Teck Resources, a Canadian miner, rejected a revised hostile bid of $23bn from Glencore. However the miner left the door open to continue talks with a different deal format than the one proposed by the FTSE100 miner.
Teck informed Glencore, that in order to continue talks with the Swiss miner in the future, it would be necessary for the Swiss company to first spin off their thermal coal business – the most profitable one on the planet – and then return for further discussions.
Sheila Murray, Teck’s chair, wrote in an letter to Sheila Murray on Thursday: “Now that you have publicly declared you are ready to spin out your Thermal Coal Business, we recommend you do so.”
She continued: “Teck Metals should engage with Glencore after our separation is complete.”
Teck has rejected two offers by the FTSE100 miner within a span of just a few weeks. But the plan that its chair outlined is the first time he has suggested the Canadian group would consider negotiating a deal with Glencore, albeit at very different terms than the current offer.
Teck has already planned to separate its metals and steelmaking coal businesses. The proposal will be put to a vote by shareholders on April 26.
Glencore proposes merging Teck and Glencore, then dividing up the assets of both companies into “MetalsCo” (a metals company) and “CoalCo” (a coal company). Teck shareholders will receive 24 percent of the shares of the new MetalsCo. They can also choose between cash or shares worth up to 8.2 billion dollars for the coal business.
Jonathan Price, Teck’s chief executive, said that Glencore’s sweetened proposal made this week was “unworkable” and a “non-starter”.
He said that Glencore would be wise to address the problems it faces with its portfolio before approaching Teck about a possible acquisition.
The Swiss company said that its proposal would maximize value for both companies by creating two global titans in metals, and coal.
In a tacit endorsement of Glencore’s plan to split, proxy voting firm ISS advised Teck shareholders to reject its plans. ISS said the proposed separation was not as compelling as “alternative structure which could be sought”, a reference to Glencore.
Glencore shareholders have been urging the Swiss commodity trader and miner to separate its thermal coal division.
Giuseppe Bivona is the chief investment officer of activist investor Bluebell Capital. Bluebell Capital owns shares both in Teck and Glencore. “But the way this transaction should be handled is completely different.”
Bluebell, in a letter to Glencore dated Wednesday, requested that it separate its coal and oil businesses before merging with Teck’s Metals Unit. This is similar to the proposal made by Teck.
Glencore said that it does not plan to separate its coal business. However, it would do it if there was a large number of shareholders who demanded it.
Gary Nagle, Glencore’s chief executive, told investors that “on coal, we always said we would divest if shareholders strongly supported it.” Nagle will be in Toronto this Thursday to meet with certain Teck shareholders.