India’s JSW Steel Ltd is slowing down the process to buy a stake in the steelmaking coal unit of Canada’s Teck Resources, a source close to the discussions said, in the first sign that a diplomatic spat is affecting trade ties.
Ties between India and Canada deteriorated sharply after New Delhi and Ottawa expelled each other’s diplomats in a dispute over the murder of a Khalistani separatist leader in the Canadian province of British Columbia in June.
India on Thursday suspended visa services for Canadian citizens, a foreign ministry spokesperson said, citing security threats to its staff in its consulates in Canada.
The source said discussions between JSW Steel – India’s largest steelmaker by capacity – and Teck over the stake sale had slowed down, though work on the paperwork was going on.
“We will wait until the issue subsides,” the source told Reuters, declining to be identified as they were not authorised to talk to the press.
“We are not expecting things to go out of hand. We are doing the paperwork for the valuation, talking to banks and this is still happening,” the source added.
JSW Steel declined to comment.
“We do not comment on market rumours or speculation,” Teck Resources said in an emailed response to Reuters queries.
Canada’s industry ministry, which approves foreign investment deals, said that the acquisition of a Canadian company by a foreign company would be subject to a national security review under the Investment Canada Act.
A source close to the matter said that JSW is in talks with investment banks including Standard Chartered and Deutsche Bank to secure the funding for the transaction.
“The final numbers could revolve in the range of 34-37% stake,” the first source said.
JSW steel is one of the largest customers of Teck’s coal business.
The Vancouver-based company has twice rejected an unsolicited $22.5 billion bid for the entire company from global miner and trader Glencore. In July, the company said it had received offers from ‘various’ interested parties for its coal business.
Japan’s Nippon Steel has also said it remains interested in Teck’s coal business, having in February agreed to buy a 10% stake post-split.
For India, Canada is the fourth largest exporter of coking coal used in the steel business, according to Indian government data. The first three are Australia, Russia and USA.
