After long back and forth, a mega takeover deal was sealed yesterday: The Swiss commodities company Glencore plc announced that it would take over 77% of the steel coal business from the Canadian competitor Teck Resources Ltd.

Both companies had signed a binding takeover agreement under which 77% of Teck’s subsidiary Elk Valley Resources (EVR), in which the Canadian company’s steel coal business is consolidated, would be sold to Glencore.

Glencore pays 6.93 billion dollars – EVR valued at 9 billion dollars For the 77% stake in EVR, Glencore has to pay a hefty 6.93 billion US dollars (USD – equivalent to about 6.47 billion euros) in cash. The deal will value EVR at a total of 9 billion USD (8.4 billion euros).

The remaining EVR shares remain in East Asia. After completion of the transaction, the Japanese steel company Nippon Steel Corporation will hold a 20% share in EVR. The remaining 3% of EVR shares will be held by the South Korean steel company Posco.

Before I discuss further details of the mega deal, I would like to briefly introduce the companies involved in the takeover.

The involved companies in a short portrait The Glencore plc based in Baar, Switzerland (30 km south of Zurich) is, according to its own statements, one of the largest commodity companies in the world and a significant producer and marketer of more than 60 commodities. The company is represented in more than 35 countries and has a global network of more than 40 branches.

The around 140,000 Glencore employees have achieved an annual turnover of almost 256 billion USD in the financial year 2022. The operating profit (EBIT) was 24.65 billion USD. The shares of the largest company in Switzerland are traded on the London Stock Exchange LSE.

Teck Resources Ltd. based in Vancouver is a leading Canadian mining company active in the fields of copper, zinc and steel coal. The company operates mines in Canada, the USA, Chile and Peru.

Teck has around 12,000 employees who generated an annual turnover of 17.3 billion Canadian dollars (CAD – approximately 11.7 billion euros) in 2022. The EBIT was around 6.5 billion CAD (approximately 4.4 billion euros). The company’s shares are listed on the Toronto Stock Exchange and the New York Stock Exchange.

The Japanese Nippon Steel Corporation and the South Korean Pohang Iron and Steel Company (Posco) are among the world’s leading steel producers.

Takeover has longer history Glencore has been trying to take over the Canadian competitor Teck for some time. So Glencore had already made an unsolicited takeover offer for Teck Resources Ltd. at the beginning of April. But the Canadians rejected this offer, which valued the entire company at 22.5 billion USD, almost immediately.

Only a few weeks later, Teck announced that Glencore – among other interested parties – had made an acquisition offer for the steel coal division EVR of the Canadians. After lengthy negotiations, the two mining companies agreed on the sale of EVR on 14.11.2023.

This is how the exchanges reacted The investors reacted positively to the takeover of EVR by Glencore. Thus, the share price of Glencore on the London Stock Exchange LSE on Tuesday rose by a hefty 4.5% to 450 British pence.

The papers of the Canadian resource company also rose slightly yesterday. Thus, the price of the Teck share on the New York Stock Exchange NYSE rose by almost 0.5% to 36.63 USD. All in all, the EVR takeover brought share price gains to shareholders of both companies.

This is how it should continue Glencore intends to spin off its steel coal business, including its EVR stake, as a separate company once Glencore has achieved sufficient debt reduction from this business. This is expected to be the case within 24 months of completion of the transaction.

The transaction still needs to be approved by the relevant authorities. Glencore expects the transaction to be completed in the third quarter of 2024.