Teck Resources Rejects Glencore’s Merger Proposal

Canadian company Teck Resources has rejected a revised offer from commodity trading and mining multinational Glencore. This follows a similar rejection of the initial offer posed earlier in April. The Vancouver-headquartered company also added that “the Teck board and management team remain fully confident that Teck’s planned separation creates a greater spectrum of value-enhancing opportunities for both Teck Metals and Elk Valley Resources.” Meanwhile, both Teck and Glencore stock prices continue to see additional attention due to the ongoing process.

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The Latest of Glencore’s Merger Attempts

Teck’s statements followed Glencore’s April 11 announcement of a revised merger offer. In this new agreement, Glencore offered to buy the Canadian company’s shareholders out of their coal exposure. The deal proposed that Teck shareholders receive 24% of the proposed metals company from the ties. This would also include $8.2 billion in cash.

“Glencore continues to believe that CoalCo’s combined thermal and coking coal assets would position it as a leading, highly cash-generative bulk commodity company which would attract strong investor demand given its yield potential. However, Glencore acknowledges that certain Teck investors may prefer a full coal exit and others may not desire thermal coal exposure,” the London- and Johannesburg-listed company stated.

Teck’s Reasoning for the Rejection

Teck’s board of directors also confirmed receipt of the revised offer on April 11. The company acknowledged the cash consideration in lieu of shares and described it as “largely unchanged.” 

“Consistent with its fiduciary duties and in consultation with its financial and legal advisors, Teck’s board of directors will carefully and expeditiously review and evaluate the new proposal. Teck will advise shareholders of the Board’s decision regarding the revised proposal as soon as practicable,” the company said.

Glencore first made its proposed merger between the two companies public on April 3 after originally approaching Teck in late March. This merger envisioned the creation of a metals company and a coal company. The prospective metals company would carry the name GlenTeck, though there is no proposed name for the coal company as yet. Teck publicly rejected the offer on the same day, however. This was partly because it would expose shareholders to thermal coal and oil trading. 

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Both Tech and Glencore Stock Prices Trending Up, but Insiders Remain Skeptical

Industry watchers also expressed reservations over a proposed Glencore-Teck hook-up. Most detractors claimed that the multinational is only investing in mergers and acquisitions rather than seeking to discover and exploit new resources.

Meanwhile, many industry players expect copper to enter a deficit later this decade. This comes as battery electric vehicles and other low-carbon-energy solutions and equipment continue to proliferate. One analyst declined to quantify the expected copper deficit but warned that it could be “massive” by the mid-2030s.

Teck also plans to separate its metals and coal businesses into Teck Metals and Elk Valley Resources. The company even announced its plans to expedite the separation process on April 13. Altogether, Teck produced 270,000 metric tons of copper in 2022 from its three operations in South America and Canada. It also noted that the total contained copper in proven and probable reserves totals 33 million metric tons.

Meanwhile, Teck Resources can also produce 295,000 metric tons of refined zinc annually at its Trail lead and zinc smelter in British Columbia. The latter uses zinc in concentrate from its Red Dog mine in Alaska. The Elkview metallurgical coal operations, consisting of four mines in British Columbia, also produced 21.5 million metric tons of coking coal in 2022.

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