Teck Resources, Anglo American to combine to form Anglo Teck group

Teck Resources (TECK) and Anglo American (NGLOY) announce they have reached an agreement to combine the two companies in a merger of equals to form the Anglo Teck group, headquartered in Canada and expected to offer investors more than 70% exposure to copper. Anglo Teck will hold six copper assets, alongside iron ore and zinc businesses. The merger is expected to deliver annual pre-tax synergies of approximately $800M by the end of the fourth year following completion of the transaction, with approximately 80% expected to be realized on a run-rate basis by the end of the second year following completion, driven by economies of scale, operational efficiencies, and commercial and functional excellence. Anglo Teck will also work with stakeholders and partners in Collahuasi and Quebrada Blanca to optimize the value of these adjacent assets to realize $1.4B of underlying EBITDA revenue synergies on an average pre-tax annual basis from 2030-2049, primarily through operational integration and optimization of Collahuasi and Quebrada Blanca. With key leadership roles based in Canada, including Duncan Wanblad as CEO, Jonathan Price as deputy CEO, and John Heasley as CFO, with Sheila Murray as chair, Anglo Teck will play a role in the Canadian mining ecosystem, while continuing to play a role in mining and business in South Africa and the UK. The merger will be implemented by means of a plan of arrangement through which Anglo American will issue 1.3301 ordinary shares to the existing Teck shareholders in exchange for each outstanding Teck class A common share and class B subordinate voting share, consistent with a merger of equals at market. Subject to satisfaction of certain conditions, the Anglo American board also intends to declare a special dividend of $4.5B, to be paid by Anglo American to its shareholders on the Anglo American register of members ahead of completion of the merger. The Anglo American special dividend creates an opening balance sheet and allows more balanced participation for Anglo American and Teck shareholders in the go-forward business’ value delivery. Immediately following completion of the merger, Anglo American and Teck shareholders will own approximately 62.4% and 37.6% respectively, of Anglo Teck plc on a fully diluted basis. The Anglo American special dividend will be subject to adjustment to ensure Anglo American and Teck shareholders receive aligned ordinary course dividends prior to completion of the merger. Anglo Teck expects stock market listings on the LSE, JSE, TSX and NYSE, subject to the approval or acceptance of each applicable exchange. At or prior to completion, Anglo American and Teck will each nominate for appointment 50% of the non-executive directors of the Anglo Teck board, with Sheila Murray to serve as chair of Anglo Teck upon completion. Upon completion, the executive directors of Anglo Teck plc will be Duncan Wanblad as CEO, Jonathan Price as deputy CEO, and John Heasley as CFO. The CEO, deputy CEO, and CFO and a significant of the senior executive team will be based in and reside in Canada, with the senior executive team including meaningful representation from South Africa and the UK. Prior to completion, Anglo American will seek shareholder approval to change its legal name to “Anglo Teck plc” from completion of the merger and, from and after completion of the merger, Anglo Teck will conduct its business under the “Anglo Teck” trade name. The merger is also subject to completion conditions customary for a transaction of this nature, including approval under the Investment Canada Act and competition and regulatory approvals in various jurisdictions globally. The arrangement agreement includes customary deal protections, including provisions that allow Anglo American and Teck to consider unsolicited acquisition proposals and for either board to terminate the transaction to accept a superior proposal or to change its recommendation that shareholders vote to approve the merger in those circumstances. A break fee in the amount of $330M will be payable by Anglo American or Teck in certain circumstances. In connection with the merger, Temagami Mining, SMM Resources, Norman Keevil and certain of the directors and executive officers of Teck and Anglo American, in respect of approximately 79.8% of the outstanding Teck class A common shares, 0.02% of the outstanding Teck class B subordinate voting shares, and 0.1% of the Anglo American shares, as applicable, have entered into customary voting agreements agreeing to vote those Teck or Anglo American shares, respectively, in favor of the merger and against any competing acquisition proposals, which agreements prohibit voting for, supporting or participating in a competing transaction unless the applicable board has changed its recommendation that the shareholders vote to approve the merger or the arrangement agreement is otherwise terminated. The merger is expected to close within 12-18 months.