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Teck rejects Glencore’s sweetened proposal, tweaks separation plans

13th April 2023

By: Mariaan Webb

Creamer Media Senior Deputy Editor Online

     

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The board of Canadian miner Teck Resources has unanimously rejected the revised acquisition proposal from Swiss commodities trader Glencore, with CEO Jonathan Price stating that “fundamental flaws” continued to make it a “nonstarter”.

“It does not address major inherent risks including substantial regulatory hurdles, jurisdictional and ESG concerns, and diluting the base metals business with significant oil trading,” he said in a statement.

Teck continues to believe that its proposed separation into Teck Metals and Elk Valley Resources (EVR) offered better opportunities.

“Glencore has made two opportunistic and unrealistic proposals that would transfer significant value to Glencore at the expense of Teck shareholders,” said chairperson Sheila Murray.

“Teck’s proposed separation creates a significantly greater spectrum of opportunities to maximise value for Teck shareholders. The special committee and board continue to recommend that shareholders vote for the proposed separation into Teck Metals and EVR as the best pathway to fully realise the greatest value.”

“Now, pre-separation, is not the time to explore a transaction of this nature,” said Dr Norman Keevil, chairman emeritus, Teck. “I have the utmost confidence in the board’s and our management teams’ strategy to maximize value for each of Teck Metals’ and EVR’s shareholders after the separation.”

Meanwhile, Teck also announced changes to allow for an earlier full separation of Teck Metals and EVR and to maximise free cash flow available to be returned to shareholders.

Following consultation with shareholders, Teck reduced the minimum term of the royalty paid by EVR to Teck Metals from about 5.5 years to 3 years, providing a potentially shorter path to full separation of Teck Metals and EVR, and putting in place measures to cap yearly capital spending by EVR at $1.3-billion, with exceptions for social and regulatory requirements.

“Teck management and the board have had extensive shareholder engagement and based on this feedback, we have decided to make these changes to allow for an earlier full separation and enhance alignment between EVR and Teck Metals,” said Price.

“We believe these amendments will enhance certainty and further protect the interests of Teck Metals shareholders.”

PROXY ADVICE
Meanwhile, shareholders in diversified miner Teck should vote against the Canadian company’s separation plan, Institutional Shareholder Services (ISS) said on Thursday.

Although the separation creates a pathway for shareholders to be unwound from their interest in steelmaking coal assets, it introduces “structural issues and uncertainties”, proxy advisory firm said.

ISS noted that nonapproval of the separation plan appeared unlikely to result in the board accepting Glencore’s unsolicited proposal, thus making Teck’s current status quo the most probable outcome in the near term.

“Teck’s status quo does not seem to offer a poor result for shareholders, given the company’s track record and the fact that shareholders will retain optionality to enter into another transaction to enter into another transaction in the future, which could provide more advantageous terms.

“Accordingly, the shareholders are recommended to vote against the proposal,” said ISS.

Edited by Creamer Media Reporter

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