Glencore open to better bid for Teck if split rejected

Gary Nagle (Source: Glencore.) and Jonathan Price (Source: BHP.)

Glencore (LON: GLEN) raised on Wednesday the prospect of improving its $23.1bn takeover bid for Teck Resources (TSX: TECK.A, TECK.B) (NYSE: TECK), provided that shareholders reject the Canadian miner’s plan to split the company in two next week.

In an open letter addressed to Teck’s Class B shareholders, who own almost all the equity but few of the votes, Glencore chief executive officer Gary Nagle said his company was open to talk improvements to its proposal directly with Teck shareholders if the board continues to rebuff its offer.

“Glencore has never stated that its proposal is ‘best and final’ and that is it not willing to make changes and improvements to its proposal,” Nagle said, adding the company would make an offer directly to Teck shareholders “if the proposed Teck separation does not proceed”.

Nagle warned that any potential future offers for spinoff metals unit Teck would likely look very different, given the friction costs, the complexity of the two companies, the time delay involved and the impact of two new management teams and boards.

Nagle also said that the Teck board had “consistently refused any engagement.”

“We believe that with engagement, we could improve our proposal’s terms and value, which would be in the best interests of all Teck shareholders,” he wrote.

The Canadian company quickly replied by saying that Teck has previously engaged “extensively” with Glencore – for six months on essentially the same proposal – and repeatedly determined it is not in the best interest of its shareholders.

Glencore’s letter comes exactly one week ahead of the Teck vote on splitting the company into two – a base metals unit and a metallurgical coal miner. To pass, the motion requires two-thirds approval by both Class A and Class B shareholders. 

Nagle landed in Toronto last week to personally explain his company’s vision and intentions, resulting in two influential shareholder advisory firms – ISS and Glass Lewis – recommending against Teck’s strategy.

His visit also triggered Teck chairman emeritus, Norman Keevil, to publish an open letter saying he wasn’t against deals with other companies, provided they were with “the right partner” and “on the right terms” after the Teck splits its base metals and coal businesses.

His comments were followed by CEO Jonathan Price’s, who expressed confidence in Teck’s biggest B-shareholder, China Investment Corp., voting for the proposed split. CIC owns 10% of the class B shares.

No “foreign predators”

Even Canadian mining legend Robert Friedland has come out in defence of Teck. The billionaire urged the Canadian government and regulators to protect Teck from “foreign predators” and to ensure that strategic resources, particularly copper and zinc, remain in local hands.

Glencore’s initial bid represented a 20% premium to Teck’s March 26 closing price, when it was privately made.

JP Morgan analysts this week said that Glencore could pay as much as $27.2 billion.

The Vancouver-based miner’s shareholders will vote on the proposal to split up its metal and steelmaking coal businesses into two companies, Teck Metals and Elk Valley Resources, on April 26.