UPDATE: Glencore sizes up Teck coal assets and backs SPAC deal

(Alliance News) - Glencore PLC on Monday said it has mounted a bid to acquire Teck Resources Ltd's steel-making coal business, after previous efforts to capture all of the New York-listed miner were rebuffed.

Glencore is a Barr, Switzerland-based miner and commodity trader.

If the deal were to be sealed, Glencore said it would eventually demerge the combined business. This would occur once it is "sufficiently" de-levered. This would take about 12 to 24 months from close, Glencore predicted.

Glencore's attempts to acquire Teck had fallen on deaf ears. In April, Glencore revised its offer for Teck, adding a cash element of USD8.2 billion plus a 24% stake in MetalsCo to the Vancouver-based miner's shareholders. MetalsCo would be a transition metals focused business. It would differ from CoalCo, which would be a standalone coal unit.

Glencore had originally offered 7.78 of its own shares for each Teck Class B subordinate voting share, and 12.73 shares for each Teck Class A common share. This represented a 20% premium for both on the date of the offer. If the deal succeeded, Glencore shareholders would have owned 76% of the merged entity, with Teck shareholders owning the remaining 24%.

The revised bid, which included a cash portion, was made to soothe investor concern on coal exposure.

Coal has fallen out of favour in some corners of the investor community and Glencore itself has faced pressure from Bluebell Capital Partners Ltd, which opposed the possible deal to acquire all of Teck.

Bluebell wants Glencore to separate its coal mines.

"We have already closed three coal mines since 2019, and plan to close three coal mines in the near term and at least six additional mines by the end of 2035 as they come to the end of their economic lives or lease expiry dates, reducing overall coal production and associated emissions across our portfolio. In addition, we may exit from other industrial assets should they become uneconomic due to high carbon and energy costs," Glencore said in its annual climate report published in March.

"We plan to continue to manage our portfolio and its emissions footprint in a manner consistent with our climate change strategy and in line with our ambition of achieving net zero emissions by 2050. We are not progressing thermal coal greenfield investments. However, we plan to continue to progress various brownfield coal extensions or expansions at existing mines, while continuing to be a responsible steward of these assets as we progress the phase down of our global coal portfolio."

Rio Tinto PLC set the tone back in 2018 when it became the first major miner to stop producing coal. Anglo American PLC in June 2021 completed the spin-off of Thungela Resources PLC.

BHP Group Ltd also plans to exit coal, though it said this time last year that it will retain New South Wales Energy Coal and will look to cease mining at the project by the end of 2030.

Analysts at UBS in May said a merger and subsequent listing of Glencore and Teck's coal mining arms would be an "attractive" outcome for both.

"We still see potential for Teck and Glencore to agree to combine their coal assets & list the combined CoalCo on the New York Stock Exchange," analysts at UBS had commented, adding that what remains of Glencore and Teck would operate independently.

UBS sees scope for cost savings should Glencore and Teck combine their coal arms. The Swiss bank sees "meaningful marketing synergies from integrating Teck's metallurgical coal mines with Glencore's coal trading platform".

Glencore shares rose 0.5% to 437.05 pence each in London on Monday morning. In Johannesburg, it traded 0.3% lower at ZAR102.17.

Teck shares closed 0.6% lower at USD42.51 in New York on Friday. It has a market capitalisation of USD22.08 billion.

Elsewhere on Monday, Glencore backed a USD1.0 billion deal by London-listed blank-cheque firm ACG Acquisition Co Ltd to acquire two mines in Brazil from funds advised by Appian Capital Advisory LLP.

Carmakers Stellantis NV and Volkswagen AG also backed the deal, and like Glencore, to the tune of USD100 million.

The deal will see ACG renamed to ACG Electric Metals Ltd. It will be "ideally positioned to benefit from the EV revolution as supplier of choice" to the western automotive industry.

By Eric Cunha, Alliance News news editor

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