Glencore offers cash-for-coal sweetener in latest Teck offer

Glencore Plc stepped up its pursuit of Teck Resources with a new takeover proposal that gives the Canadian miner’s shareholders the option to receive a cash component instead of exposure to the two companies’ coal mines.

Glencore’s announcement seeks to address one of Teck’s main arguments against its earlier offer to buy the company for about $23 billion in shares and then spin off the combined coal businesses. Teck, which produces steelmaking coal, had criticised Glencore’s plan because it would leave its investors holding shares in a large miner of thermal coal — the most polluting fuel.

Glencore is now proposing a deal that would give Teck investors 24% of the combined metals-focused business — the same split as its previous offer — plus $8.2 billion in cash. Teck investors would also have the option to choose shares in the new coal company instead, up to the equivalent of 24%.

So far Teck has refused to engage with Glencore, calling its previous proposal a “departure from reality,” while Teck’s controlling shareholder, Norman Keevil, indicated he will not sell to Glencore at any price. Instead, the miner has urged investors to approve an earlier plan to split its metals and coal businesses.

The vote on that plan has been scheduled for April 26, giving both Teck and Glencore a tight window to win over investors. Teck’s dual-class share structure means any takeover bid would need the support of the Keevil family, but the company’s current restructuring plan also requires two-thirds approval from the holders of regular class B shares.

Glencore said on Tuesday that Teck should engage and delay the vote.

“We believe that it is in your shareholders’ interests to engage with Glencore and we see no valid reason not to delay your shareholders meeting,” Glencore Chief Executive Officer Gary Nagle said in the statement.

Glencore’s proposal, if successful, would give the company control of Teck’s lucrative copper mines — adding exposure to a critical building block for the green energy transition, while also providing a roadmap for the larger company to exit thermal coal much sooner than it had previously telegraphed.

The biggest miners have been grappling for years over what to do with their coal mines — most have already retreated, while Glencore has held its ground on a plan to operate the mines until they are depleted by 2050. Teck said last week it spent four years deciding what to do with its steelmaking coal business.

As Teck has remained resolute in its opposition, analysts and investors speculated that Glencore would have to increase its bid to get enough investors to  support to its proposal. Instead, Tuesday’s offer gives them the option of owning a stake in the future coal business or taking cash.

“Glencore continues to believe that CoalCo’s combined thermal and coking coal assets would position it as a leading, highly cash-generative bulk commodity company which would attract strong investor demand given its yield potential,” Glencore said. “However, we acknowledge that certain of your investors may prefer a full coal exit and others may not desire thermal coal exposure.”

Glencore’s original offer represented a premium of about 20%, which is significantly less than Glencore’s rivals have paid in recent deals — albeit for purely copper- or nickel-focused purchases. BHP Group agreed to buy an Australian copper miner for a 49% premium to its value before the offer was announced, while Rio Tinto Group agreed a more than 50% premium to secure more control of a giant copper mine in Mongolia.

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