Glencore PLC has finalised a US$6.93 billion deal to acquire a majority share in Teck Resources Ltd's coal operations, ending a protracted negotiation and paving the way for the Swiss commodities trader to divest its own coal business, according to a report in the Australian Financial Review.
Glencore will hold a 77% stake in Teck's coal division, with the remaining shares split between steelmakers Nippon Steel Corporation and POSCO.
The acquisition implies an enterprise value of US$9 billion for Teck's coal business.
Months-long saga
This arrangement signifies the culmination of more than seven months of discussions concerning Teck's future.
Glencore's initial bid of US$23 billion to acquire the entire company was revised to refocus solely on Teck's coal assets.
The acquisition will allow Glencore, Australia's leading coal miner, to separate its profitable yet environmentally impactful thermal coal division, aligning with its strategy to concentrate on mining essential metals such as copper, nickel and zinc.
Further, the deal resolves Teck's search for a solution regarding its coking coal mines, which are integral in steel production.
The Canadian company had earlier considered various strategies, including a complex spin-off that would have left it paying royalties.
Allocation of sale proceeds
Teck plans to allocate proceeds from the sale towards debt repayment, the development of new metal mines as well as shareholder returns.
Nippon Steel, currently a minor stakeholder in Teck's coal assets, will increase its investment to secure a 20% stake in the business.
Concurrently, POSCO will adjust its existing shareholdings to obtain a 3% stake in the restructured business.