TIDMGLEN
RNS Number : 7228W
Glencore PLC
19 April 2023
Glencore plc
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/GLEN+-+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
Glencore LEI: 2138002658CPO9NBH955
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 .
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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/GLEN+-+Teck+Proposal+Update+presentation.pdf
, which is incorporated herein by reference.
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