Teck rides in

Teck Cominco (TEK-T) has emerged as a white night in Fording‘s (FDG-T) battle to fend off a hostile, $29-per-share bid by the Sherritt Coal Partnership II.

Teck Cominco is joining forces with Westshore Terminals Income Fund (WTE.u-T) in offering Fording shareholders either $34 or one new income trust unit (or a combination of each) for each Fording share tendered. Westshore operates North America’s busiest coal export terminal, in Delta, B.C.

If all of Fording’s shareholders go for the cash, each would be limited to $15.60 plus 0.541 of a unit per share. Fording’s previous, $3-per-share cash bonus has been axed.

The new offer trumps the Sherritt Coal Partnership’s $29-per-share bid. The partnership, an alliance of Sherritt International (S-T) and the Ontario Teachers’ Pension Plan, intends to merge Fording’s assets with those of Luscar Coal, which it (the partnership) took over last year, and create an income trust of its own. The offer expires Dec. 27.

All told, the new deal is valued at $795 million and would see 27.6 million trust units issued. Of the cash total, Teck Cominco will contribute $370 million, whereas Westshore will sink $170 million into trust units. The trust would finance the balance.

The deal would see Fording’s coal assets combined with Teck Cominco’s metallurgical coal assets, plus $200 million in cash, into the Fording Coal Partnership. Teck Cominco’s Bullmoose mine, which will soon close, is excluded from the deal.

In the end, Teck Cominco and Westshore would each own 13.3% of the trust units; Fording shareholders would have a 73.3% stake in the trust, which will own about 62% of the partnership. With a 38% holding of voting exchangeable units in the partnership, Teck Cominco would control, directly and indirectly, 46% of the trust.

The trio expects a cash distribution of about $1.05 per unit during the first quarter of 2003, and that is expected to climb by 25 once “synergies” of $50 million kick in.

If all goes according to plan, the new entity, with operations in Alberta and British Columbia, would produce more than 20 million tonnes of metallurgical coal, and bring in about $1.5 billion in revenue annually. Westshore would handle the coal under a long-term port services contract at normal commercial terms.

The plan requires the approval of regulators and of Fording shareholders. Details will be sent to Fording shareholders prior to a vote at a special shareholders meeting slated for Dec. 20.

Fording can still accept a more attractive offer, but that requires forking over a $51-million break-up fee to Teck Cominco and Westshore. The fee would also be applicable should shareholders vote down the deal.

Fording shares ended the Dec. 4 trading session a dime lower at $32.65 in Toronto, Teck Cominco’s B shares were off 3 at $11.13, and Westshore was a penny lighter at $4.70. For their part, Sherritt shares grabbed a penny to end at $4.25.