Teck Resources Ltd. TECK-B-T has been approached by Vale Ltd., Anglo American PLC and Freeport-McMoRan Inc., FCX-N which are all interested in exploring transactions if a planned split of Canada’s biggest diversified mining company happens, according to two sources familiar with the discussions.
Vancouver-based Teck will hold a vote on April 26 that will ask shareholders to decide on its plans to split the company into Teck Metals, which will hold its critical minerals mines, and Elk Valley Resources (EVR), which will hold its metallurgical coal mines.
Teck received the approaches from the three giant international mining companies as it attempts to fight off a hostile US$23.1-billion takeover from Glencore PLC of Switzerland, which wants to buy Teck in its standalone format.
Teck is also fending off resistance from two proxy shareholders firms, Institutional Shareholder Services (ISS) and Glass Lewis & Co., which both advised Teck shareholders to vote against the planned split and engage more fully with Glencore.
One of the sources said that Teck had received expressions of interest from at least half a dozen major mining companies, which are interested in various transactions post-split.
The Globe and Mail is not identifying the sources because the discussions are private and they were not authorized to speak publicly.
Teck, Vale, Anglo American and Freeport all declined to comment.
Controlling Teck shareholder Norman B. Keevil on Friday told The Globe that he would be willing to sell Teck Metals to a large foreign mining company, if the board was in favour, saying he would not be “swimming against the tide.”
The Keevil family, which transformed Teck from a $25-million company to one worth $25-billion, has a stranglehold on Teck’s super voting A shares. Those shares carry 100 votes apiece, compared to the single voting B shares.
Mr. Keevil and Teck’s board so far have refused to entertain any approach from Glencore and have said its proposed acquisition would destroy shareholder value, expose Teck to significant execution risk, and harm its environmental, social and corporate governance standing.
Teck has also said that post-split, there will be far more value creation options available to shareholders than right now.
Glencore is seen as one of the few, and perhaps the only, major mining company that would be interested in buying Teck currently, because of Teck’s heavy coal exposure. But post-split, analysts have said that many mining companies will covet Teck Metals, in particular because of its growing copper portfolio.
Teck’s massive QB2 copper mine in Chile, which only went into production a few weeks ago, will be the cornerstone asset of Teck Metals. Copper, alongside lithium and cobalt, is a key metal used in cleaner energy sources such as electric car batteries, as the world transitions away from fossil fuels.
While Mr. Keevil said he would not like to see Teck Metals sold to a foreign buyer, if the board, management, and most of the B shareholders wanted it, he would not stand in their way, he told The Globe on Friday. Mr. Keevil also said that in 50 years, the Keevil family has never gone against the board’s wishes and exercised its veto power.
Mr. Keevil, 85, said the A shares were put in place as an extra set of eyes for the board over strategic decisions, and as a mechanism to give it pause before acting, comparing them to a governor mechanism in an engine.
Glencore chief executive Gary Nagle on Friday told The Globe he would persist in his attempt to get Mr. Keevil, management and the board to engage with him. So far, they have all given him the cold shoulder.
Several analysts expect Glencore to increase the value of its offer before the vote, in an attempt to gain more influence over B shareholders. Glencore last week tweaked its original bid worth US$23.1-billion by adding US$8-billion in cash in lieu of stock, but the value remained unchanged.
Christopher LaFemina, an analyst with Jefferies, wrote in a note to clients that Glencore has breathing room to increase the value of its bid by up to 10 per cent, but beyond that it could be problematic, as “earnings dilution then becomes a factor.”
What is clear is that Glencore only really has one kick at the can.
Mr. Nagle told The Globe on Friday that if Teck’s proposed split goes ahead, Glencore will not be interested in buying both EVR and Teck Metals afterward, owing to the structure that Teck has planned, which he says will turn EVR into a “zombie” company.
Post-split, EVR will pay about 90 per cent of its cash flow to Teck Metals for roughly 11 years, a structure that received a lukewarm reception among Teck investors, when it was announced in February.
Glencore wants to buy Teck and then do its own split, with one division owning its thermal coal with Teck’s metallurgical coal, and another containing the metals mines of both companies, along with Glencore’s energy trading assets.
Teck’s B shareholders gave Glencore’s proposal a warm reception initially, with the stock up 19 per cent earlier this month when it was unveiled.
At least two-thirds of votes cast by B shareholders must be in favour of Teck’s split for it to be approved.