Glencore's Revised Proposal For Teck Resources: Unlike To Engage Key Shareholders, Analyst Says

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  • Teck Resources Limited TECK confirmed receiving a revised acquisition proposal from Glencore plc.
  • Glencore’s revised proposal appears unchanged, except for a cash consideration alternative instead of shares in the proposed combined coal entity. 
  • The revised proposal does not increase the overall value to be received by Teck shareholders or appears to address material risks previously raised by Teck.
  • Related: Value-Adding Vision: Analysts Dismiss Glencore’s Deal as Teck Resources’ Proposed Plan Gains Favor.
  • The National Bank Of Canada says that while a cash component representing the value of the coal company may be attractive for those looking for a more swift exit from the coal business, the proposal also removes any upside related to cash flows associated with the Elk Valley royalty that would support growth in the Teck Metals portfolio as well as debt reduction, share buybacks, among others. 
  • Overall, the analyst says the spinout of Teck Metals will remain an attractive acquisition target given its currently discounted valuation, attractive copper growth outlook in politically stable jurisdictions, and strong balance sheet. 
  • Scotia Capital writes that the revised unsolicited takeover proposal is unlikely to engage the company’s key shareholders, namely the Keevil family and Sumitomo Metal Mining Co, which collectively control a commanding ~48% of total votes outstanding. 
  • The analyst views Glencore’s offer as an opportunistic bid to take advantage of the current dislocation in Teck shares related to the proposed near-term business separation.
  • Price Action: TECK shares are up 1.38% at $43.36 on the last check Tuesday.
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