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Teck Resources’ top shareholder backs Glencore takeover

China’s sovereign wealth fund favours the deal because it allows for a cleaner exit for investors, according to media report
Teck has modified its proposed restructuring plan to allow for an earlier full separation of its metals and coal units.

Teck Resources’ (TSX: TECK.A, TECK.B)(NYSE:TECK) top shareholder, China Investment Corp (CIC), said on Friday it plans to back Glencore’s (LON:GLEN) proposed takeover of Canada’s largest diversified miner.

China’s sovereign wealth fund favours the deal because it allows for a cleaner exit for investors, Bloomberg reported on Friday. 

CIC holds slightly over 10% of Teck’s Class B shares, which puts it in a powerful position as the Vancouver-based miners needs to secure two-thirds approval from both classes of shares, voting separately. 

Teck operates under dual-class structure in which the family of octogenarian mining magnate Norman Keevil owns the majority of class A “supervoting” shares, each worth 100 votes. The class B shares are worth one vote each.

The miner has repeatedly rejected Glencore’s proposal to merge the companies and subsequently spin off their combined thermal and steelmaking coal businesses. It says the move would expose shareholders to a larger thermal coal and oil portfolio.

The company is urging investors instead to back Teck’s own restructuring proposal, which it modified on Thursday to allow for an earlier full separation of its metals and coal divisions.

Teck’s shareholders are quite divided. The miner’s controlling Keevil family has said through Norman Keevil, who holds the role of chairman emeritus, that now was “not the time to explore a transaction of this nature.”

He already has the support of key stakeholders, including gold magnate Pierre Lassonde, who is planning to buy a stake in Teck’s spinoff coal company to protect it from a foreign takeover.

Egerton Capital UK, the seventh-largest holder of Teck’s class B shares, has said that splitting Teck into two autonomous companies was “much more attractive to prospective buyers” than a takeover by Glencore.

Nippon Steel, which has agreed to buy 10% in Teck’s coal spin-off, said on Thursday it hoped the current restructuring plan would be approved.

Major advisory firm Institutional Shareholder Services, however, urged Teck shareholders on Thursday to reject the company’s move, citing “uncertainties and structural issues associated with the proposal”.

Canaccord’s mining analyst Dalton Baretto believes the upcoming shareholder vote could result in an unwelcome surprise for Teck. “With ISS recommending against Teck’s proposal and a potentially higher bid from Glencore possible ahead of the vote, Teck’s proposed separation is significantly at risk,” Baretto wrotein a note to clients.

Teck chief executive officer Jonathan Price and Glencore CEO Gary Nagle are meeting with top shareholders in Toronto since Thursday to try swaying them.

Teck investors will decide on the Canadian miner’s restructuring plan on April 26.

If Glencore ends up acquiring Teck, the deal would go down in history as one of the world’s biggest-ever mining takeovers.