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GLN - Open Letter to Teck Class B Shareholders
GLENCORE PLC
(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
ISIN: JE00B4T3BW64
LEI: 2138002658CPO9NBH955
Baar, Switzerland
19 April 2023
Open Letter to Teck Class B Shareholders
Today, Glencore plc released the following open letter to the Class B Shareholders of Teck
Resources Limited.
_________________
19 April 2023
Dear Teck Class B Shareholder
Re: Proposal for All-Share Merger between Glencore and Teck and simultaneous
demerger of combined coal and carbon-intensive businesses
We have sought to engage with your Board regarding our proposal, but your Board has
consistently refused any engagement.
While we have been able to meet directly with many shareholders, we are writing to all
shareholders directly to inform you about certain important matters regarding our proposal
for an all-share merger between Glencore and Teck and the simultaneous demerger of the
combined coal and carbon-intensive businesses (the “Proposed Merger Demerger”). Under
our revised proposal, we also include a cash component, to buy shareholders out of their coal
exposure such that Teck shareholders would receive up to US$8.2 billion in cash or 24% of
CoalCo.
We continue to believe that the Proposed Merger Demerger being a merger and not a
takeover, is demonstrably superior to the Proposed Teck Separation. It provides the most
compelling value proposition to Teck shareholders, who would fully and disproportionately
participate in the value creation, synergies and upside.
Glencore’s Proposal has a clear value proposition and is superior across all key parameters
Our proposal offers several superior features that would provide meaningful value creation for
Teck shareholders, which are not afforded to them under the Proposed Teck Separation. These
include:
• Meaningful upfront premium
• Creation of a scaled and standalone MetalsCo
• Full separation of CoalCo
• Cash option, in lieu of CoalCo exposure
• Further upside from synergies
• Further upside from immediate re-rate potential
• Full and equal shareholder voting rights at closing
We have provided a summary presentation that further illustrates the enhanced value created
through our proposal, specifically in comparison to the existing Proposed Teck Separation,
which is not in fact a clean separation from coal. This presentation is available on our website
at the following link
https://www.glencore.com/.rest/api/v1/documents/35781d04d3a36e74ddcdeb1dd65a9d27/GL
EN+-+Teck+Proposal+Update+presentation.pdf
We would also welcome equal shareholder participation and our transaction structure has the
effect of immediately eliminating any special voting arrangements, as well as any contractual
restrictions that exist for certain shareholders, so that all investors would be able to vote on an
equal basis and could increase or decrease their stake in MetalsCo without restrictions. This
would ensure that the interests of Teck shareholders are truly protected and all parties are
better aligned around creating maximum value. Our cash alternative to CoalCo shares would
also provide investors who are not able/prefer not to hold pureplay coal exposure with certain
liquidity, at an attractive valuation, immediately upon demerger.
Glencore’s Proposal will stand and Glencore is willing to make an offer directly to
shareholders if there is no engagement
We affirm Glencore’s proposal will stand and remain valid if Teck delays its shareholders’
meeting or Teck shareholders vote down the Proposed Teck Separation on 26 April 2023.
Glencore is willing to make an offer directly to Teck shareholders if the Proposed Teck
Separation does not proceed and Glencore believes that this is required where there continues
to be no engagement from the Teck Board. We note that proxy advisors have recommended
that Teck meet with Glencore to explore improvements or refinements to our proposal and
Teck has responded to the effect that there is no purpose to this engagement as Glencore is
fixed and final in its position, which has never been the case.
Glencore is willing to consider making improvements to its proposal
Glencore has never stated that its proposal is “best and final” and that it is not willing to make
changes and improvement to its proposal.
Glencore believes that any such improvements are best considered following engagement by
the Teck Board which would allow the parties to jointly explore ways that Glencore could alter
its proposal to address any issues raised by Teck management or Teck’s Board.
In fact, we believe that with engagement, we could improve our proposal’s terms and value,
which would be in the best interests of all Teck shareholders.
The Proposed Teck Separation will introduce significant complexity and impede future
transactions
The Teck Board has, following the public announcement of our proposal and related market
reaction, consistently stated that there will be more potential counterparties interested in a
potential combination with Teck after the Proposed Teck Separation. However, any potential
counterparties interested in Teck’s metals business could have approached Teck prior to the
Proposed Teck Separation and simply implemented a clean demerger of Teck’s coal business
simultaneously with an acquisition of Teck. This would allow potential counterparties
interested in Teck’s metals business to acquire this business unencumbered by coal cashflows
from the Transition Capital Structure (“TCS”).
In contrast, any potential transaction with Teck Metals after the Proposed Teck Separation
would require a party interested in Teck’s metals business to also acquire the coal cashflow
stream from the TCS.
We believe there are a limited number of parties that are willing or able to acquire both
material metals and coal cashflows – Glencore's proposal is unique in this regard in that it
provides a value accretive proposition for both metals and coal – and any potential subsequent
sale of the TCS by an acquiror of Teck Metals is likely to be at a discounted value given Teck
Metals’ lack of control over these cashflows (i.e. the value of the TCS plus the value of EVR is
likely to be less than the value of Teck’s coal business today).
To maximise value post the Proposed Teck Separation, the TCS, which creates a complex
financial integration between Teck Metals and EVR, would therefore likely need to be
unwound, necessitating a two-step transaction. A two-step transaction would require the
involvement of two sets of Boards and shareholders, and introduce significant potential delay
following completion of the Proposed Teck Separation.
There would also be meaningful breakage costs associated with these two transactions,
including change of control costs, recapitalisation expenses, duplicative set of separation and
integration costs, and redundant financing, advisory, and services-related costs.
This would be in addition to the risk of upfront value destruction on implementation of the
Proposed Teck Separation, whereby current Teck shares may de-rate significantly.
It is for this reason that Glencore has stated that it cannot pursue its proposal if the Proposed
Teck Separation proceeds. The significant value destruction that would arise from the
Proposed Teck Separation, most notably via the implementation of the TCS, would mean that
Glencore’s proposal could not be implemented in its current form, and the full value
proposition could not be realised by Teck shareholders.
Dr Keevil has confirmed that he will respect the will of the Class B Shareholders
In an interview with the Globe and Mail on Friday 14 April 2023, Dr. Keevil confirmed that: “If
everybody wants to go the other direction, I can’t go swimming against the tide. The A shares
are like the governor in an engine. So if the engine starts to move too fast, they can slow
things down a little bit, so people can think about it, and act responsibly. But the A shares
can’t go against what the majority of what the B shares want to do. That just isn’t there.”
It is therefore clear that you, the Class B Shareholders, have significant influence and the ability
to ensure that appropriate actions are taken to maximise value for all shareholders.
Major proxy advisors recommend shareholders to vote against the Proposed Teck
Separation and Glass Lewis encourages direct engagement with Glencore
The two major proxy advisors – ISS and Glass Lewis – have both released recommendations
advising Teck shareholders to vote AGAINST the Proposed Teck Separation on 26 April 2023 –
with both advisors noting the Proposed Teck Separation’s material and complicated structural
issues that arise from the ongoing financial integration between EVR and Teck Metals for the
foreseeable future.
ISS in their recommendation wrote that “the separation introduces some structural issues
and uncertainties, while the fact pattern available also demonstrates options could exist with
potential to deliver superior value”.
Glass Lewis separately noted that the “recent modification to add a cash component…could
substantially resolve at least some of the concerns regarding a Glencore deal exposing Teck
shareholders to unwanted ESG-related risks” while also noting that the “preliminary terms of
the Glencore Offer appear to imply a relatively attractive market premium and valuation for
the Company’s Class A and Class B”. Furthermore, Glass Lewis believes “shareholders would
be better served rejecting the Separation at this time with a view towards encouraging the
Company to engage in further dialogue with Glencore”.
We urge Teck Shareholders to take action to support engagement on our Proposal
Glencore is prepared to meet anytime and anywhere that is suitable for the Teck Board and/or
its management team to explore our proposal. If the Proposed Teck Separation proceeds, the
Glencore proposal cannot proceed and potential future offers for Teck Metals would likely look
very different given the friction costs, the complexity of the two companies, the time delay
involved and the impact of two new management teams and boards.
We urge Teck shareholders to take action to ensure that the Teck Board engage in bona fide
negotiations regarding Glencore’s proposal to see if this is a path for Teck shareholders to
maximise value from their Teck shares.
Yours faithfully,
Gary Nagle
Chief Executive Officer
GLENCOÂE plc
For further information please contact:
Investors
Martin Fewings t: +41 41 709 28 80 m: +41 79 737 56 42 martin.fewings@glencore.com
Media
Charles Watenphul t: +41 41 709 24 62 m: +41 79 904 33 20 charles.watenphul@glencore.com
www.glencore.com
Notes for Editors
Glencore is one of the world’s largest global diversified natural resource companies and a
major producer and marketer of more than 60 commodities that advance everyday life.
Through a network of assets, customers and suppliers that spans the globe, we produce,
process, recycle, source, market and distribute the commodities that support decarbonisation
while meeting the energy needs of today.
With around 140,000 employees and contractors and a strong footprint in over 35 countries in
both established and emerging regions for natural resources, our marketing and industrial
activities are supported by a global network of more than 40 offices.
Glencore's customers are industrial consumers, such as those in the automotive, steel, power
generation, battery manufacturing and oil sectors. We also provide financing, logistics and
other services to producers and consumers of commodities.
Glencore is proud to be a member of the Voluntary Principles on Security and Human Rights
and the International Council on Mining and Metals. We are an active participant in the
Extractive Industries Transparency Initiative.
We recognise our responsibility to contribute to the global effort to achieve the goals of the
Paris Agreement by decarbonising our own operational footprint. We believe that we should
take a holistic approach and have considered our commitment through the lens of our global
industrial emissions. Against a 2019 baseline, we are committed to reducing our Scope 1, 2 and
3 industrial emissions by 15% by the end of 2026, 50% by the end of 2035 and we have an
ambition to achieve net zero industrial emissions by the end of 2050. For more detail see our
2022 Climate Report on the publication page of our website at glencore.com/publications.
Follow us on social media:
www.facebook.com/glencore
www.instagram.com/glencoreplc
www.linkedin.com/company/glencore
www.twitter.com/glencore
www.youtube.com/glencorevideos
Disclaimer
The companies in which Glencore plc directly and indirectly has an interest are separate and
distinct legal entities. In this document, “Glencore”, “Glencore group” and “Group” are used for
convenience only where references are made to Glencore plc and its subsidiaries in general.
These collective expressions are used for ease of reference only and do not imply any other
relationship between the companies. Likewise, the words “we”, “us” and “our” are also used to
refer collectively to members of the Group or to those who work for them. These expressions
are also used where no useful purpose is served by identifying the particular company or
companies.
Please also refer to the disclaimer included in our presentation available on our website at
the following link
https://www.glencore.com/.rest/api/v1/documents/35781d04d3a36e74ddcdeb1dd65a9d27/GL
EN+-+Teck+Proposal+Update+presentation.pdf , which is incorporated herein by reference.
Sponsor
Absa Corporate and Investment Bank, a division of Absa Bank Limited
Date: 19-04-2023 08:23:00
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