Teck Mining Company's zinc and lead smelting and refining complex is pictured in Trail, B.C., on November 26, 2012.DARRYL DYCK/The Canadian Press
Japan’s Sumitomo Metal Mining Co. is standing by long-time partner Norman B. Keevil and says it will vote for Teck Resources Ltd.’s TECK-B-T proposed split into two companies next week, as the outcome hangs in the balance.
Sumitomo and the Keevil family control Teck’s super voting class A shares, which carry 100 votes apiece. Sumitomo also owns 0.1 per cent of Teck’s single-voting class B shares. Sumitomo and Teck have been in business together for almost 30 years, and the Japanese company is a joint venture partner in Teck’s recently built QB2 copper mine in Chile.
Sumitomo said in a statement Thursday it “confirms its continuous support for Teckʼs plan to create two separate world-class independent companies,” and will vote in favour of the split.
The Globe and Mail reported earlier in the month that Glencore PLC had approached Sumitomo about Teck, but the Japanese shareholder gave the big Swiss miner the cold shoulder, refusing to take a meeting.
Glencore GLNCY wants Teck shareholders to vote down the split as a show of support for its hostile takeover.
Glencore has offered to buy Teck at a 22 per cent premium to its market value in a stock and cash transaction worth approximately US$22.5-billion. Teck’s management, the board and Dr. Keevil have all rejected the Glencore approach as ruinous to shareholder value.
Next Wednesday, Teck’s A and B shareholders will meet to vote on its proposed separation into Teck Metals, which would hold Teck’s critical minerals mines, and Elk Valley Resources, which would contain its metallurgical coal assets. At least two-thirds of votes cast by both classes of shareholders must be in favour for the transaction to go forward.
While it’s clear that Teck will comfortably win the A shareholder vote, it is unknown which way the B shareholders will go.
Teck CEO Jonathan Price expressed confidence in an interview with The Globe earlier this week that its biggest B shareholder, China Investment Corp., will vote for the split. CIC owns 10 per cent of the B shares.
British-based Egerton Capital last week told The Globe that it intends to vote for the split. Egerton is the fifth-biggest B shareholder, holding approximately 11.4 million shares.
But several B shareholders are opposed.
PM Capital in Australia, which holds approximately three million B shares, told The Globe it intends to vote against the split.
Toronto-based hedge fund Waratah Capital Advisors Ltd., which owns 2.3 million B shares, has already voted against the separation in line with the recommendation of two influential proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis & Co.
Teck has the option of postponing the meeting if it feels it doesn’t have enough votes in its favour. The company will likely know well in advance where it stands, as institutional investors generally do not wait until the meeting day to cast their vote.
Teck is using proxy solicitation firm Kingsdale Advisors as it attempts to convince shareholders to back the split. Typically, proxy firms have a live running tally of where the vote stands.
If the Teck split vote fails, Glencore has said it will be waiting in the wings, and can likely be coaxed into offering a higher takeover price.
Liam Fitzpatrick, an analyst with Deutsche Bank, wrote in a note to clients that Teck merits a 40 per cent premium, which would equate to US$55 a share.
Teck’s B shares closed at US$46.57 apiece on the New York Stock Exchange on Thursday.
Niall McGee