/cloudfront-us-east-1.images.arcpublishing.com/tgam/PA23HXYYJZLL7KLIH4H5SAI7BQ.JPG)
Teck’s TECK-B-T controlling shareholder, Norman B. Keevil, once again forcefully rejected Glencore’s merger offer, raising the possibility that the Swiss commodities giant will raise its bid as the Canadian company attracts the interest of global mining players.
In a statement issued early Monday morning, Mr. Keevil, Teck’s chairman emeritus, said he is open to a deal that would enlarge the company, but not before the planned split of the business that would see the creation of two new operations, one devoted to base metals, the other to coal.
“There are numerous mining industry parties who have their eyes on Teck and would be interested in partnering or investing in Teck Metals after it separates its base metals and steelmaking coal businesses,” Mr. Keevil said. “I would support a transaction, whether it be an operating partnership, merger, acquisition or sale – with the right partner…I believe that pursuing a merger transaction now would rob out shareholders of significant posts-separation value.”
The US$23-billion offer by Glencore would see Glencore and Teck merge their base metals operations and, in a separate transaction, launch a new company that would hold Glencore’s thermal coal and Teck’s metallurgical coal businesses.
Mr. Keevil and the Teck board rejected Glencore’s opening proposal as well as its sweetened offer, made last week, which gave Teck shareholders the option of receiving up to US$8.2-billion of cash instead of shares in the spun-off coal company. But Glencore did not raise the overall value of its offer and Teck shareholders would still end up owning about one-quarter of the combined metals company.
In his statement, Mr. Keevil, who is the son of Teck founder Norman Bell Keevil, did not specifically say why he opposed Glencore’s offer, but the Teck board has said it believes that the new metals-focused Teck could create a lot of value and that mixing thermal and metallurgical coal in the same company is a messy scenario that might alienate investors who follow environmental guidelines. Thermal coal – the dirty fuel use to generate electricity – has been condemned as one of the main drivers of radical climate change.
“Glencore’s proposal is the wrong one, as well as the wrong time,” Mr. Keevil said. “Ivan Glasenberg is an interesting guy and a smart man, and his timing is certainly good for them, but not for our Teck shareholders. I fully agree with Teck’s board that there is no deal to be done pre-separation with Glencore or any other party.”
Mr. Glasenberg is the former CEO of Glencore. He was replaced by Gary Nagle, a fellow South African, two years ago.
Mr. Glasenberg owns 10 per cent of Glencore and knows Mr. Keevil well. Mr. Keevil has never met Mr. Nagle, who was in Toronto last week meeting the holders of Teck’s Class B shares, which hold a single vote each. Mr. Keevil and Sumitomo of Japan control almost half of the super-voting A shares, giving them say over the future of Teck even though their equity stake in the company is insignificant.
Mr. Nagle has said that Glencore would drop its pursuit of Teck if shareholders on April 26 approve the plan to split the company into separate metals and coal operations. But some investment bankers think that Glencore might make a play for Teck Metals, as the metals-focused company would be called, even if shareholders approve the plan to break Teck into two pieces.
The Globe and Mail reported on Sunday that Teck has been approached by Vale Ltd., Anglo American PLC and Freeport-McMoRan Inc. to explore transactions if Teck’s split goes ahead. The three are among the world’s biggest mining companies. Brazil’s Vale is the owner of the Canadian nickel producer once known as Inco. Glencore owns the rival nickel miner formerly known as Falconbridge.
Glencore would not comment on speculation that it would raise its offer for Teck either before next week’s vote, in an attempt to ensure the two-thirds majority is not reached, or after the vote if it goes in Teck’s favour. Teck’s B shareholders seem to expect a higher offer from Glencore, or a bidding war. Teck shares in the last month have climbed from C$46 each to C$60, giving the Toronto-listed company a market value of C$31-billion.
Two influential shareholder advisory firms, Glass Lewis and ISS have said that Teck shareholders should vote against the planned split of the company.
Glass Lewis last week said that “Based on our review, we believe the Glencore Offer and the Glencore Demerger represent a reasonably compelling strategic alternative that, at a minimum, warrants the Company hitting the pause button on the Separation and engaging in further discussions with Glencore.
