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Canada’s Teck Resources has rejected a hostile approach from Glencore that would have created a £69bn natural resources giant and resulted in a vast restructuring of the FTSE 100 mining company.
The unsolicited offer represents the biggest acquisition attempt by Switzerland-based Glencore — the world’s most profitable coal miner and a major commodities trading house — since its merger with Xstrata in 2013.
The combined share value of the two companies would total £69bn.
The all-share offer comes just weeks after Teck announced plans to spin out its steelmaking coal business from a portfolio of minerals vital to the energy transition.
As part of the bid, Glencore revealed it would spin out its own highly profitable coal business if the acquisition went ahead — creating a New York-listed “CoalCo” with its thermal coal assets and Teck’s metallurgical coal assets.
Under the proposal, a separate “MetalsCo” would include Glencore’s and Teck’s industrial metals businesses, as well as Glencore’s oil trading business.
This new metals company, provisionally called Glenteck, would be the world’s third-largest copper producer once its assets are fully developed, behind top copper producers Freeport and Codelco.
The offer marks growing appetite for large acquisitions in the natural resources sector after mining companies and trading houses accrued record profits amid the dislocation caused by Russia’s invasion of Ukraine.
Glencore offered to buy Teck in an all-share transaction, for a 20 per cent premium to its share price on March 26 when Teck’s closing market capitalisation stood at C$25bn ($19bn).
By swooping in just before Teck’s shareholders are set to vote on its own spinout plans on April 26, Glencore hopes to persuade shareholders that it is presenting a better offer.
Glencore chief executive Gary Nagle said on Monday that the deal would create “two global standalone giants” and offer a significant premium to Teck shareholders, who would control 24 per cent of the resulting companies if the deal went ahead.
He said that synergies of $4.25bn-$5.25bn across marketing and operations would allow the two new companies to gain about $15bn in additional market cap as a result of the transaction.
The two sides have talked about merging before in 2020, but those talks did not advance, according to Teck’s letter to Glencore published today.
Teck said the offer was “opportunistically timed” and the board “is not contemplating a sale of Teck at this time”.
It added that exposing its shareholders to Glencore’s thermal coal business would impair the value of its steelmaking standalone coal business and be contrary to its environmental, social and governance commitments.
Sheila Murray, chair of Teck’s board, said that sticking by the existing spinout plans would create “a greater spectrum of opportunities to maximise value for Teck shareholders”.
Teck is controlled by the Keevil family, who own the majority voting rights through their class A supervoting shares.
Norman Keevil, former chair of Teck, firmly rejected Glencore’s offer in a statement. He added: “I remain fully committed to Teck’s proposed transaction to create two world-class, well-focused, independent companies.”
Glencore has come under pressure from shareholders over its thermal coal business, including criticism about the level of disclosure.
Shares in Glencore fell 1.7 per cent following the announcement, while those in Teck gained 0.8 per cent in Toronto.
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