Anglo, Teck Need to Prove More Merger Benefits to Canada, Minister Says

(Bloomberg) -- Anglo American Plc and Teck Resources Ltd. haven’t done enough yet to show the advantages of their merger to the Canadian economy, said the country’s industry minister, who plans to meet with the companies’ chief executive officers next week. 

“There have been conversations with the companies, and clearly we wanted to make sure that there would be a net benefit to Canada. But I think right now that it’s not enough,” Melanie Joly told reporters Tuesday morning in Ottawa.

The government will judge both the short-term and long-term benefits of the deal, which would create a miner worth some $50 billion at current market values. Anglo and Teck have promised the headquarters of the company would be in Vancouver. 

The government has the ability to block the proposed transaction under the rules of the Investment Canada Act, ICA. The so-called “net benefit test” allows the minister to judge any deal based on a number of factors, including the impact on jobs, exports, technological development and “Canada’s ability to compete in world markets.” 

Shares of Vancouver-based Teck fell as much as 3.3%, the biggest intraday decline since Sept. 4. 

“This merger of equals will create a Canadian-based global critical minerals champion, with significant economic, social, and strategic benefits for Canada,” Teck said in an emailed statement. “We look forward to engaging with the government of Canada through the ICA process about this opportunity to strengthen Canada’s critical minerals sector.”

The merger must create jobs but also “have a strong headquarters, not only now, but also for the next decade,” Joly said.

Government officials in Canada have felt burned before by promises made by companies in order to secure approval for takeovers or mergers. In 2009, the government sued United States Steel Corp. for breaking pledges to keep jobs and production after it took over Stelco Inc.

The following year, then-Industry Minister Tony Clement rejected BHP Group’s proposed takeover of Potash Corp. of Saskatchewan.

--With assistance from Laura Dhillon Kane and James Attwood.

(Updates with comment from Teck in the sixth paragraph.)

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