Teck Resources has rejected an unsolicited $US23 billion ($34 billion) merger proposal from Glencore, believing it will “expose Teck shareholders to thermal coal and oil trading”.
The major mining company, which has operations in South and North America, announced its own demerger in February that would enable the creation of Teck Metals – a low-cost base metals producer, and Elk Valley Resources – a Canadian coal miner.
And it wishes to proceed with this separation.
“The board is not contemplating a sale of the company at this time,” Teck chair Sheila Murray said. “We believe that our planned separation creates a greater spectrum of opportunities to maximise value for Teck shareholders.”
“The special committee and board remain confident that the proposed separation into Teck Metals and Elk Valley Resources (EVR) is in the best interests of Teck and all its stakeholders, is a much more compelling transaction and does not limit our optionality going forward.”
Glencore is offering 7.78 Glencore shares per Teck Class B subordinate voting share and 12.73 Glencore shares per Teck Class A subordinate voting share, representing a 22 per cent premium from the companies’ closing share prices on March 31.
The merger would see the spin-off of MetalsCo and CoalCo, with which Glencore shareholders would own 76 per cent and Teck shareholders would own 24 per cent.
MetalsCo would be a global company comprising Glencore and Teck’s metals and minerals assets, Glencore’s metals and energy (excluding coal) marketing, recycling, and distribution businesses, along with its investment in agriculture company Viterra.
CoalCo would be a standalone steelmaking coal business comprising Glencore and Teck’s coal assets, and Glencore’s ferroalloy assets.
But Teck is not interested in Glencore’s coal exposure. Glencore owns 16 coal assets in Australia, located in the Hunter Valley and Bowen Basin.
“The Glencore proposal would expose Teck shareholders to a large thermal coal business, an oil trading business and significant jurisdictional risk, all of which would negatively impact the value potential of Teck’s business, is contrary to our ESG commitments and would transfer significant value to Glencore at the expense of Teck shareholders,” Teck chief executive officer Jonathan Price said.
Teck encourages its shareholders to approve its own demerger, which will go to a vote at the company’s annual general meeting on April 26.
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