Teck Resources Plans Coal Spinoff, Potentially Making It Attractive M&A Target

Teck Resources Limited TECK has confirmed that it is evaluating alternatives for its steelmaking coal business, including the possible spin-out of interest in that business to its shareholders.
No decision has been reached to proceed with a transaction, and there can be no assurances that any transaction will eventuate.
According to a Bloomberg report, Teck Resources has been weighing options for its coal division since September 2021 in a strategic shift toward mining more metals crucial to the global energy transition. The business could be worth about $8 billion.
Metallurgical coal, used in steelmaking, is facing significant pressure from policymakers.
According to its filings, the company produced more than 24 million metric tons in 2021 from four different operations in western Canada. The business accounted for 55% of the company’s gross profit.
A coal spinoff would leave Teck with a suite of copper and zinc mines across the Americas.
The report also adds that separating the coal business would likely make Teck an attractive target for large mining companies such as BHP Group Ltd BHP and Rio Tinto plc RIO.
“The question going forward is whether additional value can be surfaced by splitting the company, at the expense of the diversification and scale benefits,” RBC Capital Markets analyst Sam Crittenden said in a note.
“We don’t see an obvious buyer for the met coal business so this would largely be a standalone met coal business.”
Price Action: TECK shares are up 6.95% at $44.94 on the last check Thursday.

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