Teck Resources Ltd.'s planned split of coal and metals assets may fail to win broad shareholder support at a vote set for April 26, as mining giant Glencore PLC opposes the resolution in its own attempt to take over the Canadian diversified miner.

Ahead of the crucial vote, Teck asked its shareholders to support a major asset restructuring into two separate companies and the eventual end of its dual class share structure. Meanwhile, Glencore sees an opportunity to launch its own split of carbon-intensive coal assets and the metals operations that are more energy transition-friendly. For it to work, however, Glencore wants to acquire Teck before the asset split so it can pair its own metals unit with Teck's into one company and create another with the two companies' coal operations.

While Teck is largely controlled by Canada's Keevil family and Japan-headquartered Sumitomo Metal Mining Co. Ltd., which control class A shares in the dual class stock structure and oppose the Glencore offer, there may be dissent among top shareholders of Teck's more widely traded class B shares, according to media reports. Teck's largest class B shareholder, China Investment Corp., favored Glencore's offer, Bloomberg reported April 14, though Teck CEO Jonathan Price disputed the report's accuracy, according to The Globe and Mail.

Proxy advisory firms ISS and Glass Lewis & Co. LLC have separately advised Teck shareholders to vote against the asset split. The recommendations represent a risk to the April 26 vote, National Bank analysts said in an April 17 note. Other analysts also raised the potential for unforeseen twists around the April 26 decision facing shareholders.

Complicating matters, Glencore's public bid has ignited speculation from as many as three other mining companies vying for control of a Teck metals company should the proposal to split the company succeed.

"In the sport of triathlon, they say, expect the unexpected and be ready for rough water," said John Tumazos, a veteran mining analyst at Very Independent Research. "I think in this situation, there are many unexpected turns that could happen."

Hardened defenses

In recent days, Glencore and Teck have ratcheted up a war of words, each trying to sway shareholders before the April 26 vote.

Teck held a hastily scheduled call with analysts April 18, urging shareholders to vote in favor of its separation plan. Price said the strategy would create more value than a Glencore takeover and give Teck more options to consider potential deals. In part, Teck opposes Glencore's offer as it would marry Teck's metallurgical coal assets with Glencore's operations, which include thermal coal.

Teck would combine its metallurgical coal assets into one company and its metal assets into another, though it would initially divert coal revenues to the metal company through a three-year royalty. Less encumbered by carbon-intensive assets, the separation could allow the metals-focused unit to more easily do transactions with other metals companies that may be wary of direct ties to coal, Teck executives said.

Teck's management and board of directors cast Glencore's bid as opportunistic and said it would snuff the separate units' chances of considering deals as stand-alone businesses. Teck also said combining with Glencore would add unfavorable exposure to thermal coal, which is at odds with the company's decarbonization and energy transition goals.

Glencore's argument

Glencore has criticized Teck's roadmap, saying its own proposal creates a more pure metals company that would not depend on a lucrative coal royalty for a portion of cash flows.

The Swiss-based diversified miner downplayed the potential for Teck to find other suitors for its assets, noting it was so far the only company with an offer on the table. Further, Glencore highlighted the premium it is offering for Teck shares, pointing to Glass Lewis' recommendation that shareholders vote against the April 26 proposal and engage with Glencore over its bid.

Glencore called its offer "demonstrably superior" in an open letter to Teck shareholders on April 19 while dangling sweeter terms.

"Glencore has never stated that its proposal is 'best and final' and that it is not willing to make changes and improvements to its proposal," the company said in its letter.

The company declined to comment for this story.

Decision day

The Keevil family has largely controlled Teck through a dual class share structure since 1969. Norman Keevil, Teck's chairman emeritus, along with Japan-headquartered Sumitomo Metal Mining, control most of Teck's class A shares, which get 100 votes per share. All told, the Keevil family and Sumitomo Metal Mining control about 48% of votes, according to Scotiabank analysts, giving the shareholders a near lock on voting outcomes.

In a twist, Keevil said he would not oppose the position of class B shareholders, Teck's board or its executives over a sale to a non-Canadian company, according to an April 14 report in The Globe and Mail.

"If everybody wants to go the other direction, I can't go swimming against the tide," Keevil said, according to the newspaper, raising the prospect that class B shareholders hold sway, if not power, over class A shareholders.

However, Teck does not view the remarks as a change in the wind for Glencore. A Teck spokesperson highlighted a statement in which Keevil expressed potential support for transactions "after separation."

S&P Global Commodity Insights sought comment from Teck's top 10 holders of class B shares, but none disclosed their intentions.

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