(Zurich) The Swiss commodities giant Glencore published an open letter to shareholders of Canadian mining group Teck Resources on Wednesday to try to convince them to accept its takeover offer, saying it was ready to improve it further.
The Canadian group responded with its own letter to its shareholders, saying that Glencore’s offer is not a “realistic or viable option”.
Glencore’s missive is “an opportunistic attempt to disrupt” its coal split project “with an ill-defined and highly uncertain proposal”, accuses the Canadian group.
On Wednesday morning, the Swiss group published a letter to Teck Resources shareholders ahead of an extraordinary general meeting to urge them “to act”.
Glencore assures them that it could “improve the terms and value” of its proposal, “which would be in the best interest of all Teck shareholders”.
The letter is addressed to class B shareholders, the shares of Teck Resources being divided into two categories. Class A shares have more voting rights.
In February, Teck Resources, one of the main mining groups in Canada, unveiled a plan proposing to separate from metallurgical coal by splitting its activities in two. Its shareholders must vote on this project at an extraordinary general meeting on April 26.
But in the meantime, Glencore has made an offer to Teck to merge their activities and simultaneously split them to create two companies, one specialized in metals and the other in coal.
This offer of over $22.5 billion represented a 20% premium to Teck’s closing price on March 24. The Canadian group immediately refused it.
Among their arguments, its leaders warned that Glencore’s activities also include thermal coal, much more contested than metallurgical coal because of its CO2 emissions and its contribution to climate change.
Faced with this refusal, Glencore amended its proposal on April 11, offering Teck Resources shareholders who wish to exit coal to receive 24% of MetalsCo, one of the two companies that would emerge from its offer, as well as a cash payment of a total of $8.2 billion. Teck’s board again refused.
On Monday, Norman Keevil, the family patriarch who owns much of the Class A shares, supported Teck executives, saying he was open to a transaction “ with the right partner ” and on the “ right terms ”, but ” after the separation”. Glencore’s proposal is not the right one and comes “at the wrong time”, he said.
Class A shares have 100 votes per security, compared to 1 for Class B shares. Class A shares, held by the Keevil family through Temagami Mining as well as a subsidiary of the Japanese group Sumitomo Metal Mining, represent 60.5% of the voting rights, according to the annual report of Teck Resources.
The activist fund Bluebell Capital, shareholder of the two groups with an undisclosed stake, believes that Glencore itself should start by separating from its own coal activities, even if it means discussing with Teck later when the latter ci will have completed its project, told AFP the fund which sent a letter to the leaders of Glencore.
However, Glencore defends its proposal, explaining that an a posteriori merger would create a “financially complex” situation. He questions the transitional measures provided for in Teck’s proposed split, which, according to him, would complicate the integration if the merger were to take place at a later date.
His proposal “could no longer be implemented in its current form”, he wrote in his open letter to shareholders.
“We encourage Teck’s shareholders to take action to ensure that Teck’s board engages in good faith negotiations,” writes the Swiss giant, active in both brokerage and commodity mining.