Glencore (LON: GLEN) is stepping up efforts to take over Teck Resources (TSX: TECK.A, TECK.B NYSE:TECK) by adding on Tuesday a $8.2-billion cash component to its original $23-billion bid for Canada’s largest diversified miner.
The revised proposal gives Teck’s shareholders the option to receive cash instead of exposure to the companies’ combined coal portfolio, plus a 24% of the combined metals-focused business.
The Swiss miner and commodities trader’s original all-stock deal was to acquire Teck and then separate itself into two companies, with one unit holding assets in thermal and metallurgical coal, and the other its base-metals portfolio, along with its oil assets.
The Vancouver-based miner had said Glencore’s original bid was structurally flawed, branding it as “a complete non-starter.”
Glencore said the fresh offer would effectively buy Teck’s shareholders out of their coal exposure. It acknowledged that certain investors may prefer a full coal exit while others may just want to cut their thermal coal exposure.
Chief executive officer Gary Nagle said Teck should review the sweetened deal and delay the vote on its own plans to split the business, which is scheduled for April 26.
“We believe that it is in your shareholders’ interests to engage with Glencore and we see no valid reason not to delay your shareholders meeting,” Nagle said in the statement.
Experts had anticipated that Teck’s decision to split the business in two would make it a takeover target. The company owns four copper mines in South America and Canada, which produced 270,000 tonnes combined last year.
Teck also expects to double copper output after the second phase of its Quebrada Blanca (QB) project in Chile ramps up to full capacity by the end of 2023.
Glencore believes that operating Quebrada Blanca jointly with the nearby Collahuasi mine, in which the Swiss multinational holds a 44% stake, would add at least a $1 billion of value to its coffers.
Top miners are hungry for copper assets as demand for the metal accelerates and a global shortfall looms. BHP, Rio Tinto and Glencore itself have disclosed that they are actively looking to grow their copper exposure.
For Glencore, acquiring Teck would be its biggest acquisition since buying Xstrata Plc in 2012 and it would “unlock approximately $4.25 billion — $5.25 billion of post-tax synergy value”, according to the company.
Teck’s controlling shareholder, Norman Keevil, has said he would not sell to a foreign company at any price
He already already has the support of key stakeholders, including gold magnate Pierre Lassonde, who is planning to buy a stake in Teck’s spinoff coal company to protect it from a foreign takeover.
Egerton Capital UK, the seventh-largest holder of Teck’s class B shares, has also said it will back the miner’s restructuring plans.