Teck pulls vote on coal split
JOHANNESBURG - Teck Resources cancelled a vote to spin off its coal assets hours ahead of its shareholder meeting, handing the initiative to Glencore in its attempt to buy the company.
The move caps a tense three weeks of lobbying investors by both Teck and Glencore, and suggests Teck may not have mustered the support it needed. The Canadian miner rejected a US$23 billion takeover proposal from Glencore earlier this month, and said it would instead press on with the plan to spin off its coal mines, to focus on mining copper and zinc.
Prospect
The focus will now turn to Glencore — which has dangled the prospect of a higher offer and whether Teck’s own investors will pressure the company to enter discussions. While the cancelled vote is an embarrassing reversal, any takeover would still require the support of controlling shareholder Norman Keevil, who holds an effective veto through Teck’s ‘super voting’ A Class shares. Teck said in a statement it still intends to pursue the company split, and hasn’t changed its view on Glencore’s
Teck’s announcement.
The Swiss commodities giant wants to buy Teck and then create two new companies from their combined metals and coal businesses. The deal would offer control of Teck’s lucrative copper mines at a time when the world is worrying about a shortage, and also allow Glencore to get out of the profitable yet polluting thermal coal business. But the takeover fight also has wider significance in the global mining industry, marking a public return to large-scale mergers and acquisitions by the world’s biggest producers after years on the side-lines.
Structure
“Glencore’s rejected proposals remain a non-starter, with the same flawed structure and material execution risks identified by our board,” said Teck Chief Executive Officer Jonathan Price. “Our plan going forward is to pursue a simpler and more direct separation, which is the best path to unlock the full value of Teck for our shareholders.” Teck had proposed creating a new steelmaking coal company, called Elk Valley Resources, which would continue to pay a royalty to its remaining metals business for several years. The ongoing link between the two companies would have muddied its appeal for investors who no longer wanted exposure to coal. Glencore, by contrast, had offered to pay cash to buy Teck investors out of their exposure to the companies’ combined coal businesses.