Teck aims to diversify with $14.1 billion Fording deal

Tue Jul 29, 2008 5:28pm EDT
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By Cameron French

TORONTO (Reuters) - Teck Cominco will buy Fording Canadian Coal Trust for $14.1 billion in cash and stock in a deal that will make it the world's No. 2 exporter of coal used in steel making, Teck said on Tuesday.

The deal will allow Teck to take advantage of metallurgical coal prices that have nearly tripled in the past year as demand has surged, particularly in Asian countries.

It also helps Teck fulfill its goal of increasing its exposure to non-exchange-traded commodities -- where it has more control of pricing -- and away from metals such as zinc, the price of which has dropped sharply since 2006.

Under the deal, Fording unitholders will receive $82.00 in cash and 0.245 of a Teck share per unit, an 11 percent premium on the New York-listed units as of Monday's close.

The friendly deal will see Vancouver, British Columbia-based Teck gain full ownership of the Elk Valley Coal Partnership, which is 60 percent owned by Fording. Teck already owns about 20 percent of Fording, and also the remaining 40 percent of Elk Valley.

"There's no integration risk here; we already manage the asset. We didn't have to do due diligence, we know them," Teck Cominco Chief Executive Don Lindsay said in an interview.

Fording units jumped $6.51, or 7.9 percent, to close $89.00 on the New York Stock Exchange, ending shy of the offer price of $92.24 a unit, based on Teck's closing price of $41.79.

In Toronto, Fording units jumped C$6.55, or 7.8 percent, to C$90.35, while Teck rose C$2.44, or 6 percent, at C$42.85.   Continued...

<p>The Teck Cominco smelter plant sits overlooking the small city of Trail in southern British Columbia July 6, 2006. REUTERS/Andy Clark</p>