Canada’s Teck Resources Ltd. rejected a proposal from Glencore Plc to buy the company for shares and then spin off their combined coal businesses, in the latest sign of dealmaking heating up across the mining industry.
(Bloomberg) — Canada’s Teck Resources Ltd. rejected a proposal from Glencore Plc to buy the company for shares and then spin off their combined coal businesses, in the latest sign of dealmaking heating up across the mining industry.
Glencore’s proposal on March 26 represented a 20% premium at the time, according to Teck, and would be worth about $23.2 billion at Friday’s closing prices, according to Bloomberg calculations.
Glencore’s approach comes as the world’s biggest miners shift back into dealmaking mode after years on the sidelines. It also shows how large producers of coal like Teck and Glencore are grappling with the future of those business — mining companies are seeking to focus more on metals like copper and nickel that will benefit from the clean-energy transition, and yet coal still remains a big profit driver.
Teck announced in February it plans to split its own business into coal and base metals companies, in a move that spurred speculation that it could become be a target for bigger miners looking to grow copper production.
For Glencore, a deal for Teck — which would be its biggest since buying Xstrata Plc — could offer a neat solution toward hiving off its thermal coal business, which has faced pressure from some of its investors. The two companies held “conceptual discussions” about a similar transaction in 2020, according to a letter published on Monday by Teck.
However, both the board and the controlling Keevil family were unambiguous in their stance on Monday: Teck is not up for sale.
“I unequivocally support the Board’s decision to reject Glencore’s unsolicited offer to acquire Teck,” Norman Keevil, who holds the role of chairman emeritus, said in a statement. “Now is not the time to explore a transaction of this nature.”
The proposal from Glencore envisaged creating a new publicly traded company comprising Glencore’s vast thermal coal and Teck’s coking coal mines, Teck said. The remaining company would include Glencore’s and Teck’s base metals operations as well as Glencore’s oil and other commodity trading business, other than coal trading and marketing.
“The board is not contemplating a sale of the company at this time,” Teck said in the statement. “The unsolicited proposal is an opportunistically timed attempt to transfer value to Glencore shareholders at the expense of Teck shareholders.”
A Glencore spokesman declined to comment.
Canada’s Keevil family, which has been involved with the firm for six decades, has long controlled Teck through majority ownership of Class A shares, which carry more voting control than the company’s Class B shares.
Teck said Glencore proposed offering 7.78 Glencore shares for each Teck Class B subordinate voting share and 12.73 Glencore shares for each Teck Class A common share, a 20% premium for both on the date of the offer.
Glencore, under new CEO Gary Nagle, has been working to simplify its business in recent years and had talked down the prospect of major deals. Yet in an interview last month, Nagle said there were some obvious combinations in the industry, including putting together copper mines owned by Teck and Glencore in Chile.
Teck owns four copper mines in South America and Canada that produced 270,000 tons last year. The company expects to double copper output after the second phase of its Quebrada Blanca project in Chile ramps up to full capacity by the end of this year. It also owns coking coal mines that it plans to spin into the new company, Elk Valley Resources.
Teck is being advised by bankers Barclays and Ardea Partners, while its special committee was being advised by BMO Capital Markets, Goldman Sachs and Origin Merchant Partners.
–With assistance from Mark Burton and Jack Farchy.
(Updates with Keevil family comments)
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