Teck, Westshore in Fording deal

Teck Cominco (TEK-T) has emerged as a white knight in Fording‘s (FDG-T) battle to fend off a hostile 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. Teck and Westshore (which operates North America’s busiest coal export terminal, in Delta, B.C.) would each own 13.3% of the trust units, while Fording shareholders would have 73.3%.

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 has axed a previous $3-per-share cash bonus.

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

The new Fording Coal Partnership, owned 62% by the Fording trust and 38% by Teck, would have Fording’s coal assets and Teck’s Elkview mine. Teck’s Bullmoose mine, soon to close, is excluded.

The new deal is valued at $795 million and would see 27.6 million trust units issued. Of the cash total, Teck and Westshore will contribute $170 million each into trust units. Teck also puts $200 million directly into the partnership.

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.

The new partnership would produce more than 20 million tonnes of metallurgical coal, for 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. A special shareholders meeting is 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 and Westshore. The fee would also be applicable should shareholders vote down the deal.