Global Courant 2023-04-28 11:54:42
Main image: the deep dive
Teck Resources has canceled the vote to spin off its coal assets just hours before its shareholder meeting, potentially boosting Glencore’s bid to acquire the company. Teck and Glencore both lobbied for the decision for three weeks. Teck rejected Glencore’s $23 billion takeover offer earlier this month, preferring to focus on copper and zinc mining. Glencore plans to buy Teck and merge their metals and coal businesses into two new companies. The takeover battle has wider implications for the global mining industry as it marks the public return of the world’s largest producers to large-scale M&A after years on the sidelines.
The canceled vote is a significant setback for Teck, but any acquisition still requires the approval of controlling shareholder Norman Keevil, who effectively vetoes Teck through his “super-voting” A-class stock. Focus now shifts to Glencore, which has left the prospect of a higher bid dangling, and whether Teck’s own investors will put pressure on the company to begin negotiations.
Teck has stated that it will continue to pursue the split of the company and that its position on Glencore’s offer has not changed. It will take shareholder feedback into account before presenting a new proposal. The vote degenerated into a battle over Teck’s future, with Glencore claiming that if the spin-off was approved, its proposal would be dead as it tried to persuade shareholders to vote “no” and put pressure on the company to participate.
Glencore plans to acquire Teck and merge their metals and coal businesses into two new companies. The deal would give Glencore control of Teck’s profitable copper mines at a time when the world is worried about a shortage, while also allowing Glencore to exit the profitable but polluting coal business. Teck had proposed creating a new steelmaking coal company called Elk Valley Resources, which would pay royalties to the remaining metals business over several years. The ongoing relationship between the two companies would have hampered its appeal with investors who no longer wanted to be exposed to coal. Glencore, on the other hand, had offered to pay cash to Teck investors to buy them out of the companies’ combined coal business.
According to Nick Giles, an analyst at Lucas Pipes, the canceled vote “opens up several new possibilities, such as an enhanced proposal from Glencore, a separate sale process for the coal assets, or an immediate spin-off from the coal business.”
Teck, which Glencore has repeatedly rejected, had previously stated it would be willing to discuss takeover bids for its post-spinoff metals business, and had even hinted at a bidding war. However, the board’s position was weakened when two powerful shareholder advisory firms, Glass Lewis and Institutional Shareholder Services, both recommended voting against the Teck plan.
The shareholder meeting in Vancouver went ahead as planned, with Teck’s CEO holding a conference call beforehand to discuss first-quarter results. The resolution on the split required two-thirds approval from both classes of shareholders separately — the A-Class “super voting” stock dominated by Teck’s founding Keevil family, as well as B-class common stock. While several smaller investors have spoken in favor or against Teck’s plan, the company’s largest shareholders have remained silent. China Investment Corp., China’s sovereign wealth fund, owns about 10%, followed by BlackRock Inc. and Dodge & Cox.
“Teck’s belated withdrawal of its separation plan from today’s AGM appears to reflect shareholder concerns that the plan is too complicated,” Bloomberg Intelligence analysts said. “Glencore will see this climb as an opportunity to reinstate its merger proposal, which needs to be improved to gain broad shareholder support.”
