Peter Munk would be thigh-slapping proud of Norman B. Keevil, the chairman emeritus of Teck Resources TECK-A-T: the last big diversified mining company standing in the graveyard of Canadian mining companies.
Mr. Keevil (“Norm” to his friends and colleagues) is the son of Norman Bell Keevil, the prospector who, over a century ago, used a gold discovery in northern Ontario to launch what would become an international player in copper and zinc, with a market value of $30-billion. Stress on “Canada,” for being Canadian-controlled, with headquarters on Canadian soil, has always made Mr. Keevil’s proud heart go thumpity-thump, as it did for Mr. Munk – the late founder and chair of Toronto’s Barrick Gold ABX-T, once the world’s largest gold company.
At one point during the great hollowing out of Corporate Canada – in the middle part of this century’s first decade, when Falconbridge, Inco, Algoma Steel, Dofasco, Alcan and dozens of other resources and industrial companies were flogged off wholesale to foreign buyers – Mr. Munk charged into the Toronto office of The Globe and Mail to tell the editorial board that the sell-off had gone too far.
He was then in his late seventies and came alone, sporting his trademark fedora and Order of Canada medal pinned to his lapel, to rail against the rise of the branch-plant economy. He mused about putting Inco and Alcan together with Barrick to create a resources giant, as Canada’s answer to BHP, Rio Tinto, Vale, Anglo American or Glencore – the global metals beasts that seemed to carve up the planet’s ore bodies at will. Teck had the same idea and launched a bid for Falconbridge, one of Canada’s two top nickel miners. By then, it was too late. Falconbridge went to Xstata (now part of Glencore GLCNF), Inco went to Vale and Alcan to Rio.
Mr. Keevil’s nationalist leanings were put on display again early this week, when he outright rejected an offer from Glencore, the world’s biggest commodities trader and one of the biggest mining houses, to merge with Teck in an all-share deal that would give Glencore shareholders 76 per cent of the enlarged company. “MetalsCo,” as Glencore calls it, would combine the two companies’ base metals portfolios.
The second part of the deal would see Glencore and Teck create a separate company that would hold all of their coal assets. Teck had the same idea, one that is well advanced. It plans to spin off its metallurgical coal division into a separate company called Elk Valley Resources. The deal goes to shareholders on April 26 and requires two-thirds of both the Class A shares, with 100 votes each, and the single-vote Class B shares to be put into motion. That same day, shareholders will also vote on a six-year “sunset” plan that would end the super-voting status of the A shares.
Since Mr. Keevil controls the Class A shares, he has the power to kill the Glencore proposal even though his economic stake in the company is less than 1 per cent. Hardly democratic, but never mind – resources sovereignty is at stake.
“We’re not about to be swallowed up by them,” he told The Globe. “It’s not a matter of price. Canada is not for sale.”
You could imagine the spirit of Mr. Munk clapping in praise.
What will Glencore do now that Teck’s controlling shareholder is not on board with its takeover?
Glencore seems to have underestimated Mr. Keevil’s desire to keep Teck in Canadian hands. Mr. Keevil seemed immune to Glencore’s arguments that the merger would unlock a lot of value, that MetalsCo would be run from Toronto or Vancouver and that Glencore has more operating asset in Canada than Teck.
You could argue that his anti-Glencore stance is simply an effort to coax a greater share-exchange premium from Glencore, but his statements offer no hint of wiggle room. In the closing paragraph of the new edition of his book on Teck’s history, Never Rest On Your Ores, he expresses his desire for the company to be “a strong, vibrant Canadian mining champion 10 and 20 years from now.”
In other words, no one is buying his company as long as he is above ground. But what about the B shareholders? There will certainly be some who will retaliate against his no-sellout stance by nixing the coal spinoff. But Mr. Keevil cannot lose: If the vote goes against Teck, he would keep his A shares, allowing him to have final say on who owns the company. If the spinoff goes ahead, the A shares would be bought for $309-million and would convert to B shares in six years, theoretically removing any obstacle to a change of control.
Until then, Teck would almost certainly remain a Canadian company, as might Elk Valley Resources. Mr. Keevil’s ally, Pierre Lassonde, co-founder of the Franco-Nevada gold royalty company, is planning to buy about $300-million of Elk Valley shares, giving him a potential blocking position. Mr. Lassonde, like Mr. Keevil, decries the sellout of big Canadian mining companies.
Both men could emerge as all-Canadian heroes, protecting what little remains of the country’s homegrown mining industry and the head office jobs that go with them. They will, that is, if the new Teck and the new Elk Valley turn into stock market darlings, which is not certain.
Resources patriotism is fine and good, and certainly not unique to Canada; patriotism with fat shareholder returns is better.
Eric Reguly