14th Nov 2023 08:32
(Alliance News) - Glencore PLC on Tuesday said it has entered a binding agreement to buy 77% of Teck Resources Ltd's steelmaking coal business, Elk Valley Resources, for USD6.93 billion in cash.
The Barr, Switzerland-based miner and commodity trader expects the acquisition, which is subject to a "normalised level of working capital", to close in the third quarter of next year.
As part of the arrangement, Glencore said Vancouver-based Teck has agreed with Japan's Nippon Steel Corp that its current 2.5% interest in Elkview Operations will be rolled up to equity in Elk Valley, and that Nippon Steel will acquire additional equity in Elk Valley from Teck.
On closing of the Elk Valley deal, Nippon Steel will hold a 20% equity interest in Elk Valley, which is based in southeast British Columbia, Canada.
At the same time, South Korean steel maker Posco Holdings Inc intends to exchange its current 2.5% interest in Elkview Operations and its 20% interest in the Greenhills joint venture for a 3% stake in Elk Valley.
At closing of the transaction, Glencore will acquire from Teck, Nippon Steel and Posco's shareholder loans made to Elk Valley. This is repayable out of Elk Valley's cash flows. The amount payable for this portion of the loan is expected to be some USD250 million and USD300 million, Glencore said.
"We are pleased to have reached agreement to acquire Teck's steelmaking coal operations in the Elk Valley. These world-class assets and the experienced people that operate them are expected to meaningfully complement our existing thermal and steelmaking coal production located in Australia, Colombia and South Africa," Chief Executive Officer Gary Nagle said.
Glencore and Teck have engaged in bitter public battle over Teck's coal assets.
Early in April, Glencore initially had offered 7.78 of its own shares for each Teck Class B subordinate voting share, and 12.73 shares for each Teck Class A common share. But Teck rebuffed this offer.
Glencore revised its offer that same month to 7.78 of its own shares for each Teck Class B subordinate voting share, and 12.73 shares for each Teck Class A common share, adding a cash element of USD8.2 billion plus a 24% stake in MetalsCo to the Vancouver-based miner's shareholders.
On Tuesday, Glencore said it believes that a standalone company containing its combined coal and carbon steel materials business, including its stake in Elk Valley, will be well positioned as a cash-generative bulk commodity company.
It said it intends to demerge the combined businesses once it has sufficiently reduced its debt, which is expected to occur within 24 months from close.
Glencore shares rallied 3.3% to 444.85 pence early Tuesday in London on the news. In Johannesburg, the stock was up 3.5% at ZAR102.07.
By Artwell Dlamini, Alliance News reporter
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