Glencore has added a cash sweetener to its hostile takeover bid for Teck Resources as it tries to woo the Canadian miner, whose chief reiterated the board’s rejection of the deal.
Under the revised proposal, the FTSE 100 mining group has offered to pay a cash element that could amount to $8.2bn to buy Teck shareholders out of their stake in a coal-focused spin-off, while also granting them a 24 per cent stake in a separate industrial metals business that would be created off the back of the deal.
The revised offer allows investors to choose cash instead of shares or a combination of both in the coal spin-off and the valuation of the total proposal remains the same as the original bid at almost $23bn.
“Glencore acknowledges that certain Teck investors may prefer a full coal exit and others may not desire thermal coal exposure,” it said in a statement.
Teck said that it will evaluate the new proposal, adding that it “does not provide an increase in the overall value to be received by Teck shareholders or appear to address material risks previously raised”.
The revised offer comes just a day after Teck chief executive Jonathan Price told the FT that the deal was a “non-starter”.
Glencore’s original proposal was to buy Teck for a 20 per cent premium to its share price on March 26 in an all-share transaction.
A takeover of Teck would lead to a vast reshaping of Glencore’s business. The Swiss company would create “MetalsCo” — a combination of Teck’s copper and zinc mines in the Americas with its own portfolio of metal mines and oil trading business — and “CoalCo” — putting Teck’s steelmaking coal assets together with its thermal coal and ferroalloys mines.
Teck has a shareholder vote scheduled for April 26 on its own plans to split into a steelmaking coal business and a metals company, which Glencore urged the Canadian group’s board to delay in order to engage with its proposal.
“We believe that it is in your shareholders’ interests to engage with Glencore and we see no valid reason not to delay your shareholders meeting,” Nagle wrote in a letter to Teck’s board.
The offer — the largest made by Glencore since buying Xstrata in 2013 — marks one of the biggest takeover battles launched by a London-listed company in recent years, in addition to a return to dealmaking for the mining industry that has focused on returns for a decade.
The revised offer represents a bold move by chief executive Gary Nagle to simultaneously increase the company’s exposure to vital commodity copper and address longstanding shareholder concerns over the company’s exposure to coal.
However, the dual-class share structure of Teck hands effective acceptance of Glencore’s proposal to the family of 85-year-old mining magnate Norman Keevil, which owns the majority of class A supervoting shares, each worth 100 votes.
Keevil, who is now chair emeritus of the company, has said that he would not sell to Glencore regardless of the price.
Tyler Broda, analyst at RBC, said that the speed of the revised bid showed “how serious Glencore management are on the merits of this transaction” and the cash component addresses some key concerns raised by Teck’s management team. “We would expect that there would be increasing probability of [Class] B share investors calling for proper engagement,” he said.
Read the full article here
