State-owned investor will hold 17% of equity after $1.7-billion deal

A state-owned Chinese investment company is taking a big stake in Teck Resources Ltd. (TCK.A-T) in a $1.7-billion deal that will help the Canadian miner slash its hefty debt.

The deal between Vancouver-based Teck and China Investment Corp. comes as Chinese companies have been scouring the globe for resource assets, most notably oil.

CIC is acquiring more than 101 million Class B Teck (TCK.B-T) shares at $17.21 each through a private placement, or about 17.5 per cent of that class of stock, Teck said Friday.

That would give the Chinese investment manager about 17.2 per cent of Teck's equity and a voting stake of 6.7 per cent.

Teck's current Class A shareholders would hold a 61.8-per-cent voting interest in the company.

“This transaction will have an immediate and very positive effect on Teck's balance sheet, and represents an attractive opportunity for Teck to establish a relationship with a major Chinese financial investor, with a deep understanding of China, the world's largest consumer of our principal products,” Teck chief executive officer Don Lindsay said in a statement.

China's cash-rich state-controlled companies have been on a acquisition spree. In the oil industry, the Chinese have become the most aggressive deal makers, taking advantage of low oil prices to help feed the country's energy needs.

Teck, in turn, has been moving to cut the $9.8-billion (U.S.) in debt it loaded up on to pay for the takeover of Fording Canadian Coal Trust last year.

It has made several inroads, trimming a $5.8-billion bridge loan that was to come due in October and arranging a series of asset sales at better-than-expected prices. The company also suspended its dividend and slashed 1,400 jobs.

Teck said CIC is acquiring the stock for investment purposes as a “long-term passive financial investor” and will hold the shares for at least a year following the anticipated closing in mid-July.

The Chinese company has also agreed that after that year, it won't sell the stock within the industry or to any large Teck customer.