LME clearing house unveils reforms, to triple member capital requirements
The exchange also said that LME Clear would reduce the amount members have to contribute towards its default fund.
Glencore Plc revised its bid to buy Teck Resources Ltd. after some investors in the Canadian miner balked at the idea of owning a business that just produced coal.
Glencore chief executive officer Gary Nagle hosted private calls with Teck shareholders last week to sell them on the $23 billion deal and get feedback, according to people familiar with the matter. In those calls, some investors raised concerns on combining Teck’s steelmaking coal with Glencore’s vast thermal coal operations, the dirtiest of fossil fuels.
“What Glencore was trying to figure out was where Teck investors stand,” said Jon Case, a CI Global Asset Management portfolio manager who participated in a conference call with other investors. “Most of their questions were around coal — how it works, why their structure is better than Teck’s.”
An RBC Capital Markets summary of the investor call said a range of subjects were discussed.
Major investors have become increasingly resistant to owning pure-play coal companies because of the harmful environmental impact. BlackRock Inc., one of Teck’s largest shareholders, already pledged to eliminate companies that generate more than a quarter of revenue from thermal coal from its actively managed investment portfolios. Steelmaking coal, by contrast, hasn’t received the same level of criticism.
Still, under both Teck’s existing plan to split its business and Glencore’s original pitch, investors would have been left holding a business that just mined coal. Glencore’s latest plan offers to buy investors out of coal should they want to exit.
Glencore revised plan presented Tuesday gives Teck shareholders the option to receive up to $8.2 billion in cash instead of shares in the spun off coal company. Nagle is making his pitch in person this week, meeting Teck investors at a Thursday luncheon in Toronto hosted by RBC.
Glencore said in the revised offer that some Teck investors may prefer a full coal exit and others may not desire thermal coal exposure at all.
(By Jacob Lorinc and Thomas Biesheuvel)
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