Teck Resources Ltd.’s TECK-B-T biggest shareholder, China Investment Corp., voted against the mining company’s proposed split last week, burying its chances of moving forward on a restructuring that had been years in the planning, a source familiar with the matter said.
Vancouver-based Teck last Wednesday announced it was cancelling its plans to separate, after failing to win enough votes from shareholders.
Teck needed at least two-thirds of votes cast by shareholders to be in favour for the split to succeed.
With a 10.3-per-cent stake in Teck’s single voting B shares, China Investment Corp. had an outsized influence on the outcome of the vote. CIC is a state-owned Chinese company, with direct ties to the Communist Party of China.
The Globe and Mail is not identifying the source because the person was not authorized to speak publicly.
Teck spokesperson Chris Stannell wrote in an e-mail to The Globe that the company is “unable to disclose any information about individual shareholder votes under applicable law.”
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Teck’s controlling shareholder, Norman B. Keevil, declined comment.
CIC did not respond to a request for comment.
A little more than a week before the annual meeting, Teck chief executive officer Jonathan Price had reassured the market that the company’s relationship with CIC was sturdy, and that he was confident of getting the vote of the Chinese sovereign wealth fund. The split would have seen Teck separate into Elk Valley Resources, holding its metallurgical coal mines, and Teck Metals, containing its copper and zinc mines.
But not only did CIC vote against Teck’s plans, it missed the proxy deadline to vote.
The Globe last week reported that CIC was in danger of missing the cutoff, which was 48 hours before the start of the annual meeting, and Teck’s advisers were baffled as to the reason.
After missing the deadline, it was up to Teck chair Sheila Murray to decide whether to accept CIC’s late vote.
The day before, and the morning of the annual meeting, Teck scrambled to try to flip shareholders like CIC who voted against the transaction into the “Yes” camp, but to no avail.
CIC first invested in Teck during the depths of the great financial crisis of 2008 and 2009, paying $1.7-billion for a 17.5-per-cent equity stake.
Over the years, CIC has sold down a significant part of its holdings, booking big profits on each occasion.
There had been signs ahead of the meeting that Teck’s relationship with its Chinese stakeholders was evolving.
Quan Chong, a former government of China representative, did not stand for re-election as a board member last week at Teck’s annual meeting.
Mr. Chong joined Teck amid public controversy in 2016, as he was an active deputy of the National People’s Congress of China at the time, raising concerns about the potential for Chinese interference into Canada’s biggest diversified mining company.
CIC’s “No” vote has left Teck increasingly vulnerable to a takeover by Glencore PLC GLNCY. The Swiss mining and commodities trading giant had encouraged Teck shareholders to vote down the split as a ploy to make it easier for it to acquire the company.
Following Teck’s failed split vote, Glencore reiterated that its US$22.5-billion takeover proposal, which was tabled last month, still stands. Glencore also indicated that if the Canadian miner’s board doesn’t engage, it may take its offer directly to shareholders.
If Glencore were to eventually win enough support from Teck’s B shareholders in a tender offer, it would still need the company’s A shareholders to be on board.
So far, Mr. Keevil and Japan’s Sumitomo Metal Mining Co., Ltd., who both control the A shares, have refused to entertain Glencore’s approach.
Niall McGee