The Anglo Teck merger is "excellent" news for Anglo American PLC (LSE:AAL) but the combination to create a £40 billion giant will only make it more attractive as a takeover target, according to JP Morgan.
With both Anglo and Teck Resources Ltd (TSX:TECK.B) have been the subject of failed takeover attempts, with Anglo rejecting BHP's advances in 2024 and Teck from Glencore in 2023, the merger agreement includes a $330 million break fee if either party accepts a competing offer.
JPMorgan analyst Dominic O'Kane said he believes the combination is "strategically excellent for Anglo American; it will unlock significant value and re-asserts control of Anglo’s strategic destiny".
Once the deal is done, which Anglo expects in 12-18 months, the analyst said the "takeover appeal of the proforma entity will be enhanced as a direct result".
With a pro-forma market cap of around $53 billion based on yesterday’s closing prices, O'Kane said he expects Anglo Teck "will continue to be regarded as a consolidation candidate postclose, albeit larger and with additional stakeholder interests".
This is due to the consolidation of the two companies' Collahuasi and Quebrada mines in Chile into a "world-class" copper project.
The transaction should also "eliminate the complexity" of Teck’s dual share class structure, including the veto potential held through its Class B shares.
In addition, O'Kane said he expects Glencore will "benefit economically" via the $1.4 billion EBITDA uplift at the Collahuasia-Quebrada Blanca, as it has a 44% ownership share in Anglo's Collahuasi mine