Teck withdraws split proposal hours before crucial vote, will pursue alternate plan

Teck Resources Ltd. TECK-B-T +4.43%increase is not proceeding with its planned split, after evidently not gathering enough votes to secure the transaction.

The development is a huge win for Glencore PLC which has been campaigning to stop Teck’s shareholders from voting for the split, and instead accept its hostile takeover offer.

Teck needed to secure two thirds of votes cast by both its super voting A and its regular voting B shareholders.

Vancouver-based Teck made the announcement just before the start of trading on Wednesday.

Teck said it will not engage with Glencore and instead propose an alternative transaction that may win the support of its shareholders.

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Teck CEO Jonathan Price said in a statement that Teck’s plan is to pursue another split of the company but a far cleaner one this time. Under the previous plan, Teck’s coal business would have had to pay 90 per cent of its cash flow to its metals business for about a decade.

Mr. Price said that Teck had “listened and heard the feedback that some shareholders would prefer a more direct approach to separation.”

Glencore has said that if the split proposal failed, it will be waiting in the wings with its US$22.5-billion takeover proposal, and that it is prepared to improve the terms.

Teck reiterated on Wednesday that Glencore’s approach is a “non-starter.”

Glencore has proposed acquiring Teck and subsequently splitting itself into one company holding its thermal coal and Teck’s metallurgical coal, and another company containing the metals mines of both companies, alongside Glencore’s energy trading business.

Teck has slammed that proposal as ruinous to shareholder value, arguing it would carry significant execution risk, degrade its ESG standing, and provide unwanted exposure to thermal coal.

A takeover of Teck by Glencore would be subject to a net benefit review and a national security review by Ottawa.

Any such review would be lengthy, and involve discussions with Canada’s allies, including the United States.

Ottawa has given early signs that it wants to keep Teck in Canadian hands.

“We need companies like Teck here in Canada – companies with a strong commitment to Canada,” Deputy Prime Minister Chrystia Freeland, Industry Minister François-Philippe Champagne and Natural Resources Minster Jonathan Wilkinson said in a Monday letter to the Greater Vancouver Board of Trade.

Teck will hold its annual meeting as planned on Wednesday afternoon in Vancouver, but the split proposal will not be on the ballot.

All other matters, including the election of directors, and whether to approve a sunset clause on the A shares will be voted on at the meeting.

Under the sunset clause, Teck’s A shareholders would convert their securities into B shares after six years.

The A shares are controlled by the Keevil family and Japan’s Sumitomo Metal Mining Co. and give them veto power over any proposed takeover transaction.

Norman B. Keevil, Teck’s chair emeritus and patriarch of the Keevil family told the Globe and Mail earlier this month that he would not exercise his veto power, if the board, management and the majority of B shareholders want to pursue a takeover of the company.

Teck shares were up by 4 per cent in early trading on the Toronto Stock Exchange, as investors wait for an expected bump in Glencore’s bid.

Glencore declined to comment for this story.