Glencore sweetens offer for Teck with $8.2bn cash incentive

The Swiss miner and commodities trader’s original all-stock deal was to acquire Teck and then separate itself into two companies, with one unit holding assets in thermal and metallurgical coal, as well as oil, and the other containing its base-metals portfolio.

The Vancouver-based miner had said Glencore’s original bid was structurally flawed, branding it as “a complete non-starter.” It noted on Tuesday that the revised proposal neither provided an increase in the overall value to be received by Teck shareholders, nor appeared to address the material risks previously raised.

Glencore said the fresh offer would effectively buy Teck’s shareholders out of their coal exposure. It acknowledged that certain investors may prefer a full coal exit while others may just want to cut their thermal coal exposure.

Chief executive officer Gary Nagle said Teck should review the sweetened deal and delay the vote on its own plans to split the business, which is scheduled for April 26.

“We believe that it is in your shareholders’ interests to engage with Glencore and we see no valid reason not to delay your shareholders meeting,” Nagle said in the statement.

Analysts at Scotiabank said the revised takeover proposal was unlikely to engage Teck’s key “A” shareholders, namely the Keevil family and Sumitomo Metal Mining Co. , which collectively control about 48% of total votes outstanding.

“Overall, we continue to view the Glencore offer as an opportunistic bid designed to take advantage of the current dislocation in Teck shares related to the proposed near-term business separation,” they wrote.

Copper booty

Experts had anticipated that Teck’s decision to split the business in two would make it a takeover target. The company owns four copper mines in South America and Canada, which produced 270,000 tonnes combined last year. 

Teck also expects to double copper output after the second phase of its Quebrada Blanca (QB) project in Chile ramps up to full capacity by the end of 2023.

Glencore believes that operating Quebrada Blanca jointly with the nearby Collahuasi mine, in which the Swiss multinational holds a 44% stake, would add at least a $1 billion of value to its coffers.

Top miners are hungry for copper assets as demand for the metal accelerates and a global shortfall looms. BHP, Rio Tinto and Glencore itself have disclosed that they are actively looking to grow their copper exposure.

For Glencore, acquiring Teck would be its biggest acquisition since buying Xstrata Plc in 2012 and it would “unlock approximately $4.25 billion — $5.25 billion of post-tax synergy value”, according to the company.

Teck’s controlling shareholder, Norman Keevil, has said he would not sell to a foreign company at any price.

He already has the support of key stakeholders, including gold magnate Pierre Lassonde, who is planning to buy a stake in Teck’s spinoff coal company to protect it from a foreign takeover.

Egerton Capital UK, the seventh-largest holder of Teck’s class B shares, has also said it will back the miner’s restructuring plans.