China’s CIC fund to invest $1.5 billion in Canadian miner

China Investment Corporation (CIC), the state-owned Sovereign Wealth Fund has agreed to buy about 17.2 per cent equity in Canada's debt-laden mining giant Teck Resources Ltd. (Teck) for $1.5 billion, continuing the Country's investment and acquisition spree of world's natural resources during the economic downturn.

Under the deal, CIC will purchase through a wholly owned subsidiary 101.3 million Class B subordinate voting shares of Teck for $14.84 (C$17.21) per share which is approximately 17.5 per cent, representing 17.2 per cent equity and 6.7 per cent voting interests since Teck has a two class share structure.

Teck president and CEO Don Lindsay said: "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."

The deal is expected to close by 14 July, 2009 subject to customary approvals. On closing of the transaction, Teck's Class A shareholders would have a 61.8 per cent voting interest in Teck with Temagami Mining Co. Ltd. holding 28.5 per cent, a press release said.

CIC said that it is acquiring the Class B shares as a ''long-term passive financial investor'' and has agreed to hold the shares bought for at lease one year, further agreeing that it will not sell the purchased shares to a miner or a material customer of Teck. In the event of a takeover bid for Teck, CIC will be permitted to tender its shares.

A standstill provision also provides that CIC will not take certain actions, including acquiring additional securities of Teck.