Canadian commodity giant Teck Resources Ltd., Vancouver, which is known for its metals and coal, and to a much lesser extent ammonium sulfate and sulfuric acid, spent four years deciding what to do with its sprawling coal business, as was noted by a Bloomberg report. In roughly the same amount of hours, everything came crashing down on April 26.
Teck asked shareholders to approve a plan splitting the business in half: one producing metals, the other coal. But just three weeks before the vote, another commodity giant, Swiss-based Glencore Plc, emerged, offering a $23 billion takeover along with its own version of a coal and metal split.
Glencore’s aggressive lobbying was enough to sway investors against Teck’s proposal, and the Vancouver-based company pulled the vote before Wednesday’s planned shareholder meeting.
Now Teck must go back to the drawing board.
Teck continues to rebuff Glencore’s approaches, with CEO Jonathan Price saying it was the wrong offer at the wrong time. Instead, Teck will come up with a better plan for separating the businesses, he said.
While Teck previously moved at its own pace – rejecting ideas such as a spinoff or selling a stake in the coal unit – this time it must find a Plan B with Glencore, perhaps the industry’s most aggressive deal maker, circling in the water.
Glencore said on April 27 its offer remains on the table, and it would improve the bid if Teck agrees to engage. But the Swiss company also reiterated the alternative: going straight to Teck’s shareholders.
Any attempt to circumvent the board would face significant hurdles without support from Teck’s founding family, the Keevils, who have a blocking vote because they dominate the company’s “supervoting” Class A shares.
Glencore is betting that Teck’s shareholders will apply enough pressure to the board that Price will be forced back to the negotiating table.
That means the clock is ticking for Teck to come up with a plan more appealing than Glencore’s paper and cash.
Waiting in the wings, however, is the Canadian government. The Conservative Party, Canada’s main opposition party, called for the government to block Glencore’s takeover. It said thousands of jobs would be at risk if the Swiss commodities firm were to succeed in its unsolicited bid. Conservative Leader Pierre Poilievre warned that it would also mark the loss of Canada’s last remaining major diversified base-metals miner owned and headquartered in the country.
“Canada needs a government that is committed to creating and supporting Canadian jobs,” Poilievre said. “Glencore’s attempted hostile takeover will ship thousands of jobs out-of-country and threaten thousands more Canadians who work for Teck.”
Poilievre’s announcement ups the pressure on Prime Minister Justin Trudeau to take a stand on the issue. His finance and natural resources ministers have said in recent weeks that the government is watching the deal closely.
British Columbia Premier David Eby opposes the Glencore proposal, and in an April 24 letter to Vancouver’s Board of Trade, Deputy Prime Minister Chrystia Freeland said the nation needs companies like Teck in Canada as it prepares for the future of mining critical minerals key to the energy transition.
Any takeover of Teck would require the approval of the government. After a review, which could be lengthy, the final decision would most likely fall to Industry Minister Francois-Philippe Champagne, who signed Freeland’s letter alongside Natural Resources Minister Jonathan Wilkinson.
Canada blocked BHP Group’s proposed takeover of Potash Corp. of Saskatchewan in 2010, when Stephen Harper was Prime Minister. Poilievre was a member of that government.
At last report, Teck has ammonium sulfate capacity of approximately 250,000 mt/y. Teck had not responded to inquiries for further confirmation. The sulfate is marketed by International Raw Materials Ltd.