Teck Resources has withdrawn its proposal to split the company, which industry experts say may cause Glencore to attempt another takeover offer.
Until yesterday Teck was in the process of splitting its own businesses down the middle. The Canadian company was hoping to spin off its steelmaking coal as Elk Valley Resources, while the main body rebrands to Teck Metals.
The proposed restructure was to be put before shareholders yesterday for a vote, but prior to the Annual General Meeting the company took the proposal off the table.
Teck chief executive officer, Jonathan Price, said there has been very strong support for the goal of separation, and that the offer was withdrawn for revision.
“We have… listened and heard the feedback that some shareholders would prefer a more direct approach to separation,” he said.
“Our plan going forward is to pursue a simpler and more direct separation, which is the best path to unlock the full value of Teck for our shareholders.”
Teck chair of the board, Sheila Murray, echoed the same sentiment.
“The Board will focus on incorporating the feedback heard into a revised value-enhancing separation to maximise value for shareholders,” she said.
If approved, the vote to split the company would have closed the door on Glencore, which is actively attempting a takeover of Teck but has so far been rejected. But industry experts at Bloomberg say Teck’s latest withdrawal may change things.
“The late withdrawal by Teck of its separation plan from today’s Annual General Meeting appears to reflect significant shareholder concerns that the plan is too complicated,” said Bloomberg analysts.
“Glencore will view this climbdown as an opportunity to reassert its merger proposal, which will need to be improved to win over broad shareholder support.”
Teck turned an initial takeover offer earlier this month, citing a reluctance to expose its shareholders to Glencore’s oil and thermal coal assets in light of the global push for net-zero, as well as jurisdictional risk.
“All of which would negatively impact the value potential of Teck’s business… and would transfer significant value to Glencore at the expense of Teck shareholders,” Teck said in a statement.
Glencore hit back, adding an $US8.2 billion cash component to its offer in an effort to buyout shareholders who are eager to steer clear of coal.
“Glencore has proposed … to introduce a cash element to the proposal … to effectively buy Teck shareholders out of their coal exposure such that Teck shareholders would receive 24 per cent of MetalsCo and $US8.2 billion in cash,” Glencore said in a statement.
Through the merger, Glencore is seeking to simultaneously spin off two combined thermal and steelmaking coal businesses into stand-alone companies.
MetalsCo would become a world-class base metals business with a diversified portfolio.
CoalCo – the other proposed spinoff – would be a highly lucrative coal and carbon steel materials business.