Glencore buys Teck’s coal business ahead of commodity spin-off

afr.com:

Glencore has agreed to buy a majority stake in Teck Resources’s coal business for $US6.93 billion ($10.9 billion), ending a months-long saga and setting the stage for the commodity giant to spin off its own coal unit.

Glencore will own 77 per cent, and steelmakers Nippon Steel Corp and Posco will hold the remainder of the business, the companies said. The deal implies an enterprise value of $US9 billion for Teck’s coal business.

Glencore chief Gary Nagle says the Swiss miner remains committed to reducing emissions even though it is currently bankrolled by coal. Bloomberg

The agreement will mark the end of a more than seven-month wrangle over the future of Teck. Glencore originally sought to buy the whole company in an unsolicited $US23 billion bid, but was ultimately forced to scale back its ambitions to target the Canadian miner’s coal unit instead.

The deal will pave the way for Glencore – the largest coal miner in Australia – to hive off its profitable but polluting thermal coal business and focus on mining metals such as copper, nickel and zinc. The company reiterated plans to split out the combined coal operations within about two years.

It will also finally end Teck’s struggle to find a solution for its mines that produce coking coal – used to make steel – after years of studying various options to separate it. The company had initially planned a complicated spin off that left it paying royalties to the remaining metals business, before Glencore disrupted the plan.

Teck, which will now have no exposure to the coal business, said it will use the proceeds to pay off debts, build new metal mines and return some to shareholders.

Nippon Steel, which currently owns 2.5 per cent in some of Teck’s coal assets, will convert