Canada says Anglo-Teck merger needs clearer benefits

[Reclaimer working on an iron ore site under blue sky]
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Canada’s industry minister signaled that Anglo American (OTCQX:AAUKF [https://seekingalpha.com/symbol/AAUKF]) (OTCQX:NGLOY [https://seekingalpha.com/symbol/NGLOY]) and Teck Resources (NYSE:TECK [https://seekingalpha.com/symbol/TECK]) (TECK.B) (TECK.A) must do more to prove their planned merger will deliver meaningful advantages for the country, Bloomberg News reported Tuesday.

Industry Minister Mélanie Joly told reporters in Ottawa that while preliminary discussions have taken place, the companies haven’t yet provided enough assurances that the combination will generate a “net benefit” for Canada. She plans to meet with both CEOs next week.

The proposed tie-up would create a mining giant valued around $50 billion, with the combined group’s headquarters set in Vancouver. Ottawa will evaluate both near-term and long-term impacts before deciding whether to approve the deal, assessing factors such as job creation, exports, technological investment, and Canada’s global competitiveness.

Under the Investment Canada Act, the government has the authority to block foreign transactions if they fail the so-called “net benefit test.” Joly stressed that any deal must deliver sustained employment and maintain a strong Canadian head office presence over the next decade, Bloomberg News reported.

Teck’s shares fell as much as 3.4% on Tuesday, the steepest intraday drop in nearly two weeks, after Joly’s remarks. The company did not immediately issue a comment.

Canadian officials have been cautious about merger promises in the past. In 2009, Ottawa sued U.S. Steel for not upholding commitments made after acquiring Stelco. The following year, then-industry minister Tony Clement rejected BHP’s (NYSE:BHP [https://seekingalpha.com/symbol/BHP]) (OTCPK:BHPLF [https://seekingalpha.com/symbol/BHPLF]) (OTCPK:BHPTY [https://seekingalpha.com/symbol/BHPTY]) bid for Potash (POT).

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