Glencore bids for Canadian rival’s coal business, having already threatened to make a hostile takeover of the whole firm
Glencore has swooped on a Canadian rival’s coal business in another twist to one of the sector’s biggest takeover battles in decades.
The FTSE 100 mining giant said it has offered to buy Teck Resources’s coal arm for cash in a move that would see it combine the business with its own coal operations.
Glencore would then spin out the merged entity into a separate company within two years of the deal closing.
Teck’s coal arm makes coking coal used in steelmaking, while Glencore’s controversial thermal coal business is considered one of the world’s dirtiest fossil fuels.
Glencore has been battling to buy the whole of Teck, with boss Gary Nagle having previously said buying the coal arm alone would be a ‘distant second’ to a full-blown takeover.
Dirty: Glencore’s controversial thermal coal business – which includes mines in Australia (pictured) – is considered one of the world’s dirtiest fossil fuels
Teck, whose operations also include copper and zinc mines, said it was ‘engaging’ with Glencore’s latest move but stressed it was just ‘one of a number of proposals under consideration’.
Glencore previously offered to buy the entire firm for £18.3billion in a cash-and-share deal which valued the coal arm at £6.5billion.
Its advances have been repeatedly rebuffed by Teck’s managers, who previously branded the takeover proposal as a ‘non-starter’.
But Glencore has been steadily ratcheting up the pressure, having threatened to mount a hostile takeover by taking its proposal directly to investors.
Teck’s leadership originally planned to split its own business in two, focusing on coal and metal mining respectively.
But they U-turned in April when it failed to win support from investors, strengthening Glencore’s hand.
Reports also emerged last month that Glencore could sweeten its bid for the entire firm in a bid to get a deal over the line.
But it faces several hurdles in its pursuit of Teck, which has sparked opposition from the Canadian government and the mining industry.
Any takeover would come under heavy scrutiny from officials in Ottawa, who can block deals, and recently clamped down hard on foreign investment in the mineral industry.
Glencore also faces Norman Keevil, 84, a Canadian magnate whose shares in Teck give him an effective veto on any takeover.
His vociferous rejection of the bid irked some investors and he has since softened his tone.
Glencore’s plans to demerge its coal business come amid mounting criticism of the firm’s strategy to cut back its greenhouse gas emissions.
‘There’s a merry-go-round of coal assets in the industry as companies don’t want to be left holding what is seen as a dirty fuel,’ said AJ Bell investment director Russ Mould.
