of the combined group and Teck shareholders will own the rest. The merged company will be renamed Anglo Teck and be headquartered in Vancouver but crucially will keep its primary listing in London.
The group will be led by Anglo’s Duncan Wanblad while Teck’s CEO Jonathan Price will become deputy chief executive.
If approved by regulators the deal expected to complete in 12 to 18 months. Ahead of completion Anglo intends to pay its investors a $4.5 billion special dividend.
The deal will result in a big increase in copper production for Anglo Teck to around 1.2 million tonnes, growing to 1.35 million tonnes by 2027. The companies estimated the merger would deliver post-tax annual cost savings of $800 million by the end of the fourth year after completion.
INTERLOPER RISK
Berenberg commented: ‘Interloper risk will be a big question for the market on this deal, we believe, and we would expect Glencore to be linked as a potential rival bidder for Teck, but Glencore has tried to acquire Teck in the past and we think the cultural differences between the two businesses will mean that a deal is less likely.
‘We think that BHP could also be a potential interloper, given the ability to scale up its own copper business (and given that it is a co-owner of the Antamina mine in Peru), but the best synergies appear to be coming through a deal with Anglo American,’ added Berenberg.
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