Glencore Share Price Edged Up 3.8% on $6.93Bn Teck Acquisition

The Glencore PLC (LON: GLEN) share price edged 3.8% higher after announcing it inked a definitive agreement with Teck Resources Limited (Teck) to acquire a substantial 77% ownership stake in Teck's steelmaking coal business, known as Elk Valley Resources (EVR), for a cash consideration of approximately US$6.93 billion.

This acquisition is structured on a cash-free, debt-free basis, with adjustments based on a normalised level of working capital. Concurrently, Teck has also agreed with Nippon Steel Corporation (NSC), whereby Teck's existing 2.5% interest in Elkview Operations will be converted into equity in EVR. 

Additionally, NSC will acquire additional equity in EVR from Teck, ultimately resulting in NSC holding a 20% equity interest in EVR upon the transaction's completion. 

Furthermore, POSCO, another key player in the steel industry, intends to swap its current 2.5% interest in Elkview Operations and its 20% interest in the Greenhills joint venture for a 3% equity stake in EVR.

Upon closing the deal, Glencore will obtain NSC's and POSCO's attributable portions of a shareholder loan that Teck extended to EVR. This loan is set to be repaid using EVR's cash flows, with an estimated amount of approximately US$250 to US$300 million due at closing.

It is important to note that the successful completion of this transaction is contingent upon obtaining mandatory regulatory approvals, including compliance with the Investment Canada Act (“ICA”) and obtaining competition approvals. The anticipated timeline for closing this transaction is set for the third quarter of 2024. 

Glencore also agreed to work with government bodies and other stakeholders to ensure Canada benefits from the transaction. The mining giant committed to constructively and meaningfully engaging in further reclamation efforts with the Elk Valley Indigenous Nations.

Gary Nagle, CEO of Glencore, said: “ We are pleased to have reached an agreement to acquire Teck's steelmaking coal operations in the Elk Valley. These world-class assets and the experienced people who operate them are expected to meaningfully complement our existing thermal and steelmaking coal production located in Australia, Colombia and South Africa. Glencore has high regard for the business that has been developed over many decades in British Columbia and looks forward to maintaining and enhancing its operational performance, environmental stewardship and social contribution.”

Glencore share price. 

Glencore share price edged 3.80% higher to trade at 447.73p from Monday’s closing price of 431.32p.