19th Apr 2023 15:29
(Alliance News) - Glencore PLC is ready to up the ante as it bids to win over shareholders in New York-listed Teck Resources Ltd.
Teck has so far resisted the Anglo-Swiss miner and commodities trader's attempt to get a deal over the line. Teck believes its own separation plan is best for business.
In a dramatic move, Glencore published an open letter to Teck shareholders, urging them take action to support engagement on its proposal.
Last week, Glencore revised its offer, adding a cash element of USD8.2 billion plus a 24% stake in MetalsCo to 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. Teck shareholders could opt for CoalCo shares instead of the cash and would own up to 24% of it if all did.
"Glencore acknowledges that certain Teck investors may prefer a full coal exit and others may not desire thermal coal exposure," it said on Wednesday.
Glencore wants to buy Teck and then separate it to create two businesses, MetalsCo and CoalCo.
Early this month, Glencore had 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 succeeds, Glencore would have owned 76% of the merged entity, with Teck owning the remaining 24%.
Teck's board had unanimously rejected an "unsolicited and opportunistic" acquisition proposal from Glencore.
Teck had said that the offer was inferior to its own planned separation, which it said better positioned the resulting companies, Teck Metals and Elk Valley Resources, for success.
However, Glencore is willing to raise the stakes. It has so far never stated that its last proposal was "best and final" and that it was not willing to improve the bid.
With better engagement with Teck's management, Glencore believes it could devise an improved offer.
"Glencore indicated it would be happy to dig a bit deeper with its merger proposal for Teck if the target’s board were willing to engage in conversation. That is not a surprise as miners rarely back down once they have fixed their eye on a new target. Expect this drama to keep playing out – ultimately, it is all down to price and even the most stubborn will eventually cave in if enough carrots are dangled in front of their face," AJ Bell analyst Russ Mould commented.
By Eric Cunha, Alliance News news editor
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