Gary Nagle: Glencore never said its proposal was best and final
Swiss commodities major Glencore has raised the prospect of making improvements to its $22.5-billion proposal for a merger with Canadian miner Teck Resources, with CEO Gary Nagle saying on Wednesday that the company never stated its proposal was “best and final”.
In an open letter to Teck ‘Class B’ shareholders, he said that any such improvements would be best considered following engagement by the Teck board.
Glencore has sought to engage with the board of the Vancouver-based firm, but said it had been consistently refused.
“We believe that with engagement, we could improve our proposal’s terms and value, which would be in the best interest of all Teck shareholders."
Glencore is facing a battle to convince Teck shareholders to accept its proposal, rather than the Canadian firm’s current strategy of separating its base metals and steelmaking coal businesses.
Teck’s shareholders are meeting to vote on the proposed separation plan in exactly a week’s time. Should the separation plan be approved, Glencore would walk away, Nagle said.
He also cautioned that any potential future offers for Teck Metals 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.
Should the April 26 shareholders meeting be delayed, or should the separation plan be voted down, Glencore’s proposal would remain valid, Nagle said.
Two major proxy advisers – ISS and Glass Lewis – have released recommendations advising Teck shareholders to vote against the proposed separation, citing material and complicated issues that will arise from the ongoing financial integration between Elk Valley Resources (EVR) and Teck Metals.
Glass Lewis noted in its recommendation that Glencore’s decision to add a cash to its proposal – essentially buying out investors out of their coal exposure with up to $8.2-billion in cash – would resolve “at least some of the concerns” regarding a Glencore deal exposing Teck shareholders to unwanted ESG-related risk.
Glass Lewis noted that shareholders would be better served to reject the separation at this time, with a view towards encouraging the company to engage in further dialogue with Glencore.
On Tuesday, Teck CEO Jonathan Price told investors in a conference call that the plan to split the company into coal and copper businesses would be safer and more lucrative for shareholders than the Glencore proposal.
Price said that Teck’s plan to split into EVR and Teck Metals would immediately benefit shareholders, and that Glencore’s proposal would not pay off for at least two years. Newswire Reuters reports that Teck’s management estimates that the post-split shares of Teck Metals could trade at C$100, or about 55% above Tuesday’s close.
One major shareholder of Teck, Norman Keevil, has made it clear that he is not interested in Glencore’s proposal.
Keevil, who is best known for his role in building Teck into the mining giant that it is today, said on Monday that there were numerous mining industry partners which had their eye on Teck and would be interested in partnering or investing in Teck Metals after it separated its base metals and steelmaking coal businesses.
He said he would support a transaction – whether it be an operating partnership, merger, acquisition, or sale – with the right partner, on the right terms for Teck Metals after separation.
“Based on my decades of experience building a successful mining company, I believe that pursuing a sale or merger transaction now would rob our shareholders of significant post-separation value.
“Glencore's proposal is the wrong one, as well as at the wrong time. Ivan Glasenberg is an interesting guy and a smart man, and his timing is certainly good for them, but not for Teck or our shareholders. I fully agree with Teck’s Board that there is no deal to be done pre-separation with Glencore or any other party,” said Keevil.
Separately, Canadian miner CEO Robert Friedland said in a series of tweets on Monday night that Canada's government should not "lightly sacrifice" Teck to Switzerland-based Glencore at a time when Ottawa wants to position itself as an important global supplier of green energy transition minerals.