Glencore makes cash swoop for Teck Resources’ coal business

Swiss mining and trading giant Glencore wants to purchase the coal business of Teck Resources for cash, the latest twist in one of the mining industry’s biggest takeover battles in a decade.

Under the new proposal, Glencore will buy Teck’s steelmaking coal business for an undisclosed valuation and then spin out a new company combining its own coal and Teck’s coal assets one or two years later.

That would create a coal mining behemoth with few rivals in scale anywhere in the world, producing just over 100mn tonnes of thermal coal and 30mn tonnes of steelmaking coal a year.

The proposal marks the first time that Glencore — the world’s most profitable coal mining company — has publicly outlined how it would spin out its coal business even in the absence of a full acquisition of Teck Resources, which has so far rebuffed multiple takeover offers.

Glencore had previously offered to pay up to $8.2bn in cash for Teck’s coal business as part of its broader proposal to buy all of Teck Resources in a $23bn cash-and-share deal.

Teck’s coal business, which includes four metallurgical coal mines in Canada’s British Columbia, previously had an implied valuation of just over C$11bn (US$8.2bn) as part of an investment agreement struck earlier this year with Nippon Steel, which aims to take a 10 per cent stake in the business.

Glencore made an unsolicited offer in April for the entirety of the Canadian group — including its copper and zinc mines across the Americas. Under that proposal, it planned to split the combined companies’ assets after the merger, ultimately creating a metals mining and trading business and a separately listed coal business.

Teck said it was engaging with Glencore to discuss the potential coal deal but noted Glencore’s was just “one of a number” of proposals under consideration.

The Canadian mining group has been working on finding a simpler way to separate its coal business from its metals business after shareholders balked at its complex original proposal to separate the two companies.

Canadian mining investor Pierre Lassonde said in May that he was assembling a consortium of investors to bid for Teck’s coal business, without disclosing further details.

Glencore said it also “remains willing to pursue” its original offer to buy the whole company, despite Teck twice rebuffing approaches.

Glencore’s pursuit of Teck has been complicated by the Canadian group’s dual-class share structure. Norman Keevil, a Canadian who in effect controls the company through supervoting class A shares, has staunchly opposed the deal.

Glencore chief executive Gary Nagle said in May that buying only Teck’s coal business would be a “distant second” in terms of benefits that could be achieved by merging.