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M&A insights: Teck Resources split, Amazon faces EU regulators over iRobot

Updated: Mar 7

1. Teck Resources splitting the company in two.

Last Tuesday, Teck Resources, a major Canadian mining group and one of the largest exporters of metallurgical coal, announced its plan to split up its business and create a new company called Elk Valley Resources, which will focus on its coal business with an enterprise value (EV) of $11.5bn. Since the announcement, Teck’s share price has increased by 7.8% to C$60.62, the highest intraday price in 12 years. The company’s decision to shift its focus towards metals is due to the crucial role they play in the global energy transition. Metallurgical coal, which is used in steelmaking industries, is under increasing pressure from policymakers due to its detrimental effects on the environment. Therefore, major miners like Teck are looking to exit fossil fuels by simplifying their dual-class share structure. This move could make Teck an attractive target for large mining companies, according to Citi analysts.

2. A Chinese tech dealmaker goes missing.

The founder of China Renaissance, Bao Fan, has reportedly gone missing, prompting concerns about a crackdown on China’s top investment bank. News of his rumored disappearance caused the company to issue a statement via the Hong Kong stock exchange, which led to a 50% drop in shares at one point, hitting an all-time low of HK$5 before rebounding to a 30% decline. No doubt this incident is a reminiscent of previous instances of disappearance and investigation, such as Jack Ma, the founder of Alibaba, who went missing for 3 months in 2020 after criticising China’s regulators. While the cause of Bao Fan’s disappearance remains unknown, there is increased awareness of the “key man risk” for foreign investors in Chinese equities due to regulatory and governance risk, particularly following the detention of the former president of China Renaissance, Cong Lin, in September.

3. Amazon in talks with EU regulators over iRobot’s acquisition.

After years of light-touch regulation of big tech acquisition, Amazon is reportedly in discussions with EU antitrust regulators over its proposed $1.7bn acquisition of iRobot, the maker of Roomba robot vacuum cleaners. The move comes as EU regulators are increasingly scrutinizing big tech acquisition, and are expected to launch a formal probe into the deal. Several issues are raised, particularly regarding Amazon’s increasing monopoly power in the home electronics industry, alongside privacy implications as iRobot’s Roomba vacuum cleaners are equipped with cameras that have the ability to take pictures. Amazon has denied the concerns raised. However, if these issues are not adequately addressed, regulators may proceed with a more extensive “phase 2” investigation, which would involve a more detailed analysis of the potential impact on competition and consumer privacy.

4. Fund manager calling for halt in Airbus deal.

Hedge fund manager Chris Hohn has called for Airbus to abandon its bid for a 29.9% stake in French IT consulting firm Atos. The strategic rationale is to strengthen its digital space in the aerospace industry by expanding Atos’ digitalisation and cyber security. However, Hohn believes Atos’ high debt levels and ongoing losses make this transaction political, as estimated by S&P global, Atos is expected to loss an average of €385mn annually through 2025. Hohn also noted that Airbus’ supply chain problems, which contributed to a low number of deliveries in January with only 20 aircraft deliveries, could distract management from focusing on the Atos acquisition. An analyst from Jefferies suggested that the cyber security aspect of the deal may be of lower quality.

5. BP acquires TravelCenters of America in $1.3bn deal.

BP, one of the world’s largest energy companies, has recently reached an agreement to acquire TravelCenters of America (TA), a leading operator of travel centers in the US, for a staggering $1.3 billion in cash, equivalent to $86 per share. This will enable BP to expand its existing off-highway convenience and mobility business by integrating TA’s well-positioned network of highway sites. BP’s global convenience gross margin is expected to double. In addition, bp’s commitment to invest $1bn in EV charging infrastructure by 2030 is a clear indication of the company’s strategy for the future of transportation. The acquisition has the potential to provide a seamless experience for travelers. TA is currently working on amending its lease agreements with Service Properties Trust for long-term real estate access.

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