This weekend, the board of Canadian mining company Teck Resources faced increasing pressure to begin talks with commodities giant Glencore regarding a takeover offer worth $23 billion (£19billion).
Glass Lewis, a shareholder advisory group with a lot of influence, has joined ISS to urge Teck shareholders to vote against its split on April 26.
Glass Lewis stated that Glencore’s proposal was “a fairly compelling strategic option which, at minimum, warrants engaging in further discussion with Glencore and hitting the pause key on the separation”. Glass Lewis said Glencore’s offer was “a reasonably compelling strategic alternative that, at a minimum, warrants the company hitting the pause button on the separation and engaging in further discussions with Glencore”.
Teck’s Board, led by Chief Executive Jonathan Price, rejected the offer, claiming that its own separation would create greater value for shareholders. Glencore increased its offer by up to $8.2bn in cash last week to Teck shareholders to buy them out.
The Keevils built Teck over many decades, and they have a lot of voting rights. They control the majority A shares due to a controversial dual-class system.
Norman Keevil said that he would not sell the company at any price. The family has pledged to get rid of the A and B share after six years. However, some shareholders such as David Einhorn’s Greenlight Capital want this to happen immediately. Greenlight Capital’s representative stated: “They need to relinquish their control immediately.” This will demonstrate to shareholders that Teck operates in good faith, and that the class B shareholders who own 99 percent of the company are treated fairly.
Teck’s other investors have questioned the decision to spin off the coal assets, but use the cashflows to fund the metals business separately for many years.
Paul Moore, PM Capital’s Sydney-based analyst, said: “We find the coal spin-off confusing as it’s a spinoff by name only. Teck owns all coal-free cashflow. We believe that the coal business will be mispriced because it is complex.
Greenlight and PM did not support Glencore’s proposal. The Greenlight representative stated that the Glencore proposal “isn’t attractive” because “Teck is better and has a lower valuation”. He said: “If Teck wanted to pursue the deal, they should launch a competition.”
Gary Nagle, the Glencore CEO, has been visiting Toronto to meet with Teck investors and convince them to oppose the split. About 120 shareholders have been met or spoke to by Gary Nagle.