Teck Cominco to Get New Name, New Business Units (TCK, FDG, BHP, BTU)

By Douglas A. McIntyre Published Oct 3, 10:48AM EDT

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Canadian miner Teck Cominco (NYSE:TCK) is changing its name to Teck Resources, and the company intends to build its brand just on the name Teck. The new name takes effect legally in April 2009. In addition, Teck is restructuring its business into five separate units: copper, zinc, coal, gold, and energy.

Last July, Teck agreed to acquire Fording Canadian Coal Trust (NYSE:FDG) for an estimated $13-$14 billion, of which Teck is borrowing $9.8 billion. The most significant piece of the deal is Fording’s 60% interest in the Elk Valley metallurgical coal operation, the world’s second largest producer of hard coking coal for export. Teck already owned a 40% interest in Elk Valley and was the mine operator. The Canadian government approved the deal earlier this week, and the takeover is set to take effect on October 29th.

Coking coal is used to manufacture steel, and its price has risensignificantly in the past year. Fording exports its coal primarily toAsian and European markets, and Teck expects the acquisition to add toits bottom line immediately. It had better.

Teck’s share price is within pennies of its 52-week low, down more than50% from a year ago. Competitors BHP Billiton (NYSE:BHP) and Peabody(NYSE:BTU) are also down, but by significantly less. Fording’s shareprice has been up about 100% in the past year, so if Teck can executeto its plan it should see its share price begin to turn back upward.

A couple of analysts were not impressed. BMO Capital Marketscut Teck’s rating to ‘underperform’ and set a price target ofC$30/share, 50% lower than its earlier target. The high cost ofoperations in Teck’s Fort Hills oil sands project is also weighing onthe share price.

Taking on nearly $10 billion in new debt and issuing new shares to payfor a huge acquisition is not a recipe for warm feelings from analystsand traders. And while Teck’s timing could have been better, this couldbe a really good deal for the company if it can bring up the rest of its operations to match the expected results from Fording.

Paul Ausick
October 3, 2008

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.