After Two Rejected Offers, Glencore Now Wants Teck Resources’ Steelmaking Coal Unit

Glencore has made an offer to acquire Teck Resources (TSX: TECK.B) steelmaking coal business as a separate entity, after the latter had rejected the London-listed firm’s $22.5 billion bid to merge the two companies.

Just a few days ago, Teck Resources announced that it had received multiple proposals for its coal business. The company had been planning to split it from its copper and zinc unit, but this strategy failed to garner enough support from shareholders in April.

Now, Teck has confirmed that it is in discussions with Glencore regarding its coal proposal as part of the board’s duties “to consider and evaluate all actionable, value-accretive proposals received relating to Teck’s steelmaking coal business”

“As part of this ongoing review, Teck confirms it is engaging with Glencore around their proposal regarding the steelmaking coal business. The proposal is preliminary in detail, conditional and non-binding,” the company said.

Glencore, a major player in mining and trading thermal coal for electricity production, as well as coking coal for steel manufacturing, has suggested demerging the coal units of both companies.

In a recent note, Deutsche Bank analysts proposed that if Teck is unwilling to sell Teck Metals outright, a potential “middle ground” could be the sale of the coking coal assets to Glencore. This arrangement would offer Teck a cleaner exit from coal and allow Glencore to split its business into two separate entities: CoalCo and MetalsCo.

While Glencore’s CEO Gary Nagle previously indicated that acquiring Teck’s coal business as a standalone unit was a secondary option for the company, as it continues to pursue its merger plans, the dwindling number of steelmaking coal mines worldwide has piqued Glencore’s interest. This scarcity makes Teck’s mines particularly attractive, especially considering the growing global momentum to phase out coal-fired power generation.

Aside from Glencore, other parties have shown interest in Teck’s coal business, including Canadian mining entrepreneur Pierre Lassonde and Japanese steel maker Nippon Steel Corporation.

As part of its original proposal, Glencore offered Teck shareholders who may not want exposure to thermal coal a staggering cash amount of up to $8.2 billion. Details of the latest offer however have not been made public.

Information for this briefing was found via Reuters and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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