Glencore Postpones Coal Spinoff Discussions Until Teck Deal Closes

Zinger Key Points
  • Glencore will consult shareholders on coal spinoff after closing Teck Resources acquisition.
  • The $6.93 billion acquisition of Teck's coal assets will close in the third quarter of 2024.

At Glencore‘s GLCNF plans to consult with shareholders on the future of its coal business following the anticipated closure of its deal to acquire Teck Resources TECK steelmaking coal assets.

Glencore CEO Gary Nagle said at the annual general meeting held on May 29 that the consultation will determine whether the company will proceed with its previously announced plans to spin off the coal unit into a separate entity.

The acquisition involves Glencore purchasing a 77% interest in Teck’s steelmaking coal business, Elk Valley Resources, for $6.93 billion.

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This deal, structured on a cash-free, debt-free basis, is expected to finalize in the third quarter of this year.

Glencore’s acquisition is aimed at bolstering its portfolio with Teck’s valuable metallurgical coal assets, essential for steel production.

The coal business has been one of Glencore’s most profitable divisions, driving record returns in recent years. The decision to potentially spin off this unit would be a strategic pivot for the company under Nagle's direction.

The pressure to spin off the coal business stems from growing environmental and social governance concerns. Activists and some investors argue that divesting from coal aligns with global efforts to reduce reliance on fossil fuels. Historically, Glencore has resisted pressure to divest, arguing that its management of these assets is more responsible than selling them off, particularly given the ongoing global reliance on coal.

The consultation with shareholders will be critical, especially considering the perspectives of Glencore’s largest stakeholders, including former CEO Ivan Glasenberg, the Qatar Investment Authority, and BlackRock Inc.

Previously, shareholders have expressed a preference for retaining the coal assets, recognizing the unit’s substantial contribution to Glencore’s overall profitability. Their support is crucial as it could sway the decision away from a spinoff.

Once the Teck acquisition closes, Glencore will initiate a consultation process with its shareholders to gauge their stance on the coal spinoff. Should a majority favor retaining the coal assets, Glencore will forgo a formal vote on the matter.

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