By Clara Denina and Pratima Desai
LONDON (Reuters) -putting down for author to review and revise -dg
Copper and zinc miner Teck Resources on Monday rejected an unsolicited $22.5 billion bid from Glencore Plc, citing reluctance to expose its shareholders to thermal coal, oil, LNG and related sectors.
New York-listed shares of Teck jumped 19.6% on Monday, their largest daily rise in two years. London-listed shares of Glencore closed down 2.6%.
Glencore’s all-share offer represents a 20% premium to Teck’s closing stock price on March 26, when the bid was made privately. The proposal includes a plan to simultaneously spin off the companies’ thermal and steelmaking coal businesses and rebrand the remaining company as GlenTeck.
Glencore Chief Executive Gary Nagle, asked in a conference call with investors if a sweetened deal was possible, said: “We should not be talking about that. This is not a takeover, but a merger.”
Some analysts saw room for a higher offer.
“We do see a compelling strategic rationale for this combination,” said Chris LaFemina, an analyst at Jefferies. “Based on Glencore’s response, we believe a higher offer is likely. However, based on the Teck press release… it is not clear that a modestly higher price is all that is necessary.”
Teck said it worries any combination of the two companies would expose its shareholders to Glencore’s large thermal coal business, an unwanted oil trading business and significant jurisdictional risk, all of which would reduce its value.
“The board is not contemplating a sale of the company at this time,” Teck Chair Sheila Murray said in a letter to Glencore’s board.
Teck said more value could be created through a restructuring proposed earlier this year in which the Vancouver-based miner would spin off its steelmaking coal unit to focus on copper and other industrial metals. A vote on this proposal is scheduled for April 26.
After the separation, Teck’s metal-focused unit plans to be known as Teck Metals Corp, while the divested unit would be listed in Toronto as Elk Valley Resources Ltd.
Teck believes its base metals business, once fully independent, would have a much better chance of attracting a competitive bid than the company in its current form, according to a source familiar with management’s thinking.
Addenda Capital, which holds about 1% of Teck’s shares, said it supports Teck’s existing plans. “The (Glencore) bid is too low for us to have any interest,” Addenda’s Todd Kapala told Reuters.
Analysts at Scotiabank said they believe the chances of any deal with Glencore to be “extremely low.”
“We view the Glencore offer as an opportunistic bid designed to take advantage of the current dislocation in Teck shares related to the proposed near-term business separation,” they said.
Canada’s Keevil family controls Teck through its dominant ownership of ‘A’ class of shares, which have more voting power than the numerous ‘B’ class shares held by institutions, could make any further merger discussion hard.
Norman Keevil, chairman emeritus of Teck Resources, agreed with Teck’s rejection of Glencore’s offer.
“Now is not the time to explore a transaction of this nature, and I have the utmost confidence in the board’s and our management teams’ strategy to maximize value for … shareholders after the separation,” Keevil said.
This is not the first time Glencore and Teck have talked about a possible spinoff and merger of their coal businesses. Informal discussions in 2020 broke down.
Glencore’s Nagle said that under this proposed deal, the new GlenTeck would be listed in London and could produce around 3 million tonnes of copper annually, making it one of the world’s largest miner of the red metal used in rechargeable batteries and charging stations for electric vehicles.
Copper assets are major targets for mining companies hunting for minerals needed for the energy transition.
The merged coal company would be primarily listed in New York, Nagle said, based on the feedback received from investors and appetite for such a company there.
Nagle added that he did not envisage major antitrust issues.
(Reporting by Clara Denina, Pratima Desai, Divya Rajagopal, Ankit Kumar, David Carnevali and Mrinalika Roy; Editing by Arun Koyyur, Tomasz Janowski, Ernest Scheyder, Paul Simao, Jonathan Oatis and David Gregorio)