Glencore CEO Gary Nagle
Swiss-headquartered Glencore does not see regulatory approval for its proposed $23-billion takeover of Canadian mining company Teck Resources as an executional challenge, said CEO Gary Nagle on Tuesday.
Speaking at the Bank of America conference in Barcelona, he said Glencore was a major producer and operator in Canada and that it had been in that country for a long time.
According to a recent Bloomberg report, Canadian Prime Minister Justin Trudeau has said that any takeover bid for Teck will have to get through a “rigorous process” to win government approval, considering the importance of the company to the Canadian economy.
“We have a good relationship with them,” Nagle said, according to a Bank of America note.
“The quiet messages we are receiving back is of course we will go through a rigorous process, but given our track record, given our history, given our footprint, given the net benefit we make and have given to Canada over the years, this is certainty manageable.”
Glencore believes that the transaction could be completed within 12 months.
Teck has rebuffed Glencore’s proposal, instead pushing for its own plan to separate its copper and coal business. However, the company last month had to postpone a vote on its separation, after failing to secure shareholder support.
“Our proposal offers value certainty for Teck shareholders. It’s putting two great companies together. Think about the alternatives – the stock drops 20% the day we walk away. There’s a lot of debt, not much of it can go with the coal company, so the metals company has a lot of debt, and then they want to do greenfield, which is very difficult…and they want to develop five projects at once with a lot of debt on their balance sheet. There certainly would have to be capital calls to shareholders,” said Nagle.
The Glencore CEO also stressed that the group had made it clear that its proposal was not “best and final”. “This isn’t an acquisition, we’re offering Teck shareholders a disproportionate benefit in the combined company, they can disproportionately participate in the re-rating benefit.”
Nagle reiterated that doing the full deal was the best offer for both sets of shareholders. Buying Teck’s coal business standalone was a “distant second” in terms of potential benefits.
Further, Nagle said that Glencore would run down coal assets responsibly and that he would not necessarily expand, but stressed that coal was a transition fuel.
“From my view, I would love coal to be shut tomorrow, because if coal is to shut tomorrow, you know how much copper, zinc and nickel the world is going to need?”