Teck Rejects Unsolicited Acquisition Proposal
Teck Resources Limited today announced that the Board of Directors of Teck has received and unanimously rejected an unsolicited and opportunistic acquisition proposal from Glencore plc, which would see that company acquire Teck and subsequently separate to create two businesses, which would expose Teck shareholders to thermal coal and oil trading.
“The Board is not contemplating a sale of the company at this time. We believe that our planned separation creates a greater spectrum of opportunities to maximize value for Teck shareholders,” said Sheila Murray, Chair of the Board, Teck. “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.”
“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,” said Jonathan Price, CEO, Teck.
Consistent with its fiduciary duties and in consultation with its financial and legal advisors, Teck’s Board of Directors has conducted a detailed review and assessment of the unsolicited proposal and, on the recommendation of the independent Special Committee of the Board, has determined that the proposal is not in the best interests of Teck or its shareholders. The Board strongly believes the separation plan that Teck has proposed, which will create two world-class Canadian companies, provides a superior opportunity to maximize value for all Teck shareholders. Furthermore, the unsolicited proposal introduces significant timing, regulatory and other execution risks, particularly as compared to Teck’s own planned separation.
The unsolicited proposal contemplates an all-share acquisition of Teck by Glencore offering 7.78 Glencore shares for each Teck Class B subordinate voting share and 12.73 Glencore shares for each Teck Class A common share, which represented a 20% premium for both on the date of the offer. The proposal notes an intention to proceed with the simultaneous (or near simultaneous) demerger of the combined thermal and metallurgical coal as well as the ferro-alloy operations of the merged company into a new publicly traded company. The remaining company would include Glencore’s and Teck’s base metals operations as well as Glencore’s oil and other commodity trading business (other than coal trading and marketing).
In making its determination to reject the unsolicited proposal and concluding that the proposal is inferior to Teck’s own planned separation, Teck’s independent Special Committee and Board considered numerous factors, including the following:
The Teck Board is not contemplating a sale of Teck at this time: If the Board were to engage in a sale process, it would undertake a disciplined process to determine the most compelling transaction for Teck’s shareholders. Teck’s proposed separation positions the resulting companies, Teck Metals and EVR, for success and does not foreclose future opportunities for other value enhancing transactions.
Opportunistically timed: The unsolicited proposal is an opportunistically timed attempt to transfer value to Glencore shareholders at the expense of Teck shareholders. It comes as Teck is ramping up its flagship QB2 copper project (which announced first copper March 31, 2023) and poised to implement its separation plan to create two world-class, pure-play companies and realize the full potential of each business for shareholders.
High execution risk: The Glencore proposal has a very high level of complexity and execution risk based on the number of jurisdictions, commodities and complex approvals required from various competition and regulatory bodies, which could take up to 24 months to resolve. This results in a high degree of execution uncertainty. In comparison, Teck’s planned separation has all regulatory approvals in place and, following shareholder approval on April 26, 2023, closing is expected on May 31, 2023, allowing Teck shareholders to begin to realize the substantial benefits of the separation in the very near term.
Thermal coal exposure: The spun-out business envisioned by Glencore would be a majority thermal coal business of an unprecedented scale. Thermal coal mines are contrary to the global decarbonization agenda. The Glencore proposal would force Teck shareholders to hold massive thermal coal exposure, which would be value destructive, drive away current and future investors who cannot hold thermal coal assets, and result in Teck’s world-class steelmaking coal business trading at a discount.
Oil trading exposure: The Glencore proposal would introduce oil exposure into the merged base metals business, which would reverse the steps Teck has taken to exit the oil business.
In a letter dated today, Teck communicated its response to Glencore. A copy of Teck’s letter can be found here: click here.
Teck’s Board continues to recommend that shareholders approve the previously announced reorganization of Teck’s business and the previously announced proposal to introduce a six-year sunset for the multiple voting rights attached to the Class A common shares of Teck, among other items of business, at the annual and special meeting of shareholders on April 26, 2023. The management proxy circular providing more information on these proposals and voting procedures will be available at www.teck.com.