British mining company Anglo American (NGLOY) has agreed to merge with Canadian miner Teck Resources (TECK) in a transaction that will create one of the world’s largest copper producers, with a market capitalization of $53 billion, and mark the revival of deal activity in the sector. TECK stock was up 10% in Tuesday’s pre-market trading in the U.S., while Anglo American’s (GB:AAL) London-listed shares jumped more than 7%, as of writing. The merger marks a significant bet on copper, a metal essential to the ongoing transition to renewable energy and electric vehicles (EVs).
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Also, copper is a core component in wiring used in the data center sector, which is seeing rapid artificial intelligence (AI)-led growth. The combined company, called Anglo Teck, will be headquartered in Canada but have a primary listing in London.
The U.S.-listed shares of Teck Resources surged 24% in Monday’s extended trading session following reports by Bloomberg and The Financial Times of a potential takeover by the British multinational mining company. However, the two companies later confirmed the news of combining through a “merger of equals.”
Teck Resources’ Toronto-listed shares have fallen nearly 20% over the past year, bringing its market cap to about C$23.7 billion ($17.1 billion). Meanwhile, the London-listed shares of Anglo American have advanced 15% over the same period, with a market value of £26.9 billion ($36.4 billion).
Teck Resources and Anglo American Agree to Merge
Anglo American will own about 62.4% in the combined company, while Teck Resources will hold the remaining 37.6%. Anglo American’s CEO Duncan Wanblad will remain the chief executive, while Teck’s Jonathan Price will serve as the deputy CEO. The merger is expected to generate annual cost savings and efficiency gains of $800 million by the fourth year after completion. The deal includes a special dividend of $4.5 billion to Anglo American shareholders, which will be paid ahead of its completion.
Teck Resources’ flagship Quebrada Blanca 2 (QB2) copper project in Chile would complement Anglo American’s existing stake in the neighboring Collahuasi mine. Anglo Teck intends to work with key stakeholders and partners in Collahuasi and QB2 to optimize the value of these adjacent assets to realize $1.4 billion (100% basis) of underlying EBITDA (earnings before interest, tax, depreciation, and amortization) revenue synergies on an average pre-tax annual basis from 2030 to 2049.
The new company will be one of the top five global copper producers, with a combined annual copper production of around 1.2 million tons, which is expected to grow by nearly 10% to about 1.35 million tons in 2027.
Interestingly, both companies have been pursued by bigger miners in recent years. Last year, Anglo American turned down a $49 billion takeover by rival BHP Group (BHP), while Teck Resources rejected an acquisition attempt by Glencore PLC (GLCNF) in 2023. However, Teck sold its steelmaking coal business to Glencore in a $7 billion deal.
Here’s How Wall Street Rated TECK Stock Prior to the Merger News
Prior to the merger news, Wall Street had a Moderate Buy consensus rating on Teck Resources stock based on 10 Buys and seven Holds. The average TECK stock price target of $42.40 indicates about 21% upside potential from current levels.
