Canadian politicians, the background players in Glencore’s GLNCY battle for Vancouver’s Teck Resources TECK-B-T, are suddenly becoming assertive. And they don’t like what they interpret as yet another attempt to gut Corporate Canada. Glencore might win the blessings of Teck shareholders – but winning Ottawa’s blessing is another story, as governments try to protect head offices and keep the critical minerals needed for the energy revolution on home soil.
Glencore, a Swiss commodities giant, has made two pitches since March to merge with Teck, Canada’s last remaining diversified mining company of significant size. Both were resoundingly rejected by the board. It is about to make a third, no doubt with a fattened-up premium, now that Teck proved incapable of winning a shareholders’ vote that proposed separating its coal business from the base metals assets.
If the premium is high enough, there is some chance that the Teck board, and the company’s controlling shareholder, Norman B. Keevil, will feel compelled to endorse Glencore’s pursuit. This scenario scares some politicians.
A timeline of the takeover bid for Teck Resources that captured the mining world’s attention
Deputy Prime Minister Chrystia Freeland, Industry Minister François-Philippe Champagne and Natural Resources Minister Jonathan Wilkinson effectively sided with Teck early this week when they told the Greater Vancouver Board of Trade that, “We need companies like Teck here in Canada, companies with a strong commitment to Canada.”
A few days later, Conservative Leader Pierre Poilievre warned about the possible hollowing out of Teck. “Glencore’s attempted hostile takeover will ship thousands of jobs out of country and threatens thousands more Canadians who work for Teck,” he said. British Columbia Premier David Eby told a local news site that, “Teck has an international reputation for high environmental standards, high social standards, high standards of corporate governance that Glencore does not.”
Reguly: Teck’s ambitious break-up proposal crashes and burns. Mistakes were made that worked in Glencore’s favour
And on Friday, Prime Minister Justin Trudeau told Bloomberg that Glencore would face a rigorous review. Its fight for Glencore is “certainly something that we’re looking very, very carefully at because it is important to have these great companies in Canada,” he said.
In an apparent effort to gain Ottawa’s sympathies, Teck itself used a presentation to list the more than US$1-billion in penalties paid by Glencore in 2022 to the U.S. Department of Justice and various other regulatory authorities to settle bribery and market manipulation probes. The message: Beware a global mining giant that plays fast and loose with the law.
You can see where this is going. Teck and the politicians who support the last remaining Canadian metals champion hope that Ottawa will find a way to block a Glencore takeover. Ottawa has the machinery to do so. The Investment Canada Act reviews foreign takeovers to determine whether they provide a net benefit to the country, by encouraging growth, employment opportunities and the like, and are not “injurious to national security.”
The act is purposely vague in parts, giving the reviewers a fair amount of leeway to reach a conclusion about either question. Still, Ottawa is going to have a tough time painting Glencore as the assassin of what remains of the Canadian mining industry, or as a threat to the state. Almost no foreign investors in any industry are sent packing, though BHP in 2010 abandoned its planned purchase of Saskatchewan’s Potash Corp. after Ottawa determined the deal would not be in Canada’s best interests.
On the hollowing-out front, you can see why politicians, and Canadians in general, are wary of big-name investors from afar. Takeovers in the resources industry (mining, oil and gas, steel, aluminum smelting) in the past 20 years or so have routinely gutted the Canadian head offices, leaving them as branch plants. Everything from senior management jobs and Canadian stock market listings to sponsorship of the arts and charities went missing.
Would Glencore, which is located in the low-tax Zug canton in Switzerland, carve the heart of out Teck, leaving it as a glorified parking lot in downtown Vancouver? Possibly, but unlikely.
Glencore says it will go out of its way to preserve Teck’s Canadian identity. Between its nickel mining operations (concentrated in the former Falconbridge company) and Viterra, its grain handling business based in Regina, Glencore has more than 9,000 employees in the country. In the past two years, Glencore’s capital spending on the mining side in Canada has come to $1.35-billion.
Ottawa has nothing to review so far because Glencore’s offer has not been accepted by Teck and may never be. But Glencore, determined to win Teck, has vowed to run the operations of the combined metals businesses from Canada. That means the chief operating officer would be based in Vancouver or Toronto, along with all the departments that he would oversee, from mine planning to procurement.
The new company, tentatively called GlenTeck, would run the worldwide metals operations too, with a special focus on South America, where Glencore and Teck have big mines. The company would have a secondary stock market listing in Toronto. Glencore would probably transfer Kenyan-born Peter Freyberg, head of industrial assets, to Canada to run the show.
The likely chief executive of GlenTeck, Gary Nagle, who is Glencore’s CEO, would remain in Switzerland and the Glencore name would disappear.
The question is whether Glencore will keep its word to use Teck to greatly expand its presence in Canada, or convert Teck into little more than a collection of holes in the ground. Ottawa would have every right to grill Glencore on its commitments, seek guarantees and threaten penalties if Glencore is found to have exaggerated its pledges (as many of the previous foreign buyers of Canadian resources companies did). Glencore’s greatest battle might be in Ottawa, not Vancouver, and that’s how it should be.
Editor’s note: A previous version of this column stated that Teck CEO Jonathan Price lives in London. He is, in fact, based in Vancouver.