Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK)
(“Teck”) today issued a letter to shareholders reaffirming the
strong rationale for its pending separation and responding to
Glencore’s latest attempt to frustrate value creation for Teck
shareholders.
- Glencore’s opportunistic proposal hasn’t changed – same low
value, same flawed structure, same material execution risks
- Teck has previously engaged extensively with Glencore – for six
months on essentially the same proposal – and repeatedly determined
it is not in the best interest of Teck shareholders
- The choice for shareholders is clear: vote FOR Teck’s
separation plan to create the world’s pre-eminent, pure-play base
metals company with a greater array of value creating
opportunities
The full text of the letter is as follows:
April 19, 2023
Dear Shareholders,
A vote for the separation is a vote to create two world-class,
pure play mining companies, providing both unparalleled exposure to
a premier base metals platform and an attractive opportunity to
remain invested in a high-quality, high-margin steelmaking coal
business. Voting FOR the pending separation opens the door to value
maximizing opportunities and provides certainty with no execution
risk. In fact, separation can be completed in as little as six
weeks from today and the separation – and the further path to value
– has the clear support of our class A shareholders.
Glencore’s proposal is not a realistic or viable option. Its
latest presentation and open letter include no changes from its
previous offers, which we have carefully reviewed and rejected.
This is a distraction – a transparent and opportunistic attempt to
disrupt our separation plan with an ill-defined and highly
uncertain proposal. Importantly, Glencore admits that they are
uniquely positioned to make an offer for Teck in its current form;
the pending separation will correct that by opening up a wider
range of opportunities for value enhancement.
Nothing has changed – same low value, same flawed
structure, same material execution risks
Glencore’s motivation is plain – they are seeking to
opportunistically frustrate the vote and pre-empt a competitive
future landscape, which is good for Glencore, and bad for Teck’s
shareholders. Glencore’s proposal is complex, ill-defined, with the
risk of substantial tax impacts, and value loss for our
shareholders if it were to proceed. It also carries significant
execution risk, requiring extensive regulatory approvals, and would
not close for up to two years, if ever. In contrast, Teck’s pending
separation will be completed in as little as six weeks.
The premium in Glencore’s proposal continues to undervalue Teck,
is based on a highly volatile share-based consideration, and does
not reflect the value of the base metals portfolio that will be
unlocked by the creation of Teck Metals. Underpinned by a
favourable long-term copper price trend and copper growth pipeline,
Teck Metals will be unique in the industry as a pure-play,
high-growth copper vehicle, with significant value upside, which
shareholders would realize in addition to ownership of EVR. In
comparison, the Glencore proposal seeks to acquire that value
pre-emptively for pennies on the dollar. It is a transparent
attempt to transfer value from Teck’s shareholders to
Glencore’s.
Glencore’s proposal also fails to address material risks that we
have repeatedly identified, including exposure to significant oil
trading in the base metals business, severe execution risk and
regulatory uncertainty, and unacceptable jurisdictional and ESG
risk. Under Glencore’s proposal, the base metals business would be
permanently contaminated by one of the world’s largest oil trading
businesses which would contribute tens of billions of dollars in
revenue to the combined company. This significant oil exposure
would destroy value in the base metals portfolio.
Teck has extensively engaged with Glencore
Glencore complains that Teck has refused to engage, which is
simply not true. Teck’s Board has now carefully reviewed the two
recent and substantially similar proposals from Glencore, both of
which it rejected. We clearly communicated our concerns and
rationale for rejecting the proposals in letters to the Chairman of
Glencore’s Board.
These proposed transactions were only slightly modified from
Glencore’s proposal from 2020, which we engaged on with Glencore
for over six months before determining it – like Glencore’s
subsequent proposals – was not in the best interests of our
shareholders. Further discussions in late 2022 and early 2023
confirmed their proposal remained essentially unchanged, with the
same flaws, risks and uncertainties.
Teck’s separation creates options for further value
enhancement
Glencore recognizes the strategic optionality that will be
created by our separation, which is why they are acting now.
Glencore says in its letter: “We believe there are a limited number
of parties that are willing or able to acquire both material metals
and coal cash flows – Glencore’s proposal is unique in this
regard…”. That is the situation today, pre-separation, which is
exactly why transacting with Glencore now is inadvisable.
One of the biggest challenges in the industry today is the
effective separation of base metal assets from carbon-intensive
assets. This is exactly what our separation will achieve, tax
effectively, and in less than six weeks’ time. Further, the royalty
and preferred shares in our transition capital structure are
attractive and liquid instruments. There are lots of avenues
post-separation for Teck Metals to monetize the transition capital
structure, in the context of a corporate transaction or otherwise,
to create further value.
Dr Keevil’s position is clear
Dr. Keevil’s formal statement was clear:
“I would support a transaction –
whether it be an operating partnership, merger, acquisition, or
sale – with the right partner, on the right terms for Teck Metals
after separation. Based on my decades of experience building a
successful mining company, I believe that pursuing a sale or merger
transaction now would rob our shareholders of significant
post-separation value.
I fully agree with Teck’s Board that
there is no deal to be done pre-separation with Glencore or any
other party.”
Conclusion
Now is not the right time to pursue a transaction with Glencore.
We fully believe that Glencore’s proposals are nothing more than an
opportunistic attempt to interfere with the vote at Teck’s annual
and special meeting of shareholders on April 26th to their benefit
and to the detriment of our shareholders.
The choice for shareholders is clear: vote FOR Teck’s separation
plan to create the world’s pre-eminent, pure-play base metals
company with a greater array of value creating opportunities.
For information on how to vote, go to www.teckagsm.com.
Sincerely,
Jonathan PriceCEO, Teck
Cautionary Note Regarding Forward-Looking
StatementsThis news release contains certain information
which constitutes “forward-looking statements” and “forward-looking
information” within the meaning of applicable Canadian securities
laws. Any statements that are contained in this news release that
are not statements of historical fact may be deemed to be
forward-looking statements. Forward-looking statements are often
identified by terms such as “may”, “should”, “anticipate”,
“expect”, “potential”, “believe”, “intend” or the negative of these
terms and similar expressions. Forward-looking statements in this
news release include, but are not limited to: statements regarding
Teck’s planned separation transaction, including the timing
thereof, and Teck’s expectations regarding the impacts of any such
transaction in terms of creating value for shareholders; statements
related to anticipated risks of Glencore’s proposal, including with
respect to execution, timing and exposure to thermal coal and oil
trading, and Teck’s assessment thereof as compared to its own
planned separation transaction; statements related to the
opportunity for future transactions involving Teck Metals or EVR;
statements regarding timing and production levels of Teck’s QB2
copper project; statements regarding Teck’s expectations regarding
ESG commitments and decarbonization trends; and statements with
respect to Teck’s business and assets and its strategy going
forward. Readers are cautioned not to place undue reliance on
forward-looking statements. Forward-looking statements involve
known and unknown risks and uncertainties, most of which are beyond
the Teck’s control. Several factors could cause actual results to
differ materially from those expressed in the forward-looking
statements, including, but not limited to: future actions taken by
Glencore in connection with its unsolicited proposal; fluctuations
in supply and demand in steelmaking coal, base metals and specialty
metals markets; changes in competitive pressures, including pricing
pressures; timing and receipt of requisite shareholder and court
approvals; the recent global banking crisis and conditions and
changes in credit markets; changes in capital markets; changes in
currency and exchange rates; changes in and the effects of,
government policy and regulations; and earnings, exchange rates and
the decisions of taxing authorities, all of which could affect
effective tax rates. Additional risks and uncertainties can be
found in our Annual Information Form dated February 21, 2023 under
“Risk Factors”. Should one or more of the risks or uncertainties
underlying these forward-looking statements materialize, or should
assumptions underlying the forward-looking statements prove
incorrect, actual results, performance or achievements could vary
materially from those expressed or implied by the forward-looking
statements.
The forward-looking statements contained herein are made as of
the date of this release and, other than as required by applicable
securities laws, the Company does not assume any obligation to
update or revise them to reflect new events or circumstances. The
forward-looking statements contained in this release are expressly
qualified by this cautionary statement.
Investor Contact:Fraser PhillipsSenior Vice
President, Investor Relations & Strategic
Analysis604.699.4621fraser.phillips@teck.com
Media Contact:Dale SteevesDirector, Stakeholder
Engagement604.699.4514dale.steeves@teck.com
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