Industry Minister Mélanie Joly said Anglo American’s promise to move its global headquarters to Vancouver helped paved the way for approval of the company’s takeover of Teck Resources.Justin Tang/The Canadian Press
Industry Minister Mélanie Joly is signalling she got the best deal possible for Canada after approving Anglo American PLC’s NGLOY takeover of Teck Resources Ltd. TECK-B-T, even as worries persist over this country’s waning influence on the global mining stage.
The US$20-billion all-stock deal, which was announced in September, was given the rubber stamp by Ms. Joly on Monday night after she deemed it to be of net economic benefit to Canada.
Dating back to 1913, Teck is one of Canada’s last remaining large diversified, mining companies, with domestic and international operations in copper, zinc, lead and germanium.
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As part of Anglo’s efforts to win approval from the federal government, it said it would move its global headquarters to Vancouver from London. For Ms. Joly, this was a crucial concession that held great sway over her decision to rule in favour of the deal.
“My goal was to keep jurisdiction over the company and that’s why it was important to have a very strong headquarters in Vancouver,” she said in an interview with The Globe and Mail on Tuesday.
With Anglo agreeing to keep its HQ in Vancouver in perpetuity, this was a first for Ottawa in its dealings with a foreign acquirer.
“The first time in history that we have this,” she said.
Anglo also committed to maintaining Teck’s current employment levels in Canada, which equates to 4,000 jobs, and promised to invest $4.5-billion over five years in capital intensive projects, such as expanding Teck’s Highland Valley Copper mine in British Columbia and increasing critical minerals processing at its Trail smelter, also in B.C.
Teck Resources' Highland Valley Copper mine near Logan Lake, B.C.DARRYL DYCK/The Canadian Press
The Keevil family has been involved in Teck since the 1950s. Norman B. Keevil, now in his late 80s, is one of the company’s controlling shareholders.
He called the approval of the deal by Ottawa “a great day for Canada.”
“Before, the global critical minerals champions all operated from places like Australia, the USA and England, and even Switzerland. Canada had good miners, but never a critical minerals company of this scale,” he said.
“Now we do, a major international miner with global headquarters right here in Canada.”
Obtaining legally binding commitments from Anglo was no small feat for Ottawa, said Subrata Bhattacharjee, partner and national chair of the competition and foreign investment review group with Borden Ladner Gervais LLP. That’s because the government can sue Anglo Teck if it doesn’t live up to its promises.
“Under the Investment Canada Act, these commitments are intended to be binding. The government treats them as binding, and foreign investors generally will appreciate that they’re entering into a binding agreement with the minister, with sanctions imposed if they don’t comply,” he said.
However, the commitments obtained by Ms. Joly appear to fall short of what she had been pushing for. On more than one occasion, after the deal was announced, she said that promises made by Anglo didn’t go far enough. Anglo chief executive officer Duncan Wanblad, in an interview with The Globe in September, said that Anglo wasn’t willing to move its legal home to Canada. However, The Globe subsequently reported that Ottawa still made a push for Anglo to redomicile.
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Ultimately, the legally binding commitments obtained by the Industry Minister were substantially the same as Anglo’s original promises, although there was more precision in the language around them. For example, Anglo originally said that a “significant majority” of its senior executives would reside in Canada, and a “substantial proportion” of its board would be Canadian. In the final agreement, Ottawa stipulated that 66 per cent of Anglo Teck’s senior executives will live in Canada, and that there will be 50-per-cent Canadian representation on the board for seven years.
Bay street veteran Tom Caldwell, who is chairman of Caldwell Securities Ltd., said he wasn’t surprised that Ms. Joly ultimately did not extract major additional concessions out of Anglo once the deal was announced.
“One of my neighbours once described governments as a big, lumbering giant trying to catch up with a sprinter,” he said. “They’re always behind the curve. ‘Let’s put a good face in this. Let’s look as if we’ve really done something to protect Canada and jobs in Canada.’ It’s all about optics.”
Mr. Caldwell added that even the framing of the deal as a “merger of equals” by Anglo, Teck and the government was about optics, and not a reflection of what is actually going on.
“I’ve been in the investment business for over 60 years. I can tell you, mergers don’t exist, he said. “A merger of equals – It’s never equal. It’s a takeover. Period.”
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If the deal closes, Anglo shareholders will have majority control of the combined company, owning 62.4 per cent, with Teck shareholders owning 37.6 per cent. Anglo’s domicile will remain in London and the primary stock listing will also be in London, with a secondary listing planned for the Toronto Stock Exchange.
In addition, Anglo’s current CEO, Mr. Wanblad, and chief financial officer John Heasley will continue to work in both of those key management roles. Teck’s existing CEO, Jonathan Price, will work under Mr. Wanblad as deputy CEO.
Mr. Caldwell likened the Teck deal to past large acquisitions that saw former Canadian mining and metals giants such as Inco Ltd., Falconbridge Ltd. and Alcan Inc. devoured by foreign buyers, with this country emerging as a branch office plant inside a giant multinational. He laments that Canada in the resource sector has far too often been the seller and not the acquirer.
“The sad part is that we are a mining country, but we are not controlling our major mines,” he said.
The Anglo purchase of Teck still needs approval from regulators in Europe, Japan, South Korea, the United States, Chile and China around antitrust concerns.
Editor’s note: This article has been updated to correct the names of Alcan Inc. and Teck’s Highland Valley Copper mine.