In news that was somewhat anticipated, Vancouver-based Teck Resources (TSX: TCK.B) announced today a $1.74-billion private placement by state-owned China Investment Corp. The Chinese investor will purchase, through a wholly owned subsidiary, 101.3 billion Class B subordinate voting shares for $17.21 a share. At the time of this writing, Teck was trading at $19.92, up almost 8% from Thursdays close.
This transaction will have an immediate and very positive effect on Tecks balance sheet, and represents an attractive opportunity for Teck to establish a relationship with a major Chinese financial investor, with a deep understanding of China, the worlds largest consumer of our principal products, said Don Lindsay, Teck president and CEO, in a statement.
The deal translates to China Investment taking a 17.2% economic interest and 6.7% voting interest in Teck. However, it will be a passive investment. China Investment will not have board representation and it has a minimum hold commitment of 12 months.
In a presentation, Teck gave its rationale for the deal, which included allowing it to immediately pay off its bridge loan, reduce its term debt and expedite its return to investment grade.
The deal is expected to close July 14, 2009.
Last month, Canadian Business ran a story about Tecks path to recovery. Teck Resources: Back from the brinkfeatured an exclusive interview with Lindsay.