Teck Resources Ltd., the largest Canadian diversified mining company, agreed to buy SilverBirch Energy Corp. for about C$435 million ($425 million) to acquire the rest of the Frontier oil-sands project that it doesn’t already own.
SilverBirch investors will get C$8.50 and one share of a new company, SilverWillow Energy Corp., for each of their shares, Vancouver-based Teck said today in a statement. SilverWillow will hold most of Calgary-based SilverBirch’s assets except for its 50 percent stake in Frontier and the Equinox oil-sands project in northeastern Alberta.
“The Frontier ownership structure is simplified, our exposure to oil sands leases not amenable to mining is reduced, and Teck now has the opportunity to explore new potential partnerships and other alternatives to move Frontier towards development,” Teck Chief Executive Officer Don Lindsay said in the statement.
Teck is investing in oil sands to diversify its business, which is currently reliant on coal, copper and zinc. The company is the world’s second-largest producer of metallurgical coal that’s exported by sea and coal accounted for 51 percent of its sales in the third quarter of 2011, according to data compiled by Bloomberg.
The Frontier oil-sands project is expected to begin production in late 2021, according to Teck’s website.
SilverBirch rose 33 percent to C$9.61 at the close in Toronto. Teck fell 1.8 percent to C$37.65.
The cash portion of the bid is 32 percent more than the 20-day volume-weighted average price of SilverBirch’s shares, according to data compiled by Bloomberg. The average premium paid in pending and completed takeovers of Canadian oil exploration and production companies announced in the past 12 months and worth $100 million or more is 31 percent, according to Bloomberg data.
The SilverBirch deal comes six days after Cretaceous Oilsands Holdings Ltd., a unit of PetroChina Co., said it will acquire the 40 percent of the MacKay River oil-sands project that it doesn’t already own from Athabasca Oil Sands Corp. for $673 million.
China’s Cnooc Ltd. in November completed its acquisition of Canadian oilsands producer Opti Canada Inc. for $34 million in cash and the taking on of $2.4 billion in debt.
Teck said it will contribute to SilverWillow C$25 million in working capital and Teck’s 50 percent interest in several oil-sands leases that are currently jointly owned with SilverBirch.
RBC Dominion Securities and TD Securities are SilverBirch’s financial advisers and Cassels & Graydon LLP and Torys LLP are its legal counsel. Stikeman Elliott LLP is Teck’s legal counsel.