Glencore Buys Majority Stake in Teck Resources' Coal Unit for $6.93 Bln
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Canadian miner Teck Resources (+0.5% in New York) said it is selling its coal assets to a group led by mining and trading giant Glencore (+4.5% in London) in a deal that would cap a lengthy saga and be one of the biggest in mining this year. The transaction would value the business at around $9 billion. Under the terms of the deal, Switzerland-based Glencore will pay $6.93 billion for a 77% stake. Japan-based steelmaker Nippon will hold a 20% stake after converting existing holdings in some of Teck’s coal operations and paying cash, while South Korean steelmaker Posco will hold a 3% position after converting its holdings. The Wall Street Journal previously reported a deal with Glencore was near. Shares in Glencore rose 3% in London on Tuesday. The deal value reflects a robust market for so-called metallurgical coal, the kind used in steelmaking. Teck has spent much of the year figuring out a future for its coal business. In February, it unveiled plans to split into two independent companies, with one focused on base metals and the other on coal. Then, Glencore proposed a full-blown, roughly $23 billion merger between the companies. Under that plan, it proposed forming two separate companies for Glencore and Teck’s merged metals and coal businesses, and then later spinning off the combined coal business. Teck in April rebuffed Glencore’s initial advance and a subsequent revised offer that included a cash component investors could take instead of shares in a combined coal operation. Glencore earlier this year valued that business at $8.2 billion. On Tuesday, it reiterated plans to spin off a combined coal company once Glencore sufficiently reduces its debt, which it expects to do up to two years after the transaction closes. The spinoff plan requires a shareholder vote.
On Tuesday, US inflation data drove prices on the Swiss stock exchange. The SMI gained 1.2 per cent to 10,716 points. Among the 20 SMI stocks, there were 17 price gainers and 3 price losers. A total of 24.36 (previously: 19.07) million shares were traded. The market was led by Richemont, which recovered by 5.5 per cent after recent marked losses. Sonova (+4.6%), Geberit (+4.2%) and Lonza (+4%) were also among the strong performers. Financial stocks were unable to keep pace, as banks and insurance companies generally benefit from higher interest rates. UBS showed some resilience with a gain of 1 per cent after being under pressure recently. Zurich Insurance added 0.2 per cent and Swiss Re lost 0.1 per cent. Partners Group, on the other hand, climbed 3.4 per cent. Partners is acquiring a majority stake in the Swiss Rosen Group, an inspection service provider in the energy infrastructure sector. The defensive heavyweights Roche (+0.4%), Novartis (-0.1%) and Nestle (+0.5%) underperformed.
The European stock markets rose sharply on Tuesday following the announcement of a further slowdown of inflation last month in the United States. The Stoxx Europe 600 index closed up 1.3% at 452.6 points. In Paris, the CAC 40 and SBF 120 gained 1.4% and 1.5% respectively. Frankfurt's DAX 40 gained 1.8%, while London's FTSE 100 gained 0.2%. The operator of retirement homes and clinics Clariane (-12.4%), formerly known as Korian, presented a plan on Tuesday to strengthen its financial structure, including a proposed capital increase of €300 million and further asset disposals worth €1 billion. Eramet jumped 8.4% to €73.05. Oddo BHF raised its target price from €85 to €89, judging the targets presented by the mining group on Monday to be "ambitious" and "fairly credible". Airbus (+1.1%) received an order for ten A350-900s from Egypt's national airline Egyptair on Tuesday. Aircraft equipment supplier Safran (+1.3%) announced a series of contracts with Emirates worth an estimated total of $1.2 billion. The pharmaceutical group Ipsen (-0.4%) and its partner Genfit presented full results from a phase 3 trial confirming the potential of elafibranor in patients with primary biliary cholangitis (PBC), a rare liver disease.
An autumn stock-market rally accelerated Tuesday after fresh data showed that inflation cooled more than expected, powering big gains across stocks and government bonds. Consumer prices were unchanged in October from the previous month and up 3.2% from a year ago, less than what economists had forecast. The figures helped reassure investors that the Federal Reserve is likely done raising rates and put a soft landing for the U.S. economy in view. House lawmakers approved a Republican plan Tuesday that would continue funding federal agencies until early next year, a critical step in averting a partial government shutdown, with House Speaker Mike Johnson (R., La.) relying heavily on Democratic votes to get his bill across the finish line. The S&P 500 jumped 1.9%, bringing its November gains to 7.2%. The tech-heavy Nasdaq Composite added 2.4%, pushing its advance this month to almost 10%. A jump in shares of Home Depot and Goldman Sachs helped send the Dow Jones Industrial Average up 490 points, or 1.4%, Tuesday, and 5.4% for the month. The S&P 500 and Nasdaq recorded their biggest one-day jumps since April. Shares of technology companies, which have been roiled by the prospect of higher interest rates, notched gains. Nvidia, one of the hottest trades this year, clinched a 10-session win streak that was the best since 2016. The stock jumped 2.1%, touching a record. Shares of other companies that are especially sensitive to interest rates sprung higher. Home builder PulteGroup jumped 7.1%. Regional bank shares, which were hammered by the rapid rise in rates earlier this year, rocketed higher. Goldman Sachs shares rose 3.6%.
In Asia, major indexes broadly closed with gains on Wednesday. Hong Kong, Seoul and Tokyo all rose by over 2 per cent, with the Japanese Nikkei-225 climbing to 33,478 points. Shanghai lags slightly behind with a gain of just 0.5 per cent. Among the individual stocks, Nippon Paint Holdings rose by over 8 per cent in Tokyo after raising its profit forecast. Mitsubishi UFJ dropped by 2.2 per cent following the presentation of its quarterly figures, with financial stocks generally lagging behind in the face of falling market interest rates. Sumitomo Mitsui Financial was up 0.3 per cent after the presentation of its figures, while the share price of the advertising agency Dentsu slumped by 10 per cent.
U.S. government debt yields plunged on Tuesday, handing 2- and 10-year rates their biggest one-day declines since March, after October’s U.S. consumer price inflation report came in below expectations. The 10-year Treasury yield plunged by 19 basis points to 4.446%, as investors reassessed their estimates for the path of Federal Reserve (Fed) rates. The 2-year Treasury yield fell by 21 basis points to 4.834%.
Target price Adecco: Goldman Sachs upgrades to CHF 41.50 (36.50) - Neutral
Target price AMS Osram: Bernstein lowers to CHF 4 (7) - Market Perform
Price target UBS: Goldman Sachs cuts to 33.60 (33.70) CHF - Buy