Teck Resources Ltd. TECK-B-T soon will face one of its most important shareholder votes in its more than 100-year history.
Shareholders will decide on Wednesday whether to approve the company’s planned split into Teck Metals, which would hold its critical minerals mines, and Elk Valley Resources, which will hold its metallurgical coal. At least two thirds of votes cast by shareholders must be in favour for the vote to succeed.
Adding extreme tension to the vote is Glencore PLC’s GLNCY hostile US$22.5-billion takeover proposal. The Swiss mining and trading house giant is actively trying to persuade Teck’s shareholders to vote down the split, and instead accept its offer to swallow Teck in its current format.
At the moment, the outcome of the vote is uncertain, with several large institutional shareholders saying they will vote in favour, and others saying they will do the opposite.
On Friday, Norwegian sovereign wealth fund Norges Bank Investment Management said it will vote for the proposed split. It owns a 1.5-per-cent stake in Teck, making it the eighth biggest shareholder, according to Refinitiv.
Meanwhile, both CPP Investment Board, and the California Public Employees’ Retirement System (CalPERS) said they intended to vote against the split. CPP owns a 0.23-per-cent stake in Teck, while CalPERS owns 0.17 per cent.
As the vote approaches here are key things to consider:
Teck has the best information on where it stands, but Glencore has a good idea as well.
The vast majority of investors vote in advance of the shareholder meeting. Teck has a live running tally of the vote from its proxy solicitation firm Kingsdale Advisors. Glencore is not privy to this information, but it still has a solid back-of-the-envelope calculation on where it stands. That’s because it has engaged with hundreds of shareholders, and while not all would have told the company which way they are voting, many will have shown their cards.
Teck likely doesn’t know the outcome yet, but it will soon.
Many shareholders will wait until approximately two days before the meeting (the proxy deadline), which is noon Pacific Time on April 24, before casting their vote. In this case, there is an especially good reason to wait before voting, because Glencore may improve its offer for Teck. Glencore has been very clear that its offer isn’t its best and final.
If Glencore is going to bid higher, it will likely happen over the weekend.
If Glencore is going to make a move, it makes sense to do that before the Monday proxy cutoff deadline, so that investors will be able to factor that into their vote.
The last 48 hours before the vote could be critical.
If Teck is behind in the vote after the April 24 cutoff date, it will use the remaining 48 hours to try to persuade investors who voted against, into yes votes. Investors are allowed to change their minds after they’ve cast their vote.
Glencore could cause chaos by increasing the offer on the morning of the vote.
If Glencore waits to increase its bid until the day of the meeting, Teck will have a big decision to make. The decision on whether to go ahead with the meeting will be at the discretion of Teck’s chair, Sheila Murray. Legally there appears to be no impediment to her calling the meeting, holding the vote, knowing that Teck would win. However, Teck could face blowback for not postponing last minute to consider a new Glencore offer. Either way, any such last-minute move by Glencore would cause pandemonium.
If Teck stands to lose the vote, it will likely postpone the meeting to save face.
Teck will know the result on the morning of the meeting. If the vote is super close, it might not know the outcome until minutes before the start time of the meeting. But if Teck knows it’s facing a losing vote, it is highly unlikely to hold the meeting and suffer the humiliation of losing. The company is likely to postpone the meeting, and whether it wants to or not, engage with Glencore.
Everyone is watching China Investment Corp. (CIC).
Based on a conversation with CIC earlier this week, Teck chief executive Jonathan Price is confident CIC will back the split, but confidence does not equate to certainty. Controlled by the Chinese Communist government, CIC is extremely secretive. The Globe has reached out to CIC on multiple occasions, but it has not responded. CIC is the biggest B shareholder by far with 10-per-cent holding.
The ISS and Glass Lewis recommendations are bad for Teck but not a fatal blow.
Normally having the two major proxy advisory firms advising against the split would be a herculean task to overcome, but in this case, Teck has a trump card. Teck has dangled the prospect of a bidding war breaking out for its metals division (Teck Metals) postsplit. This potentially means exponential gains for shareholders if they are willing to bide their time.
Some hedge funds and arbitrage players have no power in this vote.
While many hedge funds and arb players potentially stand to make a killing on the outcome, some have no voting power in the meeting. That’s because the record date was March 7. That’s the date when an investor needs to have owned the stock to be able to vote in the meeting.
Investors with no skin in the game have power, but may not use it.
If someone owned shares on the record date, but has since sold their holdings, they are still entitled to vote. Investors in this category hold what’s called “empty votes.” Teck and Glencore will be working this category of investor as hard as others.
Niall McGee