Glencore’s move on Teck Resources is getting interesting with a cash component added to the previously all-share offer placing extra pressure on Teck to delay a key shareholder meeting on April 26.
Tuesday saw Swiss-based Glencore sweeten its bid for Teck by adding an $US8.2 billion cash component to the previously $US23 billion all paper offer. The total value of the bid hasn’t change and the share component has been adjusted to account for the cash.
Glencore said the revised proposal gives Teck’s shareholders the option to receive cash instead of exposure to the companies’ combined coal portfolio, plus 24% of the combined metals-focused business.
The revised deal is an attempt by Glencore to get Teck to delay its April 26 meeting where the Canadian miner’s shareholders will vote to split the company into two businesses – one based on its steelmaking coal, the other based on a copper dominated metals operation.
Glencore thinks a delay will give it more time to talk the Teck board into a deal, but the dominant shareholding Kevill family remains strongly opposed.
Judging by comments from Glencore CEO Gary Nagle, the new terms give Teck shareholders what they want. According to the Teck board on the other hand, it’s merely the old deal repackaged.
Nagle said Teck should review the sweetened deal and delay the April 26 meeting and vote.
Glencore’s trader’s original all-stock deal was to acquire Teck and then separate itself into two companies, with one unit holding assets in thermal and metallurgical coal, as well as oil, and the other containing its base-metals portfolio.
Glencore’s change came a day after Teck again urged shareholders to vote to greenlight the split in the company into its coal and metal parts after rejecting the approach from Glencore.
It’s quite clear Glencore knows if Teck shareholders hold the meeting and vote for the split on April 26 (as it seems they will), then it will have lost the chance of grabbing the Canadian company’s four copper mines in Canada and South America.
Teck says its board of directors continues to unanimously recommend shareholders approve the plan to spin off its steelmaking coal business to shareholders, creating two independent companies, Teck Metals Corp. and Elk Valley Resources Ltd.
Glencore said on Tuesday its refreshed offer would effectively buy Teck’s shareholders out of their coal exposure. It acknowledged that certain investors may prefer a full coal exit while others may just want to cut their thermal coal exposure.
The April 26 meeting and vote would also see the introduction of a six-year sunset (end) for the multiple voting rights attached to the class A common shares in the company.
That means the Kevill family will continue to dominate Teck’s most attractive business, the metal mining operations which is what Glencore really wants.
Teck’s four copper mines in South America and Canada produced a combined 270,000 tonnes of the metal last year.
Teck has also said it 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.
