Teck takes restructuring plan off the table ahead of vote

Teck Resources (TSX: TECK.A/TECK.B; NYSE: TECK), Canada’s largest diversified miner, has decided to withdraw its plan to split up the company into two — a base metals and a coal one —  ahead of a shareholder vote on the proposal scheduled for Wednesday.

All other matters to be considered at the meeting remain unchanged, the Vancouver-based miner said. It added the plan forward was to pursue “a simpler and more direct separation” to best unlock value for its investors.

Chief executive Jonathan Price said that while the company received “very strong support” from shareholders for the goal of separation, it also gathered feedback that a more direct approach to dividing up the business was preferred.

“In the interim, Teck is poised for value creation; we are ramping up our flagship QB2 copper project to full production, advancing our industry-leading pipeline of copper growth projects, and safely and responsibly optimizing production at our existing operations,” Price said. 

The executive noted that Glencore’s (LSE: GLEN) rejected proposals remained a non-starter. Earlier this month, the Swiss company sweetened its US$23 billion unsolicited bid for Teck by offering a US$8.2 billion cash incentive to shareholders. 

The revised deal would have given Teck’s shareholders who did not want to own shares in the combined coal operation the option to receive cash plus 24% of the combined metals-focused business.

Teck’s board will focus on incorporating the feedback heard into a revised “value-enhancing separation” to maximize value for shareholders, chair Sheila Murray said in the statement.

The move rounds off a tense three weeks of lobbying investors by both Teck and Glencore, and suggests that the Canadian mining giant may not have gathered the support it needed. 

The deadline for proxy vote submissions was noon Vancouver time and requires the backing of two-thirds from both classes of investors separately — the A Class shares, dominated by Teck’s founding Keevil family, which each worth 100 votes, as well as regular B class shares, worth one vote each. 

The market attention will now be on Glencore, which had indicated it was ready to make a higher offer if the split did not proceed.

“Glencore will view this [late withdrawal by Teck of its separation plan] as an opportunity to reassert its merger proposal, which will need to be improved to win over broad shareholder support,” said Bloomberg Intelligence analysts.

The move “opens up several new possibilities, such as an improved proposal from Glencore, a separate sales process for the coal assets, or an immediate spin of the coal business,” said Nick Giles, an analyst at Lucas Pipes, told Bloomberg News.

Copper booty

Experts had anticipated that Teck’s decision to split the business in two would make it a takeover target. The company owns four copper mines in South America and Canada, which produced 270,000 tonnes combined last year. 

Teck also expects to double copper output after the second phase of its Quebrada Blanca (QB) project in Chile ramps up to full capacity by the end of 2023.

Glencore believes that operating Quebrada Blanca jointly with the nearby Collahuasi mine, in which the Swiss multinational holds a 44% stake, would add at least a US$1 billion of value to its coffers.

Top miners are hungry for copper assets as demand for the metal accelerates and a global shortfall looms. BHP, Rio Tinto and Glencore itself have disclosed that they are actively looking to grow their copper exposure.

For Glencore, acquiring Teck would be its biggest acquisition since buying Xstrata Plc in 2012 and it would “unlock approximately US$4.25 billion — US$5.25 billion of post-tax synergy value,” according to the company.

Teck’s B shares were up almost 5% in New York in midday trading, at US$45.03 each. The company is now worth US$23.5 billion (or about $31.2 billion). B shares were changing hands at $61.34 apiece in Toronto, up 4% from the previous day close.

Price is scheduled to hold a conference call to discuss the company’s first-quarter earnings before the shareholders meeting, scheduled for noon in Vancouver.