Teck Resources Ltd. TECK-B-T chief executive officer Jonathan Price played down any notion of its metals business being quickly acquired by a big foreign multinational after a planned split of the company, as the Canadian miner rejected Glencore PLC’s GLNCY latest hostile takeover offer.
Vancouver-based Teck said earlier this year that it plans to separate into Elk Valley Resources, containing its metallurgical coal assets, and Teck Metals, holding its copper and zinc mines.
“There will be opportunities to create value in the short term, medium term and long term with respect to Teck Metals, and much of that value can be created through the development of projects that we have in our copper growth pipeline,” Mr. Price said in an interview with The Globe and Mail.
When asked if he was ruling out an acquisition of the company during that time frame, he said the board will continue to consider proposals that are in the best interests of shareholders.
However, almost unique amongst Canadian companies, Mr. Price and Teck’s board are not in control of the company’s destiny. Teck’s controlling shareholder, Norman B. Keevil, who has a lock on the company’s super-voting A shares, which carry 100 votes apiece, has most of the power.
Last week, Mr. Keevil told The Globe that he was opposed to a foreign takeover of Teck by Switzerland-based Glencore, no matter the price, because “Canada is not for sale.”
Mr. Keevil, who is Teck’s chairman emeritus, reiterated in a release on Thursday that now is “not the time to explore a transaction,” with Glencore.
If Teck’s planned split occurs, Mr. Keevil will continue to hold A shares for six years, after which he will receive a significant premium for exchanging them for single-voting B shares. Only at that point, would the Teck Metals CEO and board be able to accept a takeover proposal without Mr. Keevil’s blessing.
Glencore last week proposed buying Teck in an all-stock deal worth US$21.3-billion at a 22-per-cent premium to Teck’s market value. Glencore later sweetened the offer by adding US$8-billion in cash in lieu of stock.
But Teck once again slammed Glencore’s proposal on Thursday as a “non-starter,” pointing out the overall value of the deal is unchanged, and once again raised myriad concerns over ESG, jurisdiction, and execution issues in any merger scenario.
“Glencore has made two opportunistic and unrealistic proposals that would transfer significant value to Glencore at the expense of Teck shareholders,” Sheila Murray, chair of Teck, said in a release, as she urged shareholders instead to vote for the company’s planned split.
But that transaction was dealt a significant blow on Thursday after influential proxy advisory firm Institutional Shareholder Services (ISS) advised Teck shareholders to vote against the proposal. Many institutional shareholders rely on proxy advisory firms for guidance in how to vote, and ISS is the market leader in its field.
“The uncertainties and structural issues associated with the proposal appear to make [Teck’s] separation a less compelling outcome compared to the company’s status quo or alternative structures which could be sought,” ISS said.
Investors have given the split a lukewarm reception, in part because the new coal unit is compelled to pay Teck Metals about 90 per cent of its cash flow for about a decade.
Teck shareholders will vote on the planned split on April 26, with two-thirds approval needed for success.
Paul Moore, chief investment officer with PM Capital in Australia, which holds approximately three million of Teck’s single-voting B shares, said he intends to vote against the split.
One of his main objections is that it isn’t a true separation, because the metals business and the coal business will be linked through the cash flow payments for such a long period of time.
“If this is such a great deal, why did the market not respond?” he said, referring to Teck’s B shares falling on the day the split was announced in February.
In contrast, he points out that Teck’s B shares rose by 19 per cent on the day Glencore unveiled its takeover proposal earlier this month.
Teck on Thursday said it will slightly reduce the financial burden on its coal unit if the planned split happens. A royalty payment from Elk Valley Resources to Teck Metals that previously had a minimum term of 5.5 years will fall in duration to three years.
As Teck faces potential headwinds in winning its shareholder vote, Glencore suffered an additional setback on Thursday when a British activist fund called for it to radically overhaul its proposed acquisition of Teck.
“Glencore is acting amateurishly, by proposing a poorly structured transaction, which has no chance of success,” Giuseppe Bivona, chief investment officer with London-based Bluebell Capital Partners, wrote in an e-mail to The Globe.
If Glencore were to acquire Teck, it plans to split itself into two companies, one holding its thermal coal alongside Teck’s metallurgical coal, and a metals unit with an oil trading division.
Mr. Bivona claims that because of thermal coal’s horrible environmental image, and the lack of any real synergies with Teck’s metallurgical coal, the combination makes little sense.
Bluebell is also against Glencore’s plans for it to appoint Glencore CEO Gary Nagle to run the combined non-coal metals and oil business.
“We don’t want any ‘Mr. Glasenberg mini-me’ to lead the combined ex-coal metal business,” he said, referring to Glencore’s previous long-time CEO and hard-nosed visionary Ivan Glasenberg, who left the company in 2021.
Bluebell owns shares in Glencore and Teck. Mr. Bivona would not disclose the value of its holdings to The Globe. The firm manages approximately US$300-million.