INSTANT VIEW - Teck and Anglo forge a $53 billion mining giant to bet on the surging demand for copper

Anglo American, a London-listed company, and Teck Resources, a Canadian firm, will merge for $53 billion, both companies announced on Tuesday. This is the largest mining deal in over a decade.

Anglo Teck will have its headquarters in Canada and a primary listing on the London Stock Exchange, according to the companies.

S&P Global Analysts

The merger will change the game for Anglo American. We believe that the merger of these two companies will result in the creation of a major copper-producing company, comparable to Escondida, and superior to Antofagasta. The combined company would also have some iron ore, zinc, and premium iron ore diversification.

Anglo Teck would have a greater incentive to unlock synergies if it could do so in Chile. Collahuasi's proximity to Quebrada Blanca and their complementary nature creates a synergy that is unmatched.

We assume, given the close proximity of the mines that the companies could optimize their operations by clubbing together their processing infrastructure and cutting costs for water, electricity, and transportation, resulting in a possible 175 kilo-ton increase in production, as well as $1.4 billion additional annual EBITDA.

JEFFERIES ANALYSTS CHRISTOPHER LAFEMINA and PATRICIA HOVE

This is a well constructed merger that has a compelling economic and strategy rationale. It should be favourable for the shares of both companies. The regulatory risk is manageable but there may be interlopers.

CRAIG HUTCHISON & ERNAD SIMJERCIC, TD COWEN ANALYSTS

"Given that the transaction is a merge of equals we believe some investors will be disappointed by the lack of premium. We wouldn't rule out an interloper. It is true that breaking an agreement with Canada, which offers significant protection, would be difficult.

RUSS MOOD, INVESTMENT DIRECTOR FOR AJ BELL ON ANGLO AMERICAN

"Anglo American is no longer a prey, but a predator. If the deal is completed, Anglo will not only have pulled itself out from a hole but also sent a strong message to its mining peers.

The combination with Teck gives Anglo greater scale for copper, which is in high demand due to its role as a key commodity in the transition to cleaner energy.

The deal is good for the UK stock exchange as the Anglo Teck group, once enlarged, will list its shares in London. Anglo believes that the UK is a good listing venue, and this sends a message of confidence to other companies undergoing M&A."

J.P.MORGAN'S ANALYST, DOMINIC O'KANE

"Nil-premium merger of equals" is a strategic advantage for Anglo...we anticipate that iron ore will be eventually divested or separated to create a pure copper play if the merger is completed.

This combination will enhance the appeal of the pro forma entity as a result of the consolidation of Collahuasi and Quebrada into a world class copper project.

This transaction will also eliminate the dual share classes of Teck, as well as the veto power held by its Class B shares.

(source: Reuters)