Is mining set for a new wave of mega-mergers?
The defining deal of the mining industry’s last merger wave never happened. bhp Billiton’s audacious $150bn bid in 2008 for a rival, Rio Tinto, which would have created a commodities super-group, captured the debt-fuelled spirit of the commodities “supercycle” of the 2000s. As China’s growth slowed and the miners’ capital spending peaked, things fell back to earth. The industry has atoned for its sins by cleaning up its balance-sheets and returning record sums to shareholders. Years of discipline, a surge in commodity prices and the prospect of an explosion in demand for “green” metals have mining bosses again dreaming up fantasy deals. For growth-hungry firms, the high costs and risks of developing new projects and relatively cheap valuations for companies in the sector mean that buying looks more attractive than digging. Last year, as dealmaking slumped in other sectors, mining bosses shook hands at a rate not seen in a decade.
Now matters have reached a fever pitch. On April 26th Teck Resources announced that it would scrap a shareholder vote on its restructuring hours ahead of its planned shareholder meeting. The proposal, which was announced in February, would have split the Canadian miner in two, spinning off the firm’s steelmaking-coal operations and leaving behind its copper and zinc businesses. Glencore, a Swiss-based commodities giant, scuppered Teck’s vision with an unsolicited proposal to merge the firms and shed their amalgamated coal business instead. After weeks of both sides courting the Canadian firm’s shareholders, Teck caved, possibly because enough of them are now convinced that selling the firm is in their best interests. Teck says it is going back to the drawing board to conjure up a “simpler and more direct separation”. That might not be enough. An emboldened Glencore may improve its offer in the coming days to capture shareholder disquiet over Teck management’s…
2023-04-27 08:02:16
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