Canadian miner Teck Resources rebuffed a revised hostile $23bn bid from Glencore, but left the door open for continued talks under a different deal structure than that proposed by the FTSE 100 miner.
Teck told Glencore that if it wished to continue deal talks in future, the Swiss miner should first spin off its thermal coal business — which is the world’s most profitable — then come back for discussions.
“As you have now publicly stated you are prepared to spin out your thermal coal business, we suggest you proceed with that,” wrote Teck chair Sheila Murray in a letter on Thursday.
Glencore should also separate its oil business, she continued, “then engage with Teck Metals after our own separation has been completed”.
Teck has now rebuffed two offers from the FTSE 100 miner in as many weeks but the plan its chair outlined represents the first time the Canadian group has indicated it would be willing to consider deal talks with Glencore — albeit under very different conditions than its current offer.
Teck is already planning to separate its metals business and its steelmaking coal business, a proposal that goes to shareholder vote on April 26.
Glencore has proposed merging with Teck, then dividing the joint assets into a “MetalsCo” and a “CoalCo”. Teck shareholders would receive 24 per cent of the shares in the new MetalsCo, as well as the option of shares or cash — worth up to $8.2bn — for the coal business.
Teck chief executive Jonathan Price told the Financial Times that Glencore’s sweetened offer proposed this week, was “unworkable” and a “non-starter”.
“Our recommendation is that Glencore should address some of the issues that it has with its portfolio, before approaching Teck for a potential acquisition,” he said.
The Swiss company has said its proposal would create maximum value for the two companies, by creating two global giants in metals and in coal.
In a tacit indication of support for Glencore, proxy voter ISS recommended Teck shareholders reject the Vancouver-based group’s plans to separate. ISS noted the separation was less compelling than “alternative structures which could be sought”, an apparent reference to Glencore’s offer.
Some of Glencore’s own shareholders have already been calling for the Swiss miner and commodity trader to spin out its thermal coal business.
“There is a clear way to do this deal,” said Giuseppe Bivona, chief investment officer at activist investor Bluebell Capital, which owns shares in both Teck and Glencore. “But the way the transaction should be done is completely different.”
Bluebell wrote to Glencore on Wednesday calling for it to separate its coal business and oil business, then merge with Teck’s metals unit — similar to what Teck advocated.
Glencore has said it is not planning to separate out its own coal business, but would do so if a significant number of shareholders demanded it.
“On coal we always said, if there was strong support from shareholders to divest, it is something we would do,” Glencore chief executive Gary Nagle told investors last week. Nagle is in Toronto on Thursday meeting certain Teck shareholders.