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Glencore makes bid for Teck’s steelmaking coal assets
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Plan to merge with its own coal assets and spin-off within two years
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Glencore has made several approaches to Teck already in 2023
A long-running bid battle involving Canada’s Teck Resources (TECK:NYSE) and diversified commodities play Glencore (GLEN) took its latest turn with news the latter is offering to buy the former’s steelmaking coal operation.
Glencore, which made an attempt to buy Teck as a whole earlier in the year, has submitted a cash takeover proposal for the assets. The company says that, should a deal materialise, it would demerge the combined coal and carbon steel materials business once debt arising from the transaction had been paid down, with an indicated timeframe of around one to two years.
‘Glencore is fully committed to ensuring that the proposed acquisition would benefit Canada and is open to working with Teck to identify a comprehensive suite of commitments for the benefit of all relevant stakeholders which would, amongst others, maintain and, where feasible, enhance the business’s existing presence and capital investments in Canada,’ it said.
Teck has so far rebuffed all approaches, with Glencore’s own coal exposure, including to thermal coal, seen as an issue by some shareholders. A separate restructuring of the business by Teck was due to put to a vote in late May before the proposal was removed.
WHAT DID GLENCORE OFFER BEFORE?
Glencore had originally offered 7.78 of its own shares for each Teck Class B subordinate voting share, and 12.73 shares for each Teck Class A common share. This represented a 20% premium for both on the date of the offer. If the deal had succeeded, Glencore shareholders would have owned 76% of the merged entity, with Teck shareholders owning the remaining 24%.
In April, Glencore revised its offer for Teck, adding a cash element of $8.2 billion plus a 24% stake in MetalsCo to the Vancouver-based miner’s shareholders. MetalsCo would be a transition metals focused business. It would differ from CoalCo, which would be a standalone coal unit.
AJ Bell investment director Russ Mould said: ‘Glencore’s purpose is not to win friends but to make money and it seems to have spotted an opportunity to do so at Teck Resources. Having attempted to buy the whole company, it is now offering to purchase the steelmaking coal part of the business which Teck has been attempting to spin off.
‘There’s a merry-go-round of coal assets in the industry as companies don’t want to be left holding what is seen as a dirty fuel. Even for Glencore a plan to demerge Teck’s coal operations with its own within a couple of years of any deal suggests it wants to quarantine the rest of its assets from coal.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author (Tom Sieber) and article editor (Daniel Coatsworth), owns shares in AJ Bell.
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