Glencore Plc’s attempt to seal mining’s biggest deal in a decade has thrust chief executive officer Gary Nagle into center stage. Little known outside Glencore before taking the job nearly two years ago, the energetic South African is pursuing one of mining’s most unattainable targets, in a bitter brawl that’s headed for a potential climax this week.
While the bid for Canada’s Teck Resources Ltd. is Nagle’s first major move as CEO, the deal itself was dreamed up under his predecessor Ivan Glasenberg, who privately tried and failed to get it done in 2020. Nagle was involved in those efforts too, according to people familiar with the matter, as head of Glencore’s coal business and already earmarked to replace the man that hired him two decades earlier.
Three years later, Glencore under Nagle is trying again. It has proposed a $23 billion takeover of Teck, with a plan to create two new companies from the combination — one focused on metals and the other that produces coal.
It’s a company-defining deal that would reshape Glencore’s own business while swallowing up one of the last big Canadian miners. Glencore itself has a long history of aggressive moves, and much of its expansion over the years came through acquisitions.
Teck has rejected Glencore’s approaches, saying investors should support its own plan to spin off its coal mines before it’s willing to entertain offers. Crucially, that view is backed by Norman Keevil, the Canadian mining patriarch whose family’s “supervoting” shares give him a veto on any big decisions. For decades, the Keevil stake meant that Teck was viewed as untouchable across the industry, even as rivals coveted its mines.
Read More: Teck mining magnate stands between Glencore and mega deal
“This was always going to be speculative given Teck’s shareholding,” said Ben Davis, an analyst at Liberum in London.
Teck’s other investors will get a say on Wednesday in a vote on its spinoff plan, which Glencore has sought to frame as a referendum on whether Teck’s board should abandon the split and enter talks. Should investors approve Teck’s strategy, Nagle’s pursuit will probably be over, at least for now. If they don’t, Glencore said it’s willing to make a higher offer.
There’s a lot at stake for 48-year-old Nagle and Glencore. Buying Teck is a deal the company has worked on for years, presenting an opportunity to consolidate its control of one of the world’s best copper mining complexes while offering a neat solution for its profitable but polluting coal business.
Glencore would overnight go from being the world’s biggest coal shipper to a company with no exposure to the dirtiest fuel at all. It would also become one of the biggest metal miners, poised to benefit from surging demand as the global economy decarbonizes.
Such a transformation would define Nagle’s early leadership of a company that’s long been dominated by two figures — founder and legendary fugitive trader Marc Rich, and Glasenberg, Nagle’s predecessor who built the company in its current form and remains its biggest shareholder.
Still, while Glencore has a history of bold dealmaking, not all of its efforts have succeeded. As well as failing to convince Teck’s previous management team, Glasenberg tried unsuccessfully to merge with mining giant Rio Tinto Group in 2014.
Glencore’s willingness to separate its coal business for the Teck deal also threatens to reopen the question of whether the company should get out of coal even if the bid fails.
Glencore says nothing has changed — it will exit its coal business when shareholders say they want it to — but the structure of the Teck proposal provided the first concrete sign that the company was considering such a move.
Glencore slid about 1% in London on Monday and is down about 12% this year.
Read More: Glencore’s bid for Teck shows it’s willing to abandon coal
Glencore’s overtures have been given short shrift by Teck. The company has branded the approach as opportunistic, as it starts up a huge new copper mine, and pointed to differences in the two cultures, including Glencore’s record of bribery and price fixing. Teck says other mining companies have expressed interest in a deal after the coal spinoff and dangled the prospect of a bidding war.
“Glencore, quite frankly, has been rather clever at maybe jumping the gun before others have been able to put together offers,” said Peter Letko, co-founder of Montreal-based Letko Brosseau & Associates Inc., who said he will vote in favor of Teck’s spinoff. “Given a little time you’ll see broader interest and a real competitive bidding for these assets.”
The vote on Wednesday requires two-thirds support from both types of shares, and Teck’s biggest investors have yet to say which way they will go. Teck will be able to see the initial results and could delay or cancel the vote if it’s heading for a loss.
Teck’s Keevil has also sought to undermine Nagle’s influence. In a statement a week ago, he referred to Glasenberg as a “smart man” whose timing was good for Glencore rather than Teck, but failed to mention Glencore’s current CEO.
Glencore, under Glasenberg, first approached Teck in 2020. After six months of talks, based around a similar structure that Glencore has proposed again now, Teck said it was not interested.
Nagle made his first attempt to succeed where his predecessor failed at London’s annual metal gathering last October, according to people familiar with the matter. Teck had just undergone its own leadership change — Don Lindsay, who ran the company for nearly two decades, handed over to his chief financial officer, Jonathan Price at the end of September.
Nagle pitched his idea over breakfast to his new counterpart, a relative newcomer to Teck who joined in 2020 from industry leader BHP Group. What followed was a series of communications through a London banker who worked as an intermediary. Price and Nagle met again at Davos in January.
Then, in mid-February, Teck announced a plan to split its company in half instead. After years of weighing options for its two main business — copper and zinc mines that straddle the Americas and a chain of coal mines in British Columbia — Teck had finally made a decision: coal would become its own company, but would remain economically linked to the metal mines for another six years.
Inside Glencore, Teck’s announcement set the clock ticking. Within months, the door would slam shut on its own long-coveted deal. It made its proposal in late March, and a week later Teck announced its rejection.
Glencore’s bid for Teck marks the public return to mega deals by the world’s biggest miners, as rising demand for metals like copper and nickel to facilitate the green-energy transition helps revive the industry’s appetite for acquisitions.
The largest producers have spent a decade on the sidelines after a series of disastrous deals during the 2000s commodities boom. During that period, nearly every big name in mining either disappeared or became one of the handful of behemoths that denominate the sector today.
The exceptions mostly had one thing in common: a single family or large shareholder that didn’t want to sell. For Chilean copper miner Antofagasta Plc it was the Luksic family, for Teck it was the Keevils.
Teck has also sought to frame the battle as a defense of Canadian mining, after many of its rivals were swallowed up during the last takeover frenzy.
For Glencore to be successful, there are some serious obstacles to overcome. Glencore cannot buy Teck without the support of Keevil, who has so far been blunt in his refusal. The company would also have to muster wider shareholder support at a time when mining investors have been demanding weighty premiums — BHP and Rio Tinto both recently bought copper miners at around a 50% premium. China’s sovereign wealth fund is the biggest holder of Teck’s Class B shares, with about 10%.
Still, while this is Nagle’s first big deal as CEO, he has some experienced heads at his side. As well as Glasenberg, Nagle has veteran dealmaker Michael Klein. Bloomberg reported on Friday Glencore has been working with Klein as well as Citigroup Inc. on the Teck bid, continuing a longstanding relationship after Klein previously acted as a go-between in the negotiations to take over Glencore’s sister company Xstrata a decade ago.
Since Teck went public in rejecting Glencore’s offer, Nagle has traveled relentlessly to meet with shareholders and muster support, including a dash to Toronto. For Nagle, who spent much of his year as a trader, the salesman lifestyle comes naturally.
In an interview with Bloomberg last month, Nagle said it goes without saying that his employees travel on a weekend to optimize their time during the week.
“It’s done naturally,” he said. “Nobody gets up and says should I travel on Sunday or Monday?”
(By Thomas Biesheuvel, with assistance from Danielle Bochove)
Comments
Jared
Now might be a good time to pick up some Copper Fox Metals. Teck owns 75% of the Shaft Creek project and Cuu the other 25%. Talk of a copper smelter in the golden triangle recently and it seems grossly undervalued.