Ottawa still has the power to block the deal if it fails to clear a net economic benefit review.Chris Helgren/Reuters
Ottawa has cleared Anglo American PLC’s NGLOY proposed $20-billion acquisition of Canada’s Teck Resources Ltd. TECK-B-T on national security grounds, removing one more hurdle to the deal closing, a source familiar with the matter told The Globe and Mail.
Industry Minister Mélanie Joly reviews all proposed foreign acquisitions of Canadian critical minerals companies for national security concerns. If she finds there are legitimate concerns, she has the authority to block a deal.
The government’s initial security review period has elapsed without an extension, meaning that the deal has been cleared by default on national security grounds, the source told The Globe.
The Globe is not identifying the source because the person wasn’t authorized to speak publicly.
A spokesperson for Ms. Joly declined to comment.
Proxy adviser ISS supports Anglo American bid for Teck
London-based Anglo in early September announced an all-stock acquisition of Vancouver-based Teck.
On Sept 19, Anglo filed its deal paperwork with Ottawa for review. All initial national security reviews of proposed foreign acquisitions last for 45 days.
In cases in which Ottawa still has concerns after that period elapses, which was in early November for the Anglo-Teck deal, the government has to notify the acquirer to extend the probe. The source said Ottawa did not contact Anglo to extend the review.
Anglo declined to comment.
Even though the Teck deal has cleared the national security probe, Ottawa still has the power to block the transaction if it fails to clear a net economic benefit review. The time limit on when to decide on net benefit is fuzzier, and similar reviews in the past have stretched for six months or longer.
Ms. Joly recently told reporters that her decision on whether to approve or reject the Teck deal will be made “in the next months.” She has been clear that promises made by Anglo don’t go far enough. The British miner has committed to moving its global headquarters to Canada, but it said it won’t redomicile to this country or make the Toronto Stock Exchange the location of its primary stock listing.
Ottawa pushing Anglo American to redomicile to Canada as it considers Teck deal
Anglo has said that getting through all the red tape to get the deal over the line could take up to 18 months.
Shareholders at Teck will meet to vote on the deal next month. At least two-thirds of votes cast must be in favour for the transaction to proceed.
Two shareholder proxy firms, Glass, Lewis & Co. and Institutional Shareholder Services Inc., have endorsed the transaction.
“Shareholders are expected to benefit from increased liquidity and stronger financial position for the combined company, and the market reaction has been positive,” ISS wrote this week in its report.
While there has been little public pushback on the transaction from the Teck side, some concerns remain. Gordon Lawson, analyst with Paradigm Capital isn’t sure if Teck can get the support it needs.
“That’s a tough call,” he said. “I don’t know which way the vote will go.”
The inability, so far, for Anglo to sell its diamonds business is one worry, he added. That’s because few Teck investors want exposure to the commodity, given that the natural diamond market has plummeted in part because of the rise in demand for synthetic diamonds.
Apart from Canada, the transaction will be scrutinized by authorities in Europe, Japan, South Korea, the United States, Chile and China. Much of the focus will be the impact that the combination of Anglo and Teck will have on the global copper market. The combined company, to be called Anglo Teck, will control just under 5 per cent of the market for the metal.
The U.S. Geological Survey recently put copper on its list of critical minerals in the U.S., suggesting that the American scrutiny of the transaction could be more stringent that it previously would have been.
Mr. Lawson doesn’t expect the U.S. to have any major issues with the transaction because the sales agreements for copper produced at Teck and Anglo’s large mines are likely to remain the same after the deal closes, meaning there should be little change for the U.S. market.