Anglo American PLC (LSE:AAL) and Teck Resources Ltd (TSX:TCK) have agreed to merge in an all-share transaction to form a new company, Anglo Teck, that would be the second-largest listed copper producer in the world.
The combination is positioned as a merger of equals, creating a group valued at around £40 billlion ($54 billion), though Anglo American shareholders are set to own 62.4% of the new group and Teck shareholders 37.6%.
The boards of both companies have unanimously recommended the deal, which is expected to complete in 12 to 18 months, with investors also seeming to like the sound of it. Shares in Anglo rose over 6% in early trading to 2,423p, a six-month high, while Teck's New York-listed shares leapt almost 24% in out-of-hours trading to $43.50.
As Anglo Teck, the group expects to offer investors over 70% exposure to copper and be a top-five global copper producer, while retaining exposure to premium iron ore, zinc and other growth options.
Annual pre-tax synergies of US$800 million are targeted within four years of completion, with an average annual EBITDA uplift of US$1.4 billion expected from 2030 to 2049 through integration of the adjacent Collahuasi and Quebrada Blanca copper assets in northern Chile.
A special pre-completion dividend of US$4.5 billion will be paid to Anglo American shareholders.
The merger follows a period of strategic restructuring by Anglo after it rejected a takeover approach from BHP, with the group selling off its platinum and diamond businesses to simplify its portfolio and prioritise high-margin growth areas.
"We are unlocking outstanding value both in the near and longer term," said Anglo CEO Duncan Wanblad, who will be CEO of the enlarged group.
"Having made such significant progress with Anglo American's portfolio transformation, which has already added substantial value for our shareholders over the past year, now is the optimal time to take this next strategic step to accelerate our growth."
Teck CEO Jonathan Price, who will become deputy CEO, said the deal "will create a leading global critical minerals champion" and the two companies' portfolios are "highly complementary", with mining and processing assets located across Canada, the United States, Latin America, and Southern Africa.
Teck has also been progressing a portfolio simplification, which he said "created a platform to enable exactly this sort of transformative transaction".
Anglo Teck will be listed on the London Stock Exchange, JSE, TSX and NYSE.
** Update: Adds share price details **