Glencore digs in for battle as momentum shifts against Teck

Glencore’s CEO Gary Nagle. (Image by Glencore).

Teck Resources Ltd. chief executive Jonathan Price began last week on a blistering note, declaring a $23 billion takeover bid from Glencore Plc a “non-starter” and slamming his mining rival’s history of bribery and risk.

He had good reason to be confident: Just days earlier, Teck’s controlling investor had said he wouldn’t sell to Glencore, no matter what the price. Yet less than one week later, the momentum has shifted sharply in favor of Glencore and its hard-charging South African CEO, Gary Nagle.

The focus of the tussle between the two companies for now is an April 26 vote by Teck shareholders on a proposed breakup of the company. The Canadian miner wants to spin off its steelmaking coal business to focus on mining copper and zinc. Glencore is trying to muster enough investor support to block that plan while proposing a takeover that would lead to the creation of two new, separate entities, a metals-producing behemoth dubbed GlenTeck and a massive coal-mining group.

But it’s not just the future of both companies that’s at stake. The unfolding corporate drama also underlines how huge mining mergers are back on the agenda after a decade-long hiatus. The potential dismantling of Teck and its consolidation with Glencore may be a preview of similar deals to come, as the biggest miners position themselves for a world in which fossil-fuel use could soon peak while the transition to green energy triggers an explosion in metals demand.

Glencore ends the week with the wind at its back. Two influential shareholder advisory firms have recommended against Teck’s strategy, with Glass Lewis suggesting the company should engage with Glencore. Bloomberg reported on Friday that Teck’s largest investor, China Investment Corp., currently favours Glencore’s proposal.

And Norman Keevil, patriarch of the Canadian family that ultimately controls Teck, also clarified to the Globe and Mail newspaper that he wouldn’t veto any deal that has the support of Teck’s board and other shareholders after the company’s coal spinout, though he still opposes Glencore’s bid.

It’s still not clear whether Teck and Keevil would entertain discussions with Glencore if investors vote against the Canadian company’s coal spinoff. But in an interview on Friday, Nagle was blunt: Glencore will keep pushing for a deal.

With less than two weeks left on the clock, Glencore is pulling out the stops to win over investors, framing the Teck vote as a referendum on its own offer to buy the company and then spin off their combined coal businesses. (Teck, on the other hand, insists it’s simply a vote between a split and the status quo.)

Adding to the drama of the past week were the simultaneous flying visits to Toronto by both chief executives, who spent the last few days pitching their visions to Teck investors.

Both men are both relatively early into their first roles as CEOs – Nagle took over in mid-2021, while Price has only been in the job for a little over six months. Both replaced longtime CEOs whose leadership shaped the legacy of their companies: Ivan Glasenberg at Glencore, and Don Lindsay at Teck. And each has an influential, larger-than-life investor to contend with – Glasenberg remains Glencore’s biggest shareholder, while Teck’s dual-class structure gives Keevil a blocking vote on any decisions through supervoting “Class A” shares.

But while Nagle has spent his career at Glencore, Price is a relative newcomer, having joined Teck from industry leader BHP Group in 2020 to become CFO.

Nagle arrived Wednesday night in Toronto with a posse of Glencore executives to sell his vision. The former commodities trader, who spent 20 years traveling weekends and cutting deals as he ascended the Glencore ranks, was in his element.

“We are ready to engage,” he said in an interview Friday. “If Jonathan says he’ll meet with me, I’ll go anywhere in the world.”

The Glencore team managed to speak with or meet about 120 Teck investors on Thursday alone, according to people familiar with the interactions.

Price, meanwhile, has been adamant that the company has the support of investors. In Monday’s presentation to analysts and investors, the Teck CEO criticized Glencore’s plan as lacking clarity and emphasized the other company’s track record on environmental, social and governance issues, including its guilty pleas last year for bribery and price manipulation.

“We’ve been speaking to a lot of shareholders and we are confident they recognize and are supportive of Teck’s planned separation as having the greatest potential to create value,” Price said on Friday.

Both companies have adjusted their proposals this week in an effort to win investor support.

Glencore had originally outlined an all-share offer for Teck, but on Tuesday offered to add a cash component to buy investors out of their exposure to the combined coal company. Several Teck shareholders had raised concerns about receiving shares in a business that just produced coal.

The change from Glencore may have won support from at least one key investor. China Investment Corp., which owns 10% of Teck’s Class B shares, currently favors Glencore’s latest proposal because it offers a quicker and cleaner exit from coal, Bloomberg reported on Friday. CIC hasn’t made a final decision yet, but is considering voting against Teck’s split plan, although it could still require a higher price to support Glencore’s offer.

In Teck’s spinoff plan, investors would get shares in the new steelmaking-coal company, and the new “Teck Metals” would earn a royalty on the coal profits for a period after the split. The company has now reduced the minimum term for those payments to three years from more than five earlier.

However, Teck’s efforts to win shareholder support received two big blows late in the week after proxy advisory firms Institutional Shareholder Services and Glass Lewis both recommended that investors vote against Teck’s spinoff plan on April 26.

The Glencore offer represents a reasonably compelling alternative that could warrant discussion and there is no urgency for Teck to have to pursue its separation now, Glass Lewis said in a report.

Some analysts have also suggested that Glencore could raise its offer to further persuade Teck investors to block the spinoff.

“Between the ISS recommendation and a higher Glencore bid likely coming, the vote really seems to be in jeopardy,” said Canaccord Genuity analyst Dalton Baretto.

(By Jacob Lorinc and Thomas Biesheuvel)


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