THE board of major Canadian mining firm Teck Resources has unanimously rejected the revised takeover offer from Glencore stating on April 13 that “it is not in the best interests of Teck or its shareholders.”
Teck chairperson Sheila Murray commented that, “Glencore has made two opportunistic and unrealistic proposals that would transfer significant value to Glencore at the expense of Teck shareholders.”
Glencore has made its proposals ahead of a meeting of Teck shareholders called for April 26 to approve a split of the group through spinning off its steel-making coal assets into a separate company called Elk Valley Resources (EVR) while retaining its mining and minerals assets in Teck Metals Corp.
According to Murray, “Teck’s proposed separation creates a significantly greater spectrum of opportunities to maximise value for Teck shareholders. The special committee and board continue to recommend that shareholders vote for the proposed separation into Teck Metals and EVR as the best pathway to fully realise the greatest value.”
Teck CEO Jonathan Price added, “Glencore recognises that post-separation it would be exposed to significantly greater competition from other parties which is why it is trying to frustrate Teck’s separation process.
“The fundamental flaws of Glencore’s revised proposal continue to make it a non-starter. It does not address major inherent risks including substantial regulatory hurdles, jurisdictional and ESG concerns and diluting the base metals business with significant oil trading.”
Glencore’s proposal involves combining Teck’s steel-making assets with its South African coal and ferro-alloy operations.
The situation regarding Teck’s proposed split has become even more complicated following the possible involvement of Canadian billionaire Pierre Lassonde who, according to Canadian newspaper The Globe and Mail, is looking at buying a “blocking stake” in EVR to ensure the company remains under Canadian ownership.
The influential Institutional Shareholder Services (ISS) group has also recommended that Teck shareholders vote against the proposed separation of the group.
According to an ISS evaluation “the uncertainties and structural issues associated with the proposal appear to make the separation a less compelling outcome than the company’s status quo scenario or alternative structures which could be sought.”
ISS added that, “Teck’s status quo does not seem to offer a poor result for shareholders given the company’s track record and the fact shareholders will retain optionality to enter into another transaction in the future which could provide more advantageous terms.”
Shelia is right! Why would an offer by Glencore not be in their interests? Teck shareholders have great assets and if they don’t like the A&B share structure can sell Teck and go and buy Glencore.
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