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Canada“s Teck Resources rejects Glencore“s $22.5 billion merger bid


The logo of commodities trader Glencore is pictured in front of the company’s headquarters in Baar, Switzerland, July 18, 2017. REUTERS/Arnd Wiegmann

Teck Resources (TECKb.TO) on Monday, citing a reluctance to increase exposure to coal and energy, rejected an unsolicited $22.5 billion bid from London-listed miner Glencore, boosting the Canadian miner’s shares by 16% on the Toronto Stock Exchange.

This is not the first time Glencore and Teck, which is also listed on the New York Stock Exchange , have talked about the possibility of a spin-off and merger of their coal businesses. Informal discussions took place in 2020 before breaking down without agreement.

Teck, which has a market value of $19 billion, said on Monday a potential merger would expose its shareholders to a large thermal coal business, an unwanted oil trading business and significant jurisdictional risk, all of which would negatively impact its value.

“The board is not contemplating a sale of the company at this time,” Teck Chair Sheila Murray said in a letter to the board of Glencore.

Glencore’s all-share offer represented a 20% premium to the closing stock price of Teck on March 26, when the bid was made. It proposed a simultaneous spin-off of the companies’ thermal and steelmaking coal businesses.

Teck said more value could be created through a proposed restructuring announced earlier this year which would see the Vancouver-based miner spin off its steelmaking coal unit to focus on industrial metals, such as copper. A vote on this proposal is scheduled for April 26.

After the separation, the company will re-brand itself as Teck Metals Corp, while the new divested unit will be listed in Toronto as Elk Valley Resources Ltd.

“We 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,” analysts at Scotiabank said.

“Given the (Keevil) family control of Teck’s A shares, we view the likelihood of a successful transaction with Glencore as extremely low, even in the event of an improved offer,” they added.

Glencore’s London-listed shares closed down 2.6%.

The Keevil family’s control of Teck through their dominant ownership of ‘A’ class of shares, which have more voting power than the numerous ‘B’ class shares held by institutions, could make any further merger discussion hard.

“I unequivocally support the Board’s decision to reject Glencore’s unsolicited offer to acquire Teck,” Norman Keevil, chairman emeritus of Teck Resources, said in a statement.

“Now is not the time to explore a transaction of this nature, and I have the utmost confidence in the Board’s and our management teams’ strategy to maximize value for … shareholders after the separation.”

A merged metals company with the proposed name of GlenTeck and a main listing in London would have the potential to produce around 3 million tonnes of copper, Glencore CEO Gary Nagle told shareholders in a presentation.

Assets producing copper, used in rechargeable batteries and charging stations for electric vehicles, are major targets for mining companies hunting for minerals needed for the energy transition.

The merged coal company would be primarily listed in New York, Nagle said, based on the feedback received from investors and appetite for such a company there.

Nagle also said Glencore did not envisage major antitrust issues and there was no possibility of a sweetener as “this is not a takeover but a merger.”

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