Swiss giant Glencore announced Thursday that its merger bid with Teck Resources “still stands” a day after the Canadian group pulled out at the last minute of its plan to spin off its coal business. At the same time, the Swiss group active in commodities trading and mining also announced investments in the activities of Norwegian Norsk Hydro.
Arm wrestling between the two companies
Teck Resources, one of Canada’s largest mining groups, announced on Wednesday that it was withdrawing its plan to split its metals and metallurgical coal businesses, just before its annual general meeting. The shareholders of Teck Resources were to vote on this project announced in February but which has been disrupted in the meantime by an offer from Glencore, twice rejected by the Canadian group. In a statement, Glencore said it took note of Teck Resources’ decision to withdraw its project and confirmed that its “proposal still stands”. The Swiss group is now hoping that Teck Resources’ management will “engage constructively to fully explore” its proposal, “which has not been done so far”, it said. But Glencore warned that it “remains prepared to make an offer directly to Teck shareholders” if the board does not enter into discussions.
In early April, the Swiss group unveiled an offer valuing Teck Resources at more than $22.5 billion (20.3 billion euros). He proposed that the Canadian group combine their operations and then split them into two companies, one called MetalsCo for metals, the other called CoalCo for coal. Teck Resources executives refused, in part because such a combination would bring Glencore’s thermal coal into its business, which is much more contested than metallurgical coal for its contribution to climate change.
Higher” chances of success
On April 11, Glencore had improved its offer by offering Teck Resources shareholders who want to exit coal 24% of MetalsCo and a cash payment totaling $8.2 billion. Faced with a second refusal, he addressed Teck Resources’ shareholders directly in an open letter published on April 19. He assured them that he could still improve his offer. “Clearly,” the Teck board realized it would “not get shareholder approval” and withdrew its plan to avoid “further embarrassment,” Varun Sikka, an analyst at Baader Helvea, reacted in a stock commentary. “And now the Swiss group’s chances of getting its bid through, without the risk of overpaying, are higher,” he adds. Glencore’s trading margin has improved “a little bit”, says the analyst, who feared that Glencore would pay too much to take it over.
Teck Resources had the support for its project from its Class A shareholders, who hold more voting rights. But China Investment Corp, which owns 10% of the Class B shares, is said to favor Glencore’s offer, Bloomberg reported, citing unnamed sources. Shareholder advisory firms Glass Lewis and ISS had also called for a vote against the proposal. On Wednesday, Teck Resources CEO Jonathan Price said he wanted to opt for a simpler project to implement in the future while reiterating that Glencore’s proposals remain “unacceptable”. At 11:17 GMT, Glencore shares were down 0.89% while the FTSE100, the London Stock Exchange index where the Swiss group is listed, was down 0.09%. In a separate announcement on Thursday, Glencore announced a stake in two businesses of Norwegian group Norsk Hydro. It plans to acquire a 30% stake in the Alunorte aluminum refinery and 45% of Mineracão Rio do Norte, which operates a bauxite quarry in Brazil.
