Canada’s Teck Resources has rejected a hostile bid from Glencore that would have created a £95bn natural resources giant and resulted in a vast restructuring of the FTSE 100 mining company.
The unsolicited offer represents the biggest acquisition attempt by Switzerland-based Glencore — the world’s most profitable coal miner and a major commodities trading house — since its merger with Xstrata in 2013.
The combined share value of the two companies would total £69bn, while the enterprise value, which includes debt, would be £95bn, according to S&P Capital IQ.
The all-share offer comes just weeks after Teck announced plans to spin out its steelmaking coal business from a portfolio of minerals vital to the energy transition.
As part of the bid, Glencore revealed it would spin out its own highly profitable coal business if the acquisition went ahead — creating a “CoalCo” with its thermal coal assets and Teck’s metallurgical coal assets.
Under Glencore’s proposal, a separate “MetalsCo” would include Glencore’s and Teck’s industrial metals businesses, as well as the London-listed company’s oil trading division.
The offer marks growing appetite for large acquisitions in the natural resources sector after mining companies and trading houses accrued record profits amid the dislocation caused by Russia’s invasion of Ukraine.
Glencore’s record profits last year on the back of high coal prices have left it with a sizeable war chest for doing deals.
Glencore offered to buy Teck in an all-share transaction, for a 20 per cent premium to its share price on March 26 when Teck’s closing market capitalisation stood at C$25bn ($19bn).
By swooping in just before Teck’s shareholders are set to vote on its own spinout plans on April 26, Glencore hoped to persuade shareholders that it was presenting a better offer.
The two sides have talked about merging before in 2020, but those talks did not advance, according to Teck’s letter to Glencore published today.
A deal would have strengthened the London-listed company’s foothold in commodities for the energy transition such as copper and zinc.
Teck is developing its flagship Quebrada Blanca 2 copper mine in Chile, which is located near the Collahuasi copper mine, in which Glencore owns a 44 per cent stake. Both companies also own stakes in the Antamina copper mine in Peru.
Teck said the offer was “opportunistically timed” and the board “is not contemplating a sale of Teck at this time”.
It added that exposing its shareholders to Glencore’s thermal coal business would impair the value of its steelmaking standalone coal business and be contrary to its environmental, social and governance commitments.
Teck also said the merger would increase geopolitical risk for its shareholders, given Glencore’s presence in jurisdictions such as the Democratic Republic of Congo, and the inclusion of oil trading in the metals unit would undermine its appeal to investors.
Sheila Murray, chair of Teck’s board, said that sticking by the spinout plans would create “a greater spectrum of opportunities to maximise value for Teck shareholders”.
Glencore said in a statement that its bid would “unlock approximately $4.25bn — $5.25bn of post-tax synergy value” and create two larger and more diversified companies than Teck’s own spinout plans.
Glencore has come under pressure from shareholders over its thermal coal business, including criticism about the level of disclosure.
Shares in Glencore fell 1.7 per cent following the announcement, while those in Teck gained 0.8 per cent in Toronto.
