Glencore’s Teck saga continues with shareholders dithering over rival visions
Teck Resource’s dramatic withdrawal of its demerger plans from the jeopardy of a shareholder vote this week is only the latest twist in a protracted industry saga, with no endpoint in sight and few developments easy to predict.
The Vancouver-based miner shelved its plan to split its company in two – spinning off its coal assets into a separate offering from its future-facing green metals like copper.
This is despite Teck robustly defending its proposition to shareholders for weeks, ignoring the siren’s call of Swiss commodity giant Glencore and its massive £19.7bn and vast resources.
Meanwhile, Jonathan Price, Teck’s chief executive, has reaffirmed his objections to Glencore’s unsolicited offer.
He said he would “not engage in something that is a distraction.”
Teck ownership and ‘supervoting’
However, the reality remains Teck would not have pulled the vote if they thought a majority of its shareholders would accept it.
The Canadian miner’s restructuring proposal needs two-thirds approval from both the common class B shareholders and the class A ‘supervoting’ shareholders.
Its class A shares are dominated by the Keevil family – which supports the restructuring, while its B shareholders consist of dozens of investment groups.
This is especially relevant when realising shareholders passed all the other resolutions brought before them on Wednesday, including proposals to phase out the ‘supervoting’ quality of the A-shares, which has enabled primary shareholders to dictate the company’s direction.
The catch is the transition is still set to take another six years, which remains a source of consternation even to shareholders who voted the resolution through, and means the A-shareholders are set to be the key figures in any Teck-Glencore negotiations.
While ruling out talks with Glencore, Price has confirmed Teck will revise its separation proposal – making it simpler from a financial perspective.
The original plan was for Teck’s coal business to pay royalties to the metals business for three and a half years – which has frustrated shareholders due to the continued association of copper with coal investments and the convoluted nature of payments.
Canada’s Trudeau watching
Meanwhile, Glencore’s offer is still on the table, as its pledge to take a higher bid straight to the shareholders if Teck’s board continues to give them the hard shoulder.
There is every possibility Glencore could exploit shareholder acrimony to push through a deal
However, its plans to combine and spin off its thermal coal unit and Teck’s steelmaking coal business, while rebranding its mineral operations as Glen Teck, have not convinced shareholders either.
While the conclusion is uncertain, there could soon be a guarantee of an ending – with reports the Canadian government could intervene and establish an end-date to the M&A struggle.
Canadian Prime Minister Justin Trudeau is said to be watching events closely alongside finance and natural resource ministers, while the opposition Conservative party is calling for the takeover to be blocked to preserve thousands of jobs.
This raises the possibility that politicians could be resolving this, if an agreement between Teck and Glencore is not resolved soon.