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Glencore has struck a deal to acquire the coal operations of Teck Resources in a $9-billion transaction also involving two other companies.
Earlier this year, Glencore offered to acquire the whole company but Teck shareholders rebuffed the offer that valued the company at $22.5 billion. Per the proposal, the merged entity would be split into two, one focusing on coal and the other on metals.
Instead, the Canadian miner opted to restructure its business, separating its copper and zinc operations from its coal operations.
A few hours after the Wall Street Journal, the Globe and Mail reported that the deal being discussed also involved Nippon Steel and South Korea’s POSCO. Per that report, which also cited unnamed sources, the three would buy the majority of Teck’s coal business, paying a combined $8.9 billion.
Of this total, Glencore would pay $6.9 billion and receive in exchange a 77% stake in the coal business. Japan’s Nippon Steel, for its part, would swap its current stake in a Teck coal project for a 20% stake in the coal operations, paying an additional $1.7 billion. POSCO would also swap its stakes in two Teck coal projects for a 3% stake in the coal business of the company.
The FT later confirmed this information as it reported on the acquisition deal.
The development suggests that despite the massive pressure on companies operating in the coal space, interest in the commodity remains, as does demand. The deal negotiations come ahead of COP28, where coal will be discussed at length, judging by a recent intensification of calls to phase out the most polluting hydrocarbon.
As a result of that growing pressure, most commodity traders have shrunk their coal operations but Glencore has bucked that trend. The Swiss major has remained active in coal although it has announced plans to wind down that business by 2050 in case its shareholders want that.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com