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| Teck to sell 17pc stake to China for C$1.74bn |
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Sunday, July 05, 2009
TORONTO: Teck Resources said on Friday it will sell a 17.2 per cent equity stake to state-owned China Investment Corp in a deal that will help the Canadian miner pay down its debt while expanding China’s portfolio of commodity investments.
China, the No.1 importer of iron ore, copper and other commodities, has been steadily buying stakes in overseas producers in a broad strategy aimed at securing supply for its burgeoning economy.
Teck, a top producer of zinc, copper and metallurgical coal, said CIC will acquire the 17.2 per cent stake through a private placement that will raise C$1.74 billion ($1.5billion). “This transaction is an endorsement of Teck’s future and provides an immediate and very positive impact on Teck’s balance sheet,” said Chief Executive Don Lindsay. “It puts Teck back on the growth track and allows us to deepen our relationship with the largest customer of our core products.”
Vancouver, British Columbia-based Teck will sell 101.3 million shares at C$17.21 each, a 7 per cent discount to Thursday’s closing price of C$18.50 on the Toronto Stock Exchange. Despite the discount, Teck shares rose 8.1 per cent, or C$1.49 to C$19.99, the biggest gain among base metals miners in Toronto. The deal, which will give CIC a 6.7 per cent voting stake in the company, comes as Chinese companies take advantage of depressed resource prices to buy stakes in producers and lock in access to raw materials.
The deal does not require government approval under Canada’s foreign investment rules, which only review transactions when a foreign company takes control of a domestic firm. “This transaction is neither subject to notification or review under economic provisions of the (Investment Canada) Act,” a spokeswoman for Canada’s Industry Ministry said.
The Chinese Commerce Ministry recently said it would steadily push its “go abroad” investment policy, unperturbed by the collapse of a $19.5 billion tie-up between Rio Tinto and Chinese metals conglomerate Chinalco. The deal provides China with no guaranteed percentage of Teck’s production. Teck said that CIC has said it is acquiring the shares “for investment purposes as a long-term passive financial investor.” The fund has agreed to hold the stock for at least a year after the deal closes in mid-July, Teck said.
CIC was created in 2007 to manage part of China’s foreign exchange reserves for higher returns. The $200 billion fund became wary of overseas expansion after losing money from its investments in Morgan Stanley and Blackstone, but it has recently shown renewed interest in overseas markets as the global financial crisis eases.
Teck will use the proceeds of the deal to cut bank debt. The miner took on nearly $10 billion in debt last year to buy Fording Canadian Coal Trust, which made it a top producer of metallurgical coal, used in making steel. The company has sold some assets to pay down the debt, and has said it planned to sell a 20 per cent stake in its coal business.
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