Teck mulls Glencore proposal for coal operations
Teck Resources Ltd. (TECK.B-TSX, TECK.A-TSX, TECK-NYSE) on Monday confirmed that Swiss metals trading giant Glencore Plc. is one of a number of proposals under consideration in relation to the possible sale of Teck’s steelmaking coal business.
The update is contained in a press release in which Teck commented on its previously announced engagement with several parties that have submitted unsolicited indications of interest regarding various forms of potential transactions involving Teck’s steelmaking coal business.
Teck said its Board of Directors and independent Special Committee, in accordance with its fiduciary duties to shareholders are continuing to consider and evaluate all actionable, value-accretive proposals received relating to the company’s steelmaking coal business to determine whether they are in the best interests of Teck’s shareholders and stakeholders.
“As part of this ongoing review, Teck confirms it is engaging with Glencore around their proposal regarding the steelmaking coal business,’’ the company said in a press release. “The proposal is preliminary in detail, conditional, and non-binding.
However, Teck said there is no guarantee that any transaction will result from this process.
Monday’s announcement comes after Teck recently rejected an unsolicited $23 billion takeover bid from Glencore. The bid followed a series of announcements, including the proposed spin out of Teck’s metallurgical coal operations as well as a sunset period for its dual class share structure. However, the plan to spin out the metallurgical coal operations has been shelved, leaving the company to mull other options.
Teck ranks as the world’s second-largest seaborne exporter of steelmaking coal, with six operations in Western Canada and significant steelmaking coal reserves. They include Elkview, Fording River, Greenhills and Line Creek in southeastern British Columbia.
Steelmaking coal – or metallurgical coal – is a higher-grade coal which is a necessary component in the chemical reactions that transform iron into steel.
Coal production is currently shipped via three B.C. west coast ports including Ridley, Neptune and Westshore Terminals. Located in Delta, British Columbia, Westshore Terminals is Canada’s premier coal export terminal and handles over 33 million tonnes of coal annually.
If its earlier takeover bid had been accepted, Glencore said it would demerge the combined thermal and metallurgical coal business (along with ferro-alloys) into a new company. The remaining company could include Glencore and Teck’s base metals operations as well as Glencore’s commodity trading business.
However, Teck rejected that proposal saying it would expose Teck shareholders to a large thermal coal business, an oil trading business and significant jurisdictional risk, all of which would negatively impact the value potential of Teck’s business. Teck also said the Glencore proposal was contrary to its ESG commitments and would transfer significant value to Glencore at the expense of Teck shareholders.
Teck’s Class B common shares on Monday eased 1.09% or 62 cents to $56.10 on volume of 213,990. The shares are currently trading in a 52-week range of $66.04 and $32.68.