Zinc miner Teck Cominco to acquire world's second largest coal producer for $14.1 billion

30 July 2008

The world's second-largest zinc miner, Teck Cominco Ltd., will acquire the world's second-largest seller of seaborne metallurgical coal, Fording Canadian Coal Trust in a cash and stock deal valued at approximately $14.1 billion.

The acquisition will propel Teck to North America's largest exporter of metallurgical coal used for steelmaking.

Under the agreement, Fording Canadian investors will receive $82 in cash and 0.245 of a class B Teck share for each unit they hold, valuing the offer at about 12 per cent to Fording Canadian's closing price on Monday and an 18 per cent premium to the 20-day period (ending 25 July) volume weighted average price of Fording units on the NYSE.

In return, Teck Cominco would receive the 80.1 per cent of Fording it doesn't already own and the open-ended mutual fund's stake in their Elk Valley Coal, the world's second largest exporter of metallurgical coal, in which Fording Canadian owns 60 per cent of  the stake with Teck owning the remainder. 

Teck Cominco has entered into a debt commitment letter with a syndicate of banks to borrow $9.8 billion to finance the cash component of the transaction, which is subject to the availability to Teck Cominco of such financing at closing.

Teck Cominco also intends to sell its 29.5 million Fording units subsequent to the Fording unitholder meeting and utilise the net proceeds to fund a portion of the transaction.