Glencore’s sweetened bid for integrated miner Teck Resources is a “sound strategic move,” according to Canaccord analysts.
Earlier this week, the commodities sweetened its offer to Teck Resource to make the Canadian group more amenable to its merger proposal.
Originally an all-share proposal, Glencore has now proposed an US$8.2 billion cash element that it says effectively buys out Teck shareholders from the combination of the two companies’ coal interests.
Under the revised plan, Teck shareholders will hold 24% of the two companies’ metals businesses plus a stake either in their merged coal interests (CoalCo) or the cash alternative.
That revision has won the approval of Canaccord analysts.
Analysts like the deal - will shareholders?
In a note, Canaccord wrote that Glencore’s move eliminates Teck’s main objection regarding what it sees as potential value destruction to from merging the two coal businesses together. As well, the new offer includes a significant cash component and does not actually adjust the overall bid, leaving Glencore another card to play later, Canaccord noted.
The new offer “kills three birds with one stone, so to speak,” analysts wrote.
“We expect the Class B shareholders to view this offer favourably; that said, the path to victory for Glencore remains through the Keevil family and the other Class A shareholders,” Canaccord noted.
“We continue to view Teck’s April 26th vote on its proposed spin-off as the soft underbelly of the Teck defense (as the Class B shareholders will vote separately from the Class As), and we believe this new bid from Glencore raises the odds of the vote not going Teck’s way.”
Shares of Glencore were up 2.4% in London at market close in the UK, while Teck shares were trading 0.1% lower in New York and 1.7% down in Toronto.
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