Glencore's $6.93 Billion Acquisition of Teck Resources' Steelmaking Coal Unit Approved by Canadian Government with Strict Conditions
By Divya Rajagopal, Surbhi Misra, and Mrinmay Dey
The Canadian government has given the green light to Glencore's $6.93 billion takeover of miner Teck Resources' steelmaking coal unit, but with stringent conditions aimed at safeguarding jobs, according to the country's industry minister.
In order to secure approval for the deal, Glencore has agreed to keep Elk Valley Resources (EVR) headquartered in Canada for at least a decade, ensure that a majority of EVR's directors are Canadian, and maintain substantial employment levels at EVR for a minimum of five years.
Teck Resources, on the other hand, plans to use the proceeds from the acquisition to repurchase up to C$2.75 billion ($2 billion) of its Class B subordinate voting shares, reduce its debt by up to $2 billion, and support its near-term growth initiatives.
The transaction is expected to be finalized by July 11, with Industry Minister Francois-Philippe Champagne emphasizing that future reviews of mergers and acquisitions involving critical Canadian companies in the minerals sector will be subjected to rigorous scrutiny.
Glencore's CEO, Gary Nagle, expressed confidence in the company's commitments to the Canadian government, stating that the deal will benefit Canada and British Columbia in the long run.
In a major deal last November, Glencore led a consortium in acquiring Teck Resources' steelmaking coal unit for $9 billion, with Glencore taking a 77% stake in the business through a $6.9 billion cash agreement, while Japan's Nippon Steel will hold 20%.
Additionally, South Korea's POSCO will exchange a stake in two of Teck's coal operations for a 3% ownership in EVR's steelmaking coal business, Elk Valley Resources.
Overall, this acquisition marks a significant development in the mining and resources sector, with implications for the global economy and the respective countries involved. Investors should keep a close eye on the impact of this deal on Glencore, Teck Resources, and the broader market, as it could influence future investment decisions and market trends.