Ottawa Reviews 70B Anglo-Teck Merger as Shareholders Rally

In what could become the largest mining transaction of the decade, Teck Resources Ltd. has agreed to combine with London-based Anglo American PLC to form a copper-focused company with an estimated value near $70 billion.

The proposal is presented as a “merger of equals,” even though Anglo American’s market value is more than double Teck’s. The plan envisions an executive team and board representation drawn roughly equally from both companies.

The merged company, to be called Anglo Teck, would establish its main operating headquarters in Vancouver. Company leaders emphasize the move as a benefit to Canada, while acknowledging that the merger will face intense regulatory scrutiny.

“We think this is a hugely compelling opportunity for Canada,” Teck CEO Jonathan Price said in an interview. “We will be creating the largest head office in Vancouver, and it is unprecedented to see a firm of Anglo American’s scale shifting its global footprint here.”

Under the arrangement, Price is expected to serve as deputy CEO of the combined company. Anglo American CEO Duncan Wanblad and CFO John Heasley would relocate to Vancouver to continue in their leadership roles at Anglo Teck. Teck chair Sheila Murray would become chair of the merged board, with directors split evenly between the two legacy companies.

Merger faces Ottawa review under Investment Canada Act

The transaction must be reviewed under the Investment Canada Act, which allows the federal government to block foreign takeovers that are not judged to be in Canada’s national interest. Past examples include the government’s 2010 decision to halt BHP Group’s attempted purchase of PotashCorp (now Nutrien).

Industry Minister Melanie Joly said Ottawa will examine several aspects of the merger, including the commitment from the combined company that senior executives will be based in and reside in Canada.

The agreement also includes roughly $4.5 billion in spending commitments in Canada over five years. It is not fully clear how much of that represents new investment, but Price said the larger balance sheet of the combined entity would enable development of major Canadian projects that might otherwise be difficult for smaller companies to pursue. He cited projects such as Galore Creek as examples of opportunities that could become feasible with greater financial capacity.

Anglo Teck would continue to be listed on the London and Johannesburg exchanges and would seek listings in Toronto and New York. The plan is to keep legal incorporation in London, which means Teck would be removed from the S&P/TSX Composite Index because that benchmark requires firms to be incorporated in Canada. Wanblad said the London incorporation is driven partly by technical and capital-market considerations but stressed that the company will operate as a Canadian-headquartered business in practice. “Without a doubt, this is absolutely going to be a Canadian company,” he said.

Teck investors left with 37.6% and no takeover premium

Canada has a history of major mining assets being acquired by larger foreign firms, including Xstrata’s purchase of Falconbridge in 2006 and Vale’s acquisition of Inco in 2007. Teck itself faced a proposed US$23 billion takeover by Glencore in 2023 that ultimately resulted only in the sale of Teck’s coal business for US$7.3 billion after protracted negotiations. Anglo American has also been the subject of takeover interest: BHP Group made a US$49 billion offer last year that did not proceed.

Under the current proposal, Teck shareholders would receive 1.3301 Anglo American shares for each Teck class A and class B share they hold. Anglo plans to pay about US$4.5 billion in dividends to its shareholders to help equalize the relative value of the two companies, but Anglo’s investors would still own roughly 62.4% of the combined company while existing Teck shareholders would hold about 37.6% on a fully diluted basis.

The transaction does not include a takeover premium for Teck shareholders. Teck has been dealing with operational issues at its large Quebrada Blanca (QB) project in Chile, which has weighed on the company’s stock in the short term. Still, Price argued the deal is attractive to Teck investors because it offers exposure to a larger, high-quality copper-focused company. “Teck shareholders will get exposure to what will be one of the largest and highest-quality copper-focused companies in the world,” he said.

Executives estimate the combined company could realize about US$800 million in pre-tax annual synergies. The value of the QB project could also benefit from integration with nearby assets, such as the Collahuasi mine in which Anglo holds a stake.

National Bank analyst Shane Nagle noted that QB’s problems have pressured Teck’s share price. He said current valuations may reflect excessively negative near-term expectations and that Teck’s portfolio quality still attracts significant interest. With Teck now in play, Nagle suggested other bidders could emerge willing to pay a premium for its assets.

Teck and Anglo shares rally on merger news

Markets reacted positively to the announcement. Teck’s shares rose more than 14% on the Toronto Stock Exchange during midday trading, while Anglo American’s stock gained over 8% in London.

The agreement includes a US$330 million break fee and the companies expect regulatory and shareholder approvals to be secured within 12 to 18 months. Teck’s approval requires a two-thirds majority vote of class A and class B shareholders, voting as separate classes. Anglo American shareholders must approve the deal by a majority vote.

Holders representing about 79.8% of Teck’s class A shares have already committed to support the merger, including Teck chair emeritus Norman B. Keevil, who praised the agreement. “This agreed merger will begin a powerful next chapter, bringing together two respected, 100-year-old companies into a single world-class mining one, headquartered here in Canada,” he said.

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