Teck Resources Again Rebuffs Glencore’s $23 Billion Approach
Miner says commodity giant’s bid undervalues the company
Canadian miner Teck Resources Ltd. TECK +1.77% on Thursday rejected an updated roughly $23 billion merger offer from Glencore GLNCY 2.17% PLC, saying its own plan to split into two independent companies was in the best interest of its shareholders.
Earlier this month, Glencore detailed a bid to combine with Teck and create two separate companies for their merged metals and coal businesses. Teck rejected that all-share offer, saying it would expose its shareholders to Glencore’s large thermal coal business. Glencore this week tweaked its proposal, offering Teck shareholders the option to take cash instead of shares in the companies’ combined coal operations.
“Glencore has made two opportunistic and unrealistic proposals that would transfer significant value to Glencore at the expense of Teck shareholders,” Teck Chair Sheila Murray said.
In rebuffing Glencore’s updated offer, Teck said Thursday that a merger would limit its ability to possibly seek other buyers, would expose the company to regulatory risk from antitrust authorities and would take too long to complete. It also pointed to environmental, social and governance concerns.
“We believe there are some significant structural flaws that have been contained in the proposal that Glencore has made,” said Jonathan Price, Teck’s chief executive.
Glencore’s tweaked proposal didn’t change the value of the proposed deal, which represented a premium of about 20% on Teck’s closing share price on March 24, and which would be one of the largest mining tie-ups in several years.
London-listed, Switzerland-based Glencore has said a combination with Teck would create a leading player in cobalt and copper, crucial for the transition to less polluting forms of energy.
Teck instead favors its own, existing separation plans. In February, the company said it planned to split into two companies, with one focused on base metals and another on coal. Shareholders are set to vote on that plan on April 26. Mr. Price said Thursday that he expects there to be strong interest in the metals company after a potential separation.
“We think the separation opens up a spectrum of opportunities for those businesses to create value,” he said.
Teck urged Glencore to engage with the company once its planned separation had been completed, and if Glencore itself decides to spin out its thermal coal business, as well as separate its oil operations.
Teck also said Thursday it would tweak its existing separation plans in response to shareholders’ concerns about the length of time it would take to split off its coal and base metals’ units. It said its coal business, to be named Elk Valley Resources Ltd., would now pay royalties to the base-metals unit, to be named Teck Metals Corp., for at least three years, rather than the original proposal of at least 5½ years.
On Thursday, proxy advisory firm Institutional Shareholder Services, recommended that Teck shareholders vote against the miner’s separation plan, because the proposal was “a less compelling outcome” than the status quo.
The new plan allows for a shorter path to full separation, something shareholders said they preferred, Teck said. The company will also cap the coal unit’s annual capital spending at 1.3 billion Canadian dollars, equivalent to $970 million, giving shareholders more certainty about how much in royalties would flow to the metals unit.
Meantime, activist investor Bluebell Capital Partners Ltd. came out against its proposal for Teck—in a letter Wednesday to Glencore’s chair and chief executive—and urged the company to spin off its thermal coal business.
A spokesman for Glencore declined to comment.