Glencore feels the urge to merge

Glencore’s bid for rival miner Teck Resources “has come under renewed pressure”, says Helen Cahill in The Times. Legal & General has decided to “vote for Teck’s pre-existing plan to spin off its coal assets rather than lend support for a $23bn merger of Glencore with its Canadian competitor. Next week Teck shareholders will vote on the board’s bid for a demerger of its coal assets into a new company called Elk Valley Resources.

Glencore, by contrast, wants to merge the two firms – creating “the thirdlargest copper miner in the world” – and spin off the combined coal assets. There would also be a separate firm made up of Glencore’s thermal coal business and metallurgical coal assets run by Teck. The Canadian miner deems this plan to be “opportunistic and unrealistic”.

Glencore argues that combining the two companies would produce a UK-listed “red-metal giant poised to take advantage of a green commodities supercycle”, as well as another company, listed in America, that would “shovel all cash it generates to shareholders as the world weans itself off the black stuff”, says The Economist.

However, Teck says such a move “would expose Teck’s shareholders to Glencore’s thermal-coal business, which may command less enthusiasm from investors than coking coal for steel mills”. While it is possible that Teck “could be forced to the negotiating table” with Glencore if its own restructuring plan fails to win enough support, many of Teck’s key investors will be a “hard sell”.

Even if Glencore doesn’t pull off the merger, it can still follow the advice of its activist investors by spinning out its own coal assets, says Megha Mandavia in The Wall Street Journal. While Glencore has said it will “gradually run down its coal mines ... before 2050”, getting rid of them now would help it “focus... on green transition-friendly metals like copper, nickel and zinc”. It would also help attract environmental and social-governance (ESG)focused investors leery of Glencore’s dependence on coal profits”.