Windfall for SA shareholders as Anglo American merges with Teck in R900bn deal

Tawanda Karombo

South African shareholders in Anglo American will receive a R73 per share special dividend in addition to other economic benefits after the global miner agreed to a tie-up creating a merged entity with Teck Resources more than a year after turning down an offer from BHP.

Teck Resources is a Canadian mining company. Its merger with Anglo American will be under a merger of equals is expected to yield $800 million in pre-tax recurring annual synergies.

South African shareholders in Anglo American stand to get a windfall from the transaction, said analysts. Anglo American has been re-strategising after it rebuffed a buyout offer from BHP.

“South African shareholders will receive the economic benefits of the merger without paying a premium merger of equals. Shareholders will also receive a $4.5 billion special dividend which works out to be around R73 per share,” Robbie Proctor, resource analyst at Anchor Capital told Business Report on Tuesday.

Shares in Anglo American surged by 9.2% to R590.35 on the JSE on Tuesday, a reversal of the company’s 3.49% slump in the past six months. Kumba Iron Ore, controlled by Anglo American, also rose 1.69% to R316.55 on the same exchange in afternoon trade.

The merged entity will be renamed to Anglo Teck, becoming a top 5 global copper producer, with combined production of 1.2 million tons and expected to rise by 10% to 1.35 million tons in 2027.

“Excluding the steelmaking coal business, nickel and diamonds, Anglo American was estimated to derive 60% of Ebitda from copper. The combined entity’s copper contribution will be around 70%,” explained Proctor.

In addition to yielding $800m through synergies, Anglo Teck also stands to accrue $1.4 billion in potential uplifts to its earnings before interest, tax, depreciation and amortisation (Ebitda) from combining the Collahuasi and Quebrada Blanca mines in Chile.

Neil Wilson, an investor strategist, said the merger between Anglo American and Teck was a “sign that consolidation in the industry is afoot as copper demand” explodes. It comes after the two companies rebuffed take-over bids in the recent past; Anglo American rebuffed BHP while Glencore also looked at Teck in 2023.

“No doubt this nil premium deal will have others sniffing around and I wouldn’t be surprised to see fresh bids for either – shares +8% reflect not just pleasure at this cost-cutting deal and access to copper but also perhaps some expectations that this is not the last we hear on this deal,” added Wilson.

This comes as “large diversified miners look to focus on core commodities, particularly those with favourable long-term outlooks” like copper, according to Proctor.

Anglo Teck will have a footprint on global capital markets, with a primary listing in London and other listings on JSE, TSX and NYSE. The merged entity will be headquartered in Canada, with Anglo American shareholders owning 62.4% Teck shareholders controlling 37.6% of Anglo Teck.

The company will hold an industry-leading portfolio of producing operations, including six world-class copper assets, high-quality premium iron ore, zinc and crop nutrients businesses.

“We are unlocking outstanding value both in the near and longer term – forming a global critical minerals champion with the focus, agility, capabilities and culture that have characterised both companies for so long,” said Duncan Wanbald, CEO of Anglo American.

Anglo Teck has committed to contributing financially to South Africa’s Junior Mining Exploration Fund in partnership with the Industrial Development Corporation of South Africa and the South African Department of Mineral and Petroleum Resources. It also committed to ensuring meaningful representation from South Africa on the board and executive team.

Analysts at SP Angel said “there is an element of sticking together to survive here” for the two global resource companies.

“We would expect the combined Anglo Teck to further divest its non-core asset base as the market continues to crave copper. De Beers separation plans are ongoing, alongside the sale of Anglo American’s steelmaking coal and nickel divisions,” said the analysts.

BUSINESS REPORT