Glencore ups stakes in battle for Teck one week ahead of a crucial shareholder vote

Business

Glencore ups stakes in battle for Teck one week ahead of a crucial shareholder vote

Published

2 months ago

April 19, 2023

Megan Johnson

Glencore intensified its battle for Teck Resources TECK-B-T by dangling the prospect of a higher bid as long as shareholders reject the Canadian company’s proposal to split the company in two next week.

In an open letter pitched Wednesday morning to Teck’s Class B shareholders, who own almost all the equity but few of the votes, Glencore CEO Gary Nagle said that, should the vote go against Teck, his company would open negotiations directly with shareholders if Teck continues to resist its offer.

“Glencore is willing to consider making improvements to its proposal,” Mr. Nagle said. “Glencore has never stated that its proposal is ‘best and final’ and that is it not willing to make changes and improvements to its proposal.”

Mr. Nagle’s new pitch came exactly one week ahead of the Teck vote, which requires two-thirds approval by both the Class A and Class B shareholders to succeed. If Teck wins the vote Teck would place its copper and zinc assets in a metals-focused company and spin off its metallurgical coal business, which would pay most of its cash flow to the metals company for a number of years.

Norman B. Keevil, Teck’s Chairman Emeritus, and Japan’s Sumitomo control almost half of the A shares, which have 100 votes apiece. Mr. Keevil and Sumitomo have already committed to endorsing Teck’s split proposal.

Mr. Keevil has said that he would not stand in the way of a deal that would enlarge Teck and deliver considerable value to shareholders if the proposal were to receive the endorsement of the full board and the B shareholders. There is no sign, however, that he or the board would warm to an improved Glencore offer.

Mr. Keevil told The Globe and Mail last week that a higher per-share offer from Glencore would actually make the offer less enticing. That’s because it would result in Glencore “debasing their own currency,” he said in an interview on Friday.

“The [Glencore] shares are worth less and less and less, because there’s so many more of them,” he said.

The Teck board has refused to negotiate with Glencore and has rejected the company’s opening merger offer as well as sweetened offer that proposed buying out for cash any Teck shareholders who did not want equity exposure to the new coal company.

Glencore is gambling that the prospect of a higher price will convince the holders of the single-vote B Shares to reject the Teck restructuring.

It is not known which way Teck’s B shareholders are leaning, as the Teck split vote approaches, since investors typically make up their minds on which way to go only shortly before the vote. On Monday, Teck CEO Jonathan Price expressed confidence that the company’s biggest B-shareholder, China Investment Corp., will vote for Teck’s proposed split. CIC owns 10 per cent of the B shares.

Mr. Nagle has said that Glencore will drop its bid if Teck wins the vote. Glencore has offered to merge its metals assets with those of Teck’s, then form a separate company that would hold the two companies’ thermal and metallurgical coal businesses. The offer was delivered last month at a 20-per-cent premium.

“We affirm Glencore’s proposal will stand and remain valid if Teck delays its shareholders’ meeting or Teck shareholders vote down the proposed Teck separation,” Mr. Nagle said. “Glencore is willing to make an offer directly to Teck shareholders if the proposed Teck separation does not proceed.”

In the event of both Teck’s split getting voted down, and Teck subsequently refusing to engage with Glencore, Jefferies analyst Christopher LaFemina predicts the dynamic of the deal will change dramatically.

“We believe this becomes a takeover rather than a merger. There is no more GlenTeck if a deal is consummated in that case, ” he wrote in a note to clients. ”It would be Glencore, and Glencore’s management takes control in that case. This reminds us in many ways of the Glencore playbook when it acquired Xstrata ten years ago.”

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Business

Lululemon shares surge as consumers snap up pricier athletic wear

Published

1 day ago

June 3, 2023

Megan Johnson

By Savyata Mishra

(Reuters) – Shares of Lululemon Athletica Inc soared 15% in early trade on Friday, after the premium apparel retailer defied investor worries with a full-year outlook lift amid little pullback from consumers and a sharp rebound in China sales.

The rosy outlook comes in contrast to the general trend of U.S. retailers ranging from Macy’s to Dollar General warning of weak discretionary spending by American consumers.

At least 11 brokerages raised price targets on the company, with Piper Sandler hiking by the highest margin to $445, above the median of $424.

“We think (Lululemon) is one of the select brands continuing to drive outsized demand in this more challenging macro environment with innovation and newness,” said Abbie Zvejnieks, analyst at Piper Sandler.

Lululemon’s first-quarter results also beat estimates as the company saw traffic across both its stores and online go up about 30%.

“Lululemon’s stores continue to be a key catalyst for customer retention and acquisition,” analysts at TD Cowen wrote in a note.

The company also reported a 79% rise in sales in China, bolstered by the rollback of COVID restrictions. Lululemon’s exposure to China could be “a solid source of sales and margin upside for the rest of the year,” analysts at Barclays wrote in a note.

A loyal customer base has also given the company a leg up, helping it sell more of its popular products, such as the Align high-rise yoga pants which retails between $98 and $118, at full price, even amid an uncertain economy.

“Lululemon is just very popular right now and seems to be immune from the slowing trend,” David Swartz, an analyst at Morningstar Research said.

The company’s strong results also lifted shares of other athletic wear makers including Nike Inc and Athleta owner Gap Inc by 4% and 3%, respectively. Shares of European sportswear companies Adidas and Puma were also up.

(Reporting by Savyata Mishra and Aishwarya Venugopal in Bengaluru; Editing by Krishna Chandra Eluri)

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Business

OPEC Discussing 1 Million Bpd Output Cut

Published

1 day ago

June 3, 2023

Megan Johnson

Oil prices were trading up on Friday afternoon as shorters got a little nervous heading into the OPEC+ weekend, with new rumors circulating about the group’s discussions about another 1 million bpd in production cuts.

The OPEC+ group is scheduled for three separate meetings beginning this weekend and concluding on June 4. While the general sentiment has been that the group will keep the status quo as far as production targets are concerned. But Saudi Arabia’s Energy Minister has made boistrous threats against oil’s speculators in the runup to the meeting, saying that shorters will be “ouching”.

On Thursday, Reuters suggested that the OPEC+ group would be unlikely to deepen its production targets at the meeting this weekend. But late on Friday, Reuters suggested that OPEC+ was indeed discussing an additional output cut of around 1 million barrels “among possible options” for the meeting on June 4.

Crude oil prices were already trading up ahead of the meeting, but increased even more in the afternoon hours, bringing Brent crude to $76.32 at 4:20 p.m., a $2.06 per barrel increase on the day. WTI was trading at $71.90 per barrel at that time.

The OPEC meeting will begin at 1 pm Vienna time tomorrow, with OPEC+ meeting on Sunday.

The latest price hike could prompt OPEC+ to keep production targets the same. But Saudi Arabia appears to still be in control of OPEC+, and he could decide to make good on his threats to punish short sellers for their speculative trades that fly in the face of market fundamentals.

“I keep advising them (referencing oil speculators) that they will be ouching, they did ouch in April, I don’t have to show my cards. I am not a poker player…but I would just tell them watch out,” Saudi’s energy minister said late last month in the runup to the meeting.

By Julianne Geiger for Oilprice.com

More Top Reads From Oilprice.com:

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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Business

Air Canada should face more consequences after two disruptions in a week, consumer advocate says

Published

1 day ago

June 3, 2023

Megan Johnson

An airline consumer advocate says Air Canada should face tougher consequences for stranding passengers after two disruptions in a week.

Gábor Lukács, president of Air Passenger Rights, said Canadian airlines such as Air Canada currently don’t face enough consequences from the government each time they delay or cancel a flight.

“It feels like the airlines just have a free pass,” Lukasc told CTVNews.ca in an interview Friday.

Air Canada’s operations were jolted not once but twice in a span of seven days, impacting over 670 flights combined. On May 25, 241 Air Canada flights were delayed, and 19 were cancelled. This past Thursday, 362 flights were delayed and 48 cancelled, according to tracking service FlightAware.com.

Air Canada said the recently implemented system used to communicate with aircraft and monitor the performance of its operations was having technical problems.

In a statement to CTVNews.ca yesterday, the airline confirmed that both incidents occurred in the same system but were unrelated.

Currently, a traveller is entitled to between $125 and $1,000 in compensation for delays up to three hours or more, unless the disruption is a result of events beyond the airline’s control.

However, Lukács said he believes Air Canada is gatekeeping what really happened so they don’t have to pay passengers compensation.

“I’m confident that this is within the airline’s control,” Lukasc said.

The federal government has plans to strengthen the Air Passenger Protection Regulations. The proposed policy amendments would increase the maximum penalty for airline violations to $250,000, and hold airlines to regulatory costs of complaints.

Air Canada said no one was available for an interview on Friday.

By Friday afternoon, the Montreal-based airline told CTVNews.ca through an email statement the communicator system was stabilized and “it is functioning normally.”

However, “due to the effects of Thursday’s IT issues on our schedule, some flights may be delayed this morning as we reposition aircraft and crew,” Air Canada said.

There were 164 Air Canada flights, or 30 per cent of the airline’s scheduled load, had been delayed Friday as of 6:00 p.m. EDT, along with 36 cancellations, as seen on FlightAware.

Additionally, Air Canada Rouge had 62 flights delayed and 25 cancellations.

“That’s absurd, especially for a massive huge airline like Air Canada,” said Lukács.

A spokesperson for Transport Minister Omar Alghabra said the ministry has been in touch with Air Canada since the situation began, but did not confirm whether the airline could face any consequences, including fines.

“We expect all air carriers, including Air Canada, to uphold their obligations to keep passengers safe and protect their rights, and ensure all delays and cancellations are mitigated as soon as possible,” Alghabra’s office said in an email statement sent to CTVNews.ca on Friday.

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