Teck spin-out talk hikes shares
The Canadian Press - Feb 16, 2023 - BC Biz

Photo: The Canadian Press

VANCOUVER — Teck Resources Ltd. is evaluating alternatives for its steelmaking coal business, including the possible spin-out of an interest in that business to its shareholders.

The Vancouver-based company said Thursday that no decision has been reached to proceed with a transaction, and it can’t make any assurances that any kind of deal will happen, but that such a deal could be beneficial.

“Any transaction would be expected to create value for Teck’s shareholders and support continued benefits for communities and Indigenous Peoples in the areas where Teck operates,” the company said in a news release.

Teck made the comments at the request of the Investment Industry Regulatory Organization of Canada and the New York Stock Exchange after Bloomberg reported that the company was planning to spin out the division.

Teck’s shares jumped almost 10% on the news before they were halted mid-morning, while they were trading up $3.45, or 6.13%, at $59.70 in early afternoon.

The news appeared to be a reversal from Teck’s previous stance in using cash flow from its coal division to boost its copper growth pipeline and shareholder returns, said National Bank analyst Shane Nagle in a note.

“For management to shift its line of thinking, the value proposition from such a transaction may be more immediately accretive than we previously envisioned.”

Structuring a spinoff of the company’s coal assets will be challenging, with a simple asset sale unlike given the sheer scale of the business, said Nagle.

Spinning out the coal business while holding onto a large equity stake would be less tax advantageous, while currently elevated coal prices means a fair valuation for both parties would be difficult to agree upon, he said.

Steelmaking coal prices averaged US$278 per tonne in the company’s fourth quarter, compared with US$164 per tonne for 2019.

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