Glencore plans to acquire Teck Resources Ltd’s steel-making coal business and eventually demerge the combined business once debt has been reduced; to sweeten the deal, Glencore revised their offer with an $8.2 billion cash element and a 24% stake in MetalsCo for Teck shareholders.
Glencore and Teck would be joining the ranks of Rio Tinto PLC and BHP Group Ltd, who have already decided that coal is so last decade; UBS analysts see potential cost savings and “meaningful marketing synergies” if Glencore and Teck combine their coal businesses.
In a world where coal is about as popular as a root canal, Glencore PLC has decided to make a bid to acquire Teck Resources Ltd’s steel-making coal business. This comes after Glencore’s previous attempts to woo the New York-listed miner were given the cold shoulder. If successful, these lovebirds plan to eventually demerge the combined business once the debt has been “sufficiently” reduced, which, in Glencore’s world, means about 12 to 24 months from close.
Of course, Glencore had to sweeten the pot to calm the coal-shy investors. They revised their bid in April, adding a cash element of $8.2 billion and a 24% stake in MetalsCo for Teck shareholders. MetalsCo, for those not in the know, would be a transition metals-focused business, keeping a respectable distance from the black sheep of the family, CoalCo, the standalone coal unit.
The original offer had Glencore shareholders owning 76% of the merged entity, with Teck shareholders owning the remaining 24%. But apparently, cash speaks louder than stocks when it comes to winning over those concerned about coal exposure.
Now, Glencore isn’t ignorant of coal’s fall from grace. They’ve faced pressure from Bluebell Capital Partners Ltd, who opposed the possible deal to acquire all of Teck. Bluebell wants Glencore to give coal the boot, and Glencore’s response is akin to a middle-aged man trying to convince his wife he’s serious about a diet – they’ve closed three coal mines since 2019, plan to close three more in the near term, and at least six additional mines by the end of 2035. They even released a climate report in March, stating their noble ambition of achieving net-zero emissions by 2050. Baby steps, folks.
Glencore and Teck would be joining the ranks of Rio Tinto PLC and BHP Group Ltd, who have already decided that coal is so last decade. UBS analysts seem to think a merger of Glencore and Teck’s coal mining arms would be an “attractive” outcome for both parties. UBS sees potential cost savings and “meaningful marketing synergies” if Glencore and Teck combine their coal businesses.
While investors watch the love story between Glencore and Teck unfold, Glencore shares rose 0.5% to $6.04 each in London on Monday, but fell 0.3% to $7.07 in Johannesburg. Teck shares, on the other hand, closed 0.6% lower at $42.51 in New York on Friday, with a market capitalization of $22.08 billion.
In a side plot, Glencore backed a $1 billion deal by London-listed blank-cheque firm ACG Acquisition Co Ltd to acquire two mines in Brazil. Carmakers Stellantis NV and Volkswagen AG also threw their hats in the ring, backing the deal to the tune of $100 million. ACG will be renamed ACG Electric Metals Ltd, positioning themselves as a supplier of choice to the western automotive industry in the EV revolution.
So, as Glencore boldly ventures further into the coal industry, they’re not against expanding and investing in a sustainable energy future. Perhaps Teck will be the gateway to the next big player in electric vehicle metals. In Glencore’s world, anything is possible – just stay tuned.