Teck Resources Withdraws Plan to Split Metal and Coal Businesses


Canadian mining group Teck Resources recently withdrew its proposal to separate its metals and coal companies into two separate assets. The Vancouver-headquartered company announced its plans not to proceed with a vote to divide the business into two separate companies, Teck Resources and Elk Valley Resources, at its April 26 annual and special shareholders meeting.

“We received very strong support from shareholders for the goal of separation, which is to unlock value through creation of a premier, pure-play base metals company and a world-class steel-making coal company,” CEO Jonathan Price said. “We have also listened and heard the feedback that some shareholders would prefer a more direct approach to separation.”


“Our plan going forward is to pursue a simpler and more direct separation,” Price added. “(This) is the best path to unlock the full value of Teck for our shareholders.”

One market player told MetalMiner that Teck’s management wasn’t confident of winning a split vote. They added that the company might scrap the proposed royalty payable by the prospective coal company to the metals company due to the split.

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Teck Resources Likely Influenced by “Sweetened” Proposal

Teck Resources’ decision follows commodities trading and mining group Glencore’s April 11 announcement of a sweetened merger offer. The deal proposed that Teck shareholders receive 24% of the proposed metals company from the tie-up, plus $8.2 billion in cash.

“No doubt the Glencore bid influences their thinking,” MetalMiner’s source added.


The sweetened offer was in response to concerns by Teck and its shareholders that the merger could expose them to trading in thermal coal and oil. Besides Teck’s efforts to be low-carbon, market sources warned that some shareholders’ charters might forbid them from investing in carbon-intensive businesses.

However, Glencore said on the same day that its merger offer with Teck remains on the table. “The revised offer is also not final,” the Swiss multinational said in an open letter appeal to Class B shareholders.

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Overall Potential for a Merger Remains Uncertain

The original April 3 offer proposed the creation of a metals company, tentatively called GlenTeck, and an as-yet-unnamed coal company. The proposed merger would occur partly via a combination exchange ratio of 7.78 of its shares per Teck B share. This represents a valuation premium of 23% based on several specific March share prices for the two companies.


Glencore also proposed a combination exchange ratio 12.73 of its shares per preferred Teck A share as part of the deal. The group noted that this represents an average 39.5% valuation premium and was also based on specific March share prices for both companies. The revised April 11 merger proposal did address shareholder concerns over coal exposure.That said, the future of the deal remains uncertain at this point.

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