Copper miner Teck Resources has rejected a sweetened bid from Glencore and made changes to a proposed restructuring plan to allow for an earlier full separation of its metals and coal divisions.
Glencore has offered Teck’s shareholders 24 percent of the combined metals group and up to $8.2bn in cash for those who may not want exposure to thermal coal, which is the most polluting fossil fuel.
It had initially not offered a cash option.
Glencore’s play for the Vancouver-based miner comes amid a rising wave of buyout offers for mines and mining companies that produce copper and other green energy transition minerals, as opposition to the construction of new mines grows across the globe.
The Swiss mining giant’s unsolicited bid for the Canadian copper and zinc miner would involve combining and spinning off the thermal and steel-making coal businesses of both companies.
“Now, pre-separation, is not the time to explore a transaction of this nature,” Teck Chairman Emeritus Norman Keevil said in a statement.
Glencore’s proposal is materially unchanged and still not in the best interest of Teck, the company said.
It added a revised restructuring plan would now include a potentially shorter path to fully separate the copper and zinc business Teck Metals from the steelmaking coal Elk Valley business and reduce the minimum term of the royalty paid by to Teck Metals to three years from 5.5 years.
It also put in place measures to cap annual capital spending by the coal business at $1.3bn.
“The split makes sense and the original way was a pretty messy way of doing it because of the length of the royalty payment, but when I am given the choice between the status quo or the new plan, I have to go with the new plan,” said Bob Bishop, boss of Impala Asset Management, which holds both ‘A’ and ‘B’ class of shares in Teck.
“And they are getting rid of the A shares over a period of time and that’s a big deal. The dual class shareholding voting rights is never good for shareholders in the long term,” Bishop added.
The ‘A’ class of shares, most of which are in the hands of the Keevil family, have more voting power than the numerous ‘B’ class shares held by institutions.
Influential proxy advisor Institutional Shareholder Services (ISS) advised shareholders to reject Teck’s restructuring plan on uncertainties and structural issues.
Glencore declined to comment, but it has previously said there are flaws in Teck’s own spin-off plan because it would leave the metals unit still exposed to coal revenue.
Nippon Steel, which has agreed to buy 10 percent in Teck’s coal spin-off, said on Thursday it hoped the current restructuring plan would be approved.
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A vote on Teck’s own plan is scheduled for April 26.
Glencore chief executive Gary Nagle was on Thursday meeting some of Teck’s Canadian shareholders in Toronto to personally lobby them for support, but several have this week called on the company to increase the overall offer.
By CityAM
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