Zurich It is a deal that is intended to fundamentally transform Glencore: in his second year as CEO, Gary Nagle has set himself the goal of taking over the Canadian mining group Teck Resources – and in a second step of splitting up the merged company. It is also the largest deal since the merger with the mining group Xstrata in 2011.
But it is also a turning point for Nagle himself: the native South African is a “coal guy”: he spent most of his corporate career in the coal business and, as head of the division, made it all the way to the top. Now he could separate the coal mines, which play a central role in the energy supply in his home country, from Glencore.
Until recently, he had always rejected corresponding demands from activist investors. With his about-face, Nagle also surprised his own investors and employees.
Now he is pursuing the strategy of forming a commodities company that mainly makes money from mining and trading metals that are essential for the energy transition. After a bumpy start, Nagle has now come a little closer to this goal
Because: The management of Teck Resources recently postponed a shareholder vote on a planned split of the Canadian group into a copper and a coal producer. The move is seen as a small victory for Glencore in the takeover battle.
Access to attractive mining projects
Nagle presented an alternative offer to the Teck shareholders at the beginning of April: First, Glencore wants to take over Teck as a whole. In a second step, the merged coal business of both companies is to be spun off and listed separately on the stock exchange. Glencore is offering Teck shareholders 23 billion dollars in shares in the Swiss commodity giant. Nagle told investors the goal is to form “the biggest and best copper producer” in the world.
Teck operates large copper mines in Canada and Chile, among others. Together, both companies would produce 1.2 to 1.4 million tons of the reddish industrial metal, which plays a key role in the energy transition because of its electrical conductivity. This would make the merged group the fourth largest copper producer in the world.
Even more than the current production, however, Nagle is electrified by the growth opportunity of the newly formed industrial metal giant. Glen-Teck could produce up to three million tons annually in the future if the two companies’ interests in exploration projects were fully developed. Both groups also complement each other regionally when it comes to copper: Teck is strong in Canada and Latin America, Glencore in Australia. The Swiss are also one of the few western companies that operate mines in sub-Saharan Africa, for example in the Congo.
Since taking office, he has made no secret of the fact that Nagle sees the future in copper. At the end of last year he said: “There will be a copper deficit – but the world doesn’t seem to understand that.” “We’re a few dollars away from destroying demand, then there comes a time when we bring additional copper supply to the market,” Nagle said.
Mining patriarch with veto power
Teck also fits perfectly into Nagle’s strategy because the Canadians have interests in promising development projects. Glencore itself almost never invests in early-stage mining projects. Access to Teck’s project pipeline would allow Nagle to incrementally increase metal supply if the price is high enough.
The Glencore CEO’s master plan had just one catch from the start: Teck has a dual share structure, with the family of Canadian mining patriarch Norman Keevil controlling the majority of the voting rights. Nothing works without his consent. Because the Keevils didn’t want to sell, the Teck management initially brusquely rejected Nagle’s offer. Teck CEO Jonathan Price scoffed at this as a “non-starter”.
The takeover attempt, which was by no means hostile, as Nagle likes to emphasize, also started with irritation. For the first time at the end of March, the Swiss had proposed the merger and joint split-up to the Teck management. The talks only became known when the Teck management publicly rejected the offer at the beginning of April.
Through this detour, Glencore shareholders first learned that Nagle was in principle prepared to spin off the coal business. Until then, a majority of shareholders had supported Glencore’s course to keep the business.
In addition, Glencore negotiated under great time pressure. In just four weeks, the Swiss company had to persuade enough Teck shareholders to reject Teck’s own split plans. Otherwise the offer would have failed.
>>Read more: Glencore boss Nagle warns of a massive copper shortage
The Keevil family was unable to decide on Teck’s future on their own – and Glencore has managed to sabotage Teck’s plans for the time being. “The offer is still open,” said Glencore. The Swiss group is now expected to submit an improved offer.
Nagle’s predecessor sits at the negotiating table
So the deal is alive – but it’s far from dry. Canadian Prime Minister Justin Trudeau announced that he would closely monitor the merger negotiations. Teck also has reservations about the merger of the coal divisions of both companies. Teck mainly produces coking coal for steel production. Glencore is strong in coal, which is particularly discredited for power generation. The fact that the highly profitable trade in oil and gas should remain with the sustainable metal business for the time being does not convince everyone either.
Market experts still think the deal makes sense. As the analysts at RBC Capital Markets write: “We believe the Glencore proposal would unlock significant value for both Glencore and Teck shareholders, based on our discussions with investors and the reactions to share prices However, everything depends on the Keevil family with their veto power.
That’s another reason why Nagle’s predecessor, Ivan Glasenberg, continues to pull the strings behind the scenes. This is indicated not least by statements by Patriarch Keevil: In the course of the takeover battle, he called Glasenberg an “interesting guy” and “smart man”. He didn’t mention Nagle at all. Both men know each other, also because Glasenberg tried to swallow with Glencore Teck back in 2020. Now Nagle should finish what his predecessor started.
More: Glencore plans to acquire mining group Teck Resources