Last month, Teck Resources Ltd. announced its intention to split its business into two independent, publicly listed companies: Teck Metals Corp. and Elk Valley Resources Ltd. (EVR). Teck Metals will be positioned as a base metals mining company with a top-tier copper development portfolio. EVR will be a pure play Canadian metallurgical coal producer and eventually allow Teck to jettison its coal assets.

Subsequently, Glencore Plc confirmed that it submitted a proposal to merge with Teck and to simultaneously demerge their combined metals and coal businesses to create MetalsCo and CoalCo.

Teck’s board reviewed the Glencore proposal and unanimously rejected it. Glencore then offered to modify the terms of its proposed merger-demerger with Teck. Acknowledging that some Teck investors may prefer a full coal exit while others may not desire thermal coal exposure at all, Glencore introduced a cash element to effectively buy Teck shareholders out of their coal exposure. Teck shareholders would receive 24% of MetalsCo and $8.2 billion in cash.

“Glencore has made two opportunistic and unrealistic proposals that would transfer significant value to Glencore at the expense of Teck shareholders,” said Sheila Murray, chair of the Board, Teck. “Teck’s proposed separation creates a significantly greater spectrum of opportunities to maximize value for Teck shareholders. The Special Committee and Board continue to recommend that shareholders vote for the proposed separation into Teck Metals and EVR as the best pathway to fully realize the greatest value.”

“Glencore recognizes that post-separation it would be exposed to significantly greater competition from other parties, which is why it is trying to frustrate Teck’s separation process,” said Jonathan Price, CEO, Teck. “The fundamental flaws of Glencore’s revised proposal continue to make it a non-starter. It does not address major inherent risks including substantial regulatory hurdles, jurisdictional and ESG concerns, and diluting the base metals business with significant oil trading.”

Teck believes its pending separation provides shareholders with a greater set of options to maximize value. The separation minimizes execution risk, provides a path to fulfill the full potential of Teck Metals, realizes significant value for the high-quality steelmaking coal assets of EVR and does not foreclose future opportunities for other value enhancing transactions.

Teck’s Board of Directors continues to unanimously recommend that shareholders approve the previously announced reorganization of Teck’s business.

In related news, Teck said it is making changes to the separation proposal, including reducing the minimum term of the royalty paid by EVR to Teck Metals from approximately 5.5 years to 3 years, providing a potentially shorter path to full separation of Teck Metals and EVR, and putting in place measures to cap annual capital spending by EVR at $1.3 billion, with exceptions for social and regulatory requirements. This strengthens the alignment between EVR and Teck Metals.

“We have decided to make these changes to allow for an earlier full separation and enhance alignment between EVR and Teck Metals,” Price said. “We believe these amendments will enhance certainty and further protect the interests of Teck Metals shareholders.”