Glencore PLC (LSE:GLEN) confirmed that it has offered to buy Teck Resources Ltd (TSX:TECK.B)' steelmaking coal business (EVR) for cash in a departure from the commodities giant’s previous proposal for a full-blown merger with Canada’s biggest miner.
The move is the latest salvo in the commodity giant's battle for Teck, which has so far been rebuffed by the company's management.
In a statement, Glencore said: “While Glencore remains willing to pursue its Proposed Merger Demerger, Glencore has made this alternative proposal to acquire EVR as it is expected to allow for a value accretive demerger of the combined coal and carbon steel materials business (CoalCo) to its shareholders.
“We also note continued strong support from shareholders for a transaction between Glencore and Teck.”
If a transaction were to materialise, Glencore said it would demerge CoalCo once it has sufficiently deleveraged, which is expected approximately 12-24 months from close.
One of many proposals
However, Teck said in a statement that London-listed Glencore’s is just one of several proposals under consideration, confirming its engagement with several parties that have submitted unsolicited indications of interest regarding various forms of potential transactions involving the business.
It added that the commodity giant’s proposal is “preliminary in detail, conditional and non-binding.”
“The high degree of interest expressed by a wide range of parties underscores the value of Teck’s high-margin, long-life steelmaking coal assets,” the company said.
“Teck intends to continue to engage with all parties that have indicated interest to identify a path that realizes value for shareholders while ensuring continued responsible operations in the Elk Valley to support a sustainable future for the benefit of employees, local communities and Indigenous Peoples.”
Change of plans
In April, Glencore’s $23 billion offer to buy Teck and merge its coal and metals businesses with its own was boosted after the Canadian group dropped plans to split off its coal business.
“Glencore is fully committed to ensuring that the Proposed EVR Acquisition would benefit Canada and is open to working with Teck to identify a comprehensive suite of commitments for the benefit of all relevant stakeholders which would, amongst others, maintain and, where feasible, enhance EVR’s existing presence and capital investments in Canada as well as its community, social, labour and environmental programmes,” Glencore said.
If a deal were to proceed in principle, it would face the scrutiny of Canada’s regulators as well as President Justin Trudeau given Teck’s how strategically significant the company is as Canada’s largest producer of strategic metals.
Both companies cautioned that there is no certainty that any transaction will occur.
Shortly after 10am ET, Teck's TSX-listed shares were 0.8% down at C$56.25 while Glencore's shares were up 0.9% at £439 in London.
Contact the author at stephen.gunnion@proactiveinvestors.com