Anglo American’s $50bn Teck deal sparks Canadian unease
Doubts voiced about whether ‘merger of equals’ was best for the Vancouver-based company and the country
Anglo American’s bid to combine with Teck Resources has sparked unease in Canada, where investors, analysts and political commentators have voiced doubts about whether the $50bn deal was best for the company and the country.
The nil-premium, all-share deal announced last week has received broad support from big funds invested in both mining companies, but perturbed some in Teck’s home country.
One Teck shareholder pointed out that the deal was happening at a low point for the company’s shares, which have fallen as a result of poor performance at its flagship Quebrada Blanca mine in Chile.
“Teck can easily create more value just by executing” their business plan, said Bryan Pilsworth, a portfolio manager at Toronto investment firm Foyston, Gorden and Payne. “While offers come and go, we think it’s better for Teck to get its own valuation higher before entertaining mergers.”
Dennis da Silva, senior portfolio manager at Toronto-based Middlefield, said he had been caught “off guard” by the deal announced last week, and that many in would be displeased by the absence of a premium.
“I’m not surprised people have a view that this could be negative from a Canadian perspective,” said the Teck shareholder, although he was happy for it to proceed. “It wasn’t the 20 or 30 per cent [premium] people always hope for or expect when you see a transaction like this.”
The deal has irrevocable support from Teck’s controlling shareholder, Norm Keevil, who holds a majority of the company’s supervoting shares. It will need approval from two-thirds of Teck’s class A and class B shareholders as well as 50 per cent of Anglo shareholders, with these vote expected in the coming months.
Teck said the 20 per cent jump in its share price since the deal was announced represented a “significant premium”.
“Opportunities like this don’t come around often — and they don’t wait,” the company said in a statement to the Financial Times.
Yet regulatory approval from Canada, which tightened its takeover rules under the Investment Canada Act after Glencore’s bid for Teck in 2023, may prove challenging.
The combined Anglo Teck will be headquartered in Vancouver, in an effort to allay concerns for the Canadian authorities, but will retain its primary listing in London.
Some in Canada view this arrangement as a figleaf. Heather Exner-Pirot, director of energy, natural resources and environment at the Macdonald-Laurier Institute think-tank, said Canadians should be worried that their leading miners were being absorbed by foreign entities.
“We’re a mining nation but don’t have a single company in the global top tier,” she said. “The Investment Canada Act was meant to stop the bleeding. This deal seems structured in a way to skirt those concerns, with its headquarters in Vancouver.”
Canada’s industry minister Mélanie Joly welcomed the “new investment in our mining sector” and echoed the companies’ language that it was a “merger of equals,” while adding that it triggered a review under the ICA. British Columbia premier David Eby called the deal a “remarkable vote of confidence” in his province.
Yet John Manley, a former Liberal party finance minister, was critical of a transaction that will leave Anglo shareholders with almost two-thirds of the combined group.
“I don’t see it as a merger of equals, I see it as a takeover by Anglo,” he said, while acknowledging that it would likely go ahead.
The deal is a sensitive subject for Canada’s leading institutional investors such as the Royal Bank of Canada, TD Bank and Bank of Montreal, who all declined to comment. The Prospectors and Developers Association of Canada and the Mining Association of Canada, the main industry bodies, also chose not to comment.
Subrata Bhattacharjee, a foreign investment specialist at law firm Borden Ladner Gervais, said the ICA review into Anglo Teck would be “complex” due to the Canadian company’s prominence in critical minerals.
“The Canadian government will expect to hear more from the parties about why this is an exceptional circumstance in order to justify its approval,” he explained.
The expected 12 to 18 months it will take to get the shareholder and regulatory approvals needed also present an opportunity for rival miners to make their own offers.
Analysts and investors have speculated that the likes of Glencore and BHP could counter bid and scupper the deal. BHP failed in a bid for Anglo last year and Glencore previously tried to buy Teck. BHP and Glencore declined to comment.
Teck has said the deal would create value for shareholders, particularly because of the synergies of combining operations at Quebrada Blanca and Anglo’s Collahuasi mine.
But others remain unconvinced. “The timing of this deal is hard to understand from a Teck perspective,” Scotiabank analyst Orest Wowkodaw wrote in a note to clients.
“The relatively modest implied premium, along with the loss of a Canadian mining champion and the primary listing, are all disappointments,” he said.
Middlefield’s da Silva pointed out that only about 25 to 30 per cent of Teck’s value came from its British Columbia operations, because “although the mind is in Canada, the heart is elsewhere” — notably Chile.
“Putting aside the Canadian aspect of it, from a purely quantitative perspective, I like what I see,” he said. Investors “just look at their financial statements every month and want to see it’s growing,” he added.