Teck Resources to Sell Majority Stake in Its Metallurgical Coal Business to Glencore

No-moat-rated Teck Resources has agreed to sell 77% of Elk Valley Resources, or EVR, its metallurgical coal business in British Columbia, to no-moat Glencore. Japanese steelmaker Nippon Steel and Korean steelmaker Posco are to own the rest of EVR. The implied value for EVR (100% basis) of roughly USD 9 billion is modestly higher than Glencore offered earlier this year as an alternative to its initial proposal to purchase all of Teck. We think the sale price is reasonable for shareholders of both companies, with the deal expected to close in the third quarter of 2024. Teck intends to return some of the EVR proceeds to shareholders and maintain a strong balance sheet and its capacity to grow copper output, which seems sensible. Glencore will combine EVR with its existing coal business and, after paying down debt, intends to spin off the enlarged coal business to its shareholders.