British activist investment firm Bluebell Capital Partners is calling for the ouster of Glencore PLC chief executive Gary Nagle, accusing him of mismanaging the company’s pursuit of Teck Resources Ltd. and selling its stake in Canadian grain handler Viterra Ltd. at too low of a price.
Switzerland-based commodities trading and mining giant Glencore GLNCY in April proposed a US$22.5-billion acquisition of Teck TECK-B-T, but after its advances were spurned, the company entered into talks to buy only Teck’s coal assets, and not its large portfolio of metals mines.
Bluebell objects to Glencore taking on more coal assets. The mining and the burning of thermal coal from Glencore’s portfolio of 26 thermal coal mines in Australia, Colombia and South Africa are a major contributor to global warming. Bluebell also believes that Glencore should have pushed for a higher price for its Viterra stake, because the unit’s profitability has risen substantially in recent years. Earlier this month, Glencore said it had reached an agreement to sell its 49.9-per-cent stake in Viterra to Bunge Ltd. BG-N for US$4.1-billion.
“The proposed acquisition of Teck’s steel coal and the announced terms for the disposal of Viterra are value destructive for Glencore’s shareholders,” Giuseppe Bivona, Bluebell Capital Partners co-CIO, wrote in a release on Tuesday. “Mr. Nagle, obviously, has to go.”
London-based Bluebell owns shares in both Glencore and Teck. The Globe and Mail asked Bluebell to disclose the value of its holdings but did not receive a response.
Glencore declined to comment for this story.
Earlier this year, Teck suffered a crushing defeat after a restructuring plan it announced in February was abandoned at the 11th hour, after failing to garner enough support from shareholders. Under that proposal, Teck would have separated into two companies, one holding its metals mines and the other its coal assets. A large contingent of investors did not like the arrangement because the metals business would have received about 90 per cent of the cash flow from the coal business for about a decade, an arrangement that muddied Teck’s ESG credentials.
After the plan was aborted, Teck said it would seek a cleaner split of the company, but was steadfast that it would not engage with Glencore on its offer to buy the entire company.
Bluebell believes there is merit in Glencore pursuing an acquisition of the whole of Teck, because the addition of its copper and zinc mines would likely improve its environmental, social and corporate governance (ESG) rating. But buying only Teck’s metallurgical coal assets, Bluebell believes, would run contrary to a commitment in 2020 by Glencore to wind down its coal footprint over time. At this year’s annual meeting, shareholder dissent to Glencore’s climate strategy had risen to 30.25 per cent from 5.6 per cent in 2021, a dynamic Bluebell attributes to Mr. Nagle’s mixed messaging around coal.
“Mr. Nagle succeeded in the remarkable achievement to have shareholders’ dissent on coal strategy increase by a factor of 5.4x over the last two years,” Mr. Bivona wrote in a letter to Glencore chairman Kalidas Madhavpeddi on June 23.
While a significant number of shareholders have concerns about Glencore’s climate strategy, they appear to have no issue with Mr. Nagle as CEO. He received overwhelming support at the annual meeting, with 99.43-per-cent approval at the meeting.
Glencore is one of several bidders for Teck’s coal business. Glencore has offered to buy the unit for as much as US$8.2-billion. The Canadian miner is also fielding offers from a consortium led by Canadian mining veteran Pierre Lassonde and Japan’s Nippon Steel.
“Nippon Steel is continuing to engage with Teck regarding the steelmaking coal assets,” Kiichi Yamada, spokesperson with Nippon, wrote in an e-mail to The Globe last week.
Niall McGee