The patriarch of the family that controls Teck Resources Ltd. TECK-B-T says he has no intention of allowing the sale of Canada’s biggest diversified miner to a much larger Swiss competitor because he says the company must remain in Canadian hands.
On Monday, Glencore GLNCY unveiled an unsolicited all-share takeover proposal for Teck worth US$23.1-billion, which was a 22-per-cent premium to the Vancouver-based mining company’s close on Friday.
Teck’s board said in a statement that it had no interest in being acquired, calling the offer “opportunistic,” not environmental, social and governance (ESG) friendly, and fraught with execution risk.
Glencore is unable to consummate the deal unless Norman B. Keevil, chairman emeritus of Teck, gives it his blessing because of the stranglehold he has on Teck’s Class A shares, which carry 100 votes per share.
While Mr. Keevil said in a media release early Monday that he was opposed to the takeover offer, Glencore said it hoped to bring him around over the next few weeks as it faces a deadline to get the deal done.
But in an interview with The Globe and Mail on Monday evening, Mr. Keevil made it clear that Glencore will not succeed in changing his mind, even if it increases its takeover offer significantly.
“We’re not about to be swallowed up by them,” he said.
“It’s not a matter of price, Canada is not for sale.”
Selling Teck, even with improved terms, “would still be a complete sellout to Glencore, and that’s not in the cards, " Mr. Keevil added.
A Glencore source, who did not want to be identified because he wasn’t authorized to speak publicly about the proposed deal, said that Glencore’s chief executive officer, Gary Nagle, intended to lobby all Teck shareholders in the coming weeks to try to persuade them to support Glencore’s pitch, including Japan’s Sumitomo Group, which also owns Class A shares.
But Mr. Keevil said that Sumitomo and the Keevil family are completely aligned in their thinking, and “not in a million years” would Sumitomo go behind his back and side with Glencore, he said.
The Keevil family has been front and centre at Teck for more than half a century. Mr. Keevil’s father, Norman Bell Keevil, ran the company through much of the 1960s and 1970s. Norman B. took the CEO reins in 1981 and then served as chairman until 2018.
During his tenure, he saw scores of other Canadian mining giants gobbled up by foreigners in the mid-2000s, a dynamic that resulted in a hollowing out of Canada’s resource sector. Those deals included Rio Tinto’s US$38-billion acquisition of Quebec’s Alcan Inc., Vale SA’s $19.4-billion purchase of Inco Ltd., and the acquisition of Sudbury’s Falconbridge Ltd. by Xstrata PLC, Glencore’s predecessor company, for $18-billion.
Without Mr. Keevil’s backing, Glencore is unable to acquire Teck. “One cannot go hostile under the current shareholder structure,” Mr. Nagle said on a media call on Monday. “There is no point,” adding that Mr. Keevil “is a critical shareholder in this.”
The Keevil family’s holding company, Temagami Mining, owns 55 per cent of Teck’s Class A shares.
Sumitomo did not respond to a request for comment on Monday.
Teck earlier this year said it plans to separate its metallurgical coal business from its copper business and collapse its dual-share class structure. The move is necessary because investors have long given a much lower valuation to Teck’s legacy coal business, compared with its growing copper segment.
Glencore on Monday said that it would also split its business in a similar fashion to what Teck is proposing, putting its thermal coal into one bucket alongside Teck’s metallurgical coal business, and creating a separate entity that would hold its metals businesses, which would fold in Teck’s copper and zinc segments.
Glencore maintains that its proposal would create one of the world’s leading metals businesses, and generate between US$4.25-billion and US$5.25-billion in post-tax synergies.
Teck countered that its own arrangement, which will go to a shareholder vote later this month, is “a much more compelling transaction.”
The offer from Glencore “would force Teck shareholders to hold massive thermal coal exposure, which would be value destructive, drive away current and future investors who cannot hold thermal coal assets, and result in Teck’s world-class steelmaking coal business trading at a discount.”
Teck shareholders are scheduled to vote on its proposed split April 26. At least two-thirds of votes cast by both Class A and Class B shareholders are needed for it to succeed.
Glencore said that if Teck shareholders vote for that deal, then its pursuit of Teck would be over.
This isn’t the first time that Glencore has explored the idea of buying Teck. In a recent letter from Teck’s chair Sheila Murray to Glencore chair Kalidas Madhavpeddi, it was revealed that the two mining companies had engaged in talks in 2020, regarding a similarly structured transaction, but Teck’s board rejected the idea.
The idea of putting the two companies together was hatched by Mr. Nagle’s predecessor, Ivan Glasenberg, who remains Glencore’s largest shareholder. He floated the idea with Don Lindsay, who was Teck’s CEO until last year, when he was replaced by Jonathan Price. Glencore insiders told The Globe and Mail that Mr. Lindsay was never keen on a Glencore-Teck merger and pursued the option of a coal spinoff. Mr. Price in effect inherited the spinoff idea and pursued it. The Globe is not identifying the insiders because they were not authorized to speak on the issue.
Teck’s B shares surged by 18.7 per cent on the Toronto Stock Exchange to close at $58.59 apiece. Teck’s A shares rose by 12.6 per cent to $90.10 on Monday.
With a report from Andrew Willis