Teck Resources Nears Deal to Sell Coal Business to Glencore
The companies are in advanced talks on a deal that would value the coal assets at close to $10 billion
rebuffed
overhang
proffering
foothold
Canadian miner Teck Resources is in advanced talks to sell its coal assets to mining and trading giant Glencore
in a deal that would cap a lengthy saga and be one of the biggest in mining this year.
The deal would value the business at close to $10 billion and could be announced as soon as this week, assuming the talks don’t fall apart, according to people familiar with the matter.
The deal value, which at roughly $10 billion would be a larger price tag than what Swiss-based Glencore had in mind earlier this year, reflects a robust market for so-called metallurgical coal, the kind used in steelmaking.
Teck has spent much of the year figuring out a future for its coal business. In February, it unveiled plans to split into two independent companies, with one focused on base metals and the other on coal.
Then, Glencore proposed a full-blown, roughly $23 billion merger between the companies. Under that plan, it proposed forming two separate companies for Glencore and Teck’s merged metals and coal businesses, and then later spinning off the combined coal business.
Teck in April rebuffed Glencore’s initial advance and a subsequent revised offer that included a cash component investors could take instead of shares in a combined coal operation. Apart from Glencore’s thermal coal business, Teck raised concerns about Glencore’s oil-trading business and what it said are potential geopolitical risks in certain countries where Glencore operates.
Also that month, Teck called off its shareholder vote on its plan to spin off the coal business, a surprise that analysts said suggested investors were open to a better offer from Glencore or others. It said it would work on an alternative plan, and began engaging with bidders on just its coal assets.
The Wall Street Journal was the first to report in June that Glencore had made a bid just for the coal business.
Glencore earlier this year valued that business at $8.2 billion. In June, it said it would spin off a combined coal company once it had sufficiently reduced its debt, which would be expected up to two years after the transaction closes.
A note from Jefferies analysts on Monday said Glencore’s eventual offloading of coal could “unlock significant trapped value for Glencore shareholders and lift [an environmental, social and governance] overhang on the company’s shares.” Jefferies analysts also said Glencore could pursue more metals projects in low-risk regions and get rid of them in high-risk ones.
In initially proffering the full-company tie-up, Glencore had envisioned a combined metals company that could be a dominant force in copper, cobalt and zinc, critical components in the global transition to cleaner forms of energy.
Glencore’s recent deals include agreeing to take over an Argentinian copper project, and it is also looking to expand its foothold in metals recycling.
Glencore has been rare among major resources groups in sticking with coal. Many large mining companies in recent years have reduced their exposure to the commodity amid pressure from investors, governments and consumers to minimize greenhouse-gas emissions. Glencore has said it would run down those operations by 2050 and spin the business off completely if a majority of its shareholders approves.
Write to Julie Steinberg at julie.steinberg@wsj.com and Ben Dummett at ben.dummett@wsj.com