(Bloomberg Opinion) — Teck Resources Ltd. Chief Executive Officer Jonathan Price began last week on a searing note, declaring a $23 billion takeover offer for Glencore Plc “unfeasible” and criticizing the history of bribery and risks of its mining rival.
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He had good reason to be confident: Just days before, Teck’s controlling investor had said it would not sell Glencore, no matter the price. However, less than a week later, the momentum has shifted dramatically in favor of Glencore and its South African chief executive, Gary Nagle.
The focus of the dispute between the two companies for now is the April 26 vote by Teck shareholders on a proposed breakup of the company. The Canadian miner wants to spin off its steelmaking coal business to focus on the extraction of copper and zinc. Glencore is trying to rally enough investor support to block that plan while proposing an acquisition that would lead to the creation of two new, separate entities, a giant metals producer called GlenTeck and a massive coal mining group.
But it is not only the future of both companies that is at stake. The unfolding corporate drama also underscores how big mining mergers are back on the agenda after a decade-long hiatus. The possible breakup of Teck and its consolidation with Glencore may be a preview of similar deals to come, as the biggest miners position themselves for a world in which fossil fuel use could soon peak as the transition to green energy triggers an explosion in demand for metals. .
Read: Megaminers seeking deals after a decade on the sidelines
Glencore ends the week with a tailwind. Two influential shareholder advisory firms recommended against Teck’s strategy, and Glass Lewis suggested that the company should engage with Glencore. Bloomberg reported Friday that Teck’s biggest investor, China Investment Corp., currently favors Glencore’s proposal.
And Norman Keevil, patriarch of the Canadian family that ultimately controls Teck, also made it clear to the Globe and Mail newspaper that he would not veto any deal that enjoys the support of Teck’s board and other shareholders after the company’s coal spin-off, although he still opposes it. The Glencore offer.
It is not yet clear whether Teck and Keevil would hold talks with Glencore if investors vote against the Canadian company’s coal spin-off. But in an interview on Friday, Nagle was blunt: Glencore will continue to press for a deal.
Read: Glencore’s Nagle says he will meet Teck CEO ‘anywhere’ to discuss offer
With less than two weeks on the clock, Glencore is doing everything it can to win over investors, framing Teck’s vote as a referendum on its own offer to buy the company and then spin off its combined coal businesses. (Teck, on the other hand, insists it’s simply a vote between a division and the status quo.)
Adding to last week’s drama were simultaneous visits to Toronto by both CEOs, who spent the last few days presenting their visions to Teck investors.
Both men are relatively early in their first CEO roles: Nagle took over in mid-2021, while Price has only been on the job for just over six months. Both replaced longtime CEOs whose leadership shaped the legacy of their companies: Ivan Glasenberg at Glencore and Don Lindsay at Teck. And each has a larger-than-life, influential investor to contend with: Glasenberg remains Glencore’s largest shareholder, while Teck’s dual-class structure gives Keevil a blocking vote on any decision through supervoting “Class A” shares.
But while Nagle spent his career at Glencore, Price is relatively new, having joined Teck from industry leader BHP Group in 2020 to become chief financial officer.
Nagle arrived in Toronto on Wednesday night with a group of Glencore executives to sell his vision. The former commodities trader, who spent 20 years traveling on weekends and closing deals as he rose through the ranks at Glencore, was in his element.
“We are ready to commit,” he said in an interview on Friday. “If Jonathan says he’ll meet me, I’ll go anywhere in the world.”
Glencore’s team managed to speak or meet with about 120 Teck investors on Thursday alone, according to people familiar with the interactions.
Price, for his part, has insisted that the company has the support of investors. In Monday’s presentation to analysts and investors, Teck’s CEO criticized Glencore’s plan for lacking clarity and emphasized the other company’s record on environmental, social and governance issues, including its guilty pleas last year on bribery charges. and price manipulation.
“We have been speaking with many shareholders and we are confident that they recognize and support the planned separation of Teck as having the greatest potential to create value,” Price said Friday.
Both companies have adjusted their proposals this week in an effort to win investor support.
Glencore had originally outlined an all-stock offer for Teck, but on Tuesday offered to add a cash component to buy investors their exposure to the combined coal company. Several Teck shareholders had raised concerns about receiving shares in a company that had just produced coal.
Glencore’s move may have won the support of at least one key investor. China Investment Corp., which owns 10% of Teck’s Class B shares, currently favors Glencore’s latest proposal because it offers a faster and cleaner exit from coal, Bloomberg reported on Friday. CIC has yet to make a final decision, but is considering voting against Teck’s split plan, though it could still require a higher price to back Glencore’s offer.
In the Teck spin-off plan, investors would get shares in the new coal and steel company, and the new “Teck Metals” would get a royalty on coal profits for a period after the split. The company has now reduced the minimum term for those payments to three years from more than five before.
However, Teck’s efforts to win shareholder support received two major blows late in the week after proxy advisory firms Institutional Shareholder Services and Glass Lewis recommended that investors vote against Teck’s spin-off plan. Teck on April 26.
Glencore’s offer represents a reasonably compelling alternative that could warrant discussion and there is no urgency for Teck to seek its separation now, Glass Lewis said in a report.
Some analysts have also suggested that Glencore could increase its offer to further persuade Teck investors to block the spin-off.
“Between the ISS recommendation and a possible higher offer from Glencore, the vote really seems to be in jeopardy,” said Dalton Baretto, an analyst at Canaccord Genuity.
(Update on the sixth paragraph to clarify Keevil’s statement on veto powers)
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