Long-time shareholders of Vancouver-based Teck Resources (CA:TECK.B, CA:TECK.A) have probably never seen the company so busy.

On the one hand, management has proposed splitting its business into two separate companies: Teck Metals, which would retain its copper and zinc operations; and Elk Valley Resources, which would own its steelmaking coal business.

At the same time, Glencore PLC (US:GLCNF) has made a hostile takeover offer of the entire company for $23.1 billion. Teck’s management, board, and controlling shareholder Norman B. Keevil, wants nothing to do with the proposal. Instead, they’ve rejected it outright, refusing to even engage in discussions with the Swiss mining and commodities trading giant.

The vote to split Teck into two businesses will happen on April 26. A revised bid from Glencore could be forthcoming before then. However, only some think splitting up the company is a good idea.

Meanwhile, TECK stock is up more than 42% in the last month as Glencore’s share have gained slightly more than 14%.

Strong Institutional Dissent

On April 15, Bloomberg reported that proxy adviser Glass Lewis has recommended that Teck shareholders say “no” to management’s plan to spin off its steelmaking coal business. Glass Lewis feels that the Glencore offer should be explored further by management. In addition, it argues there’s no rush to split the company into two businesses.

Institutional Shareholder Services, another prominent proxy adviser, also recommends shareholders reject it because the status quo or other alternative structures are more appealing.

Also putting the separation vote in jeopardy is the likelihood of an improved offer from Glencore, possibly upping its price by several billion dollars.

“Between the ISS recommendation and a higher Glencore bid likely coming, the vote really seems to be in jeopardy,” Mining.com reported Canaccord Genuity analyst Dalton Baretto’s comments from an April 13 interview. “I would not be surprised to see management tweak the proposal.”

Teck shareholders are wise to pay attention to events leading up to the vote.

Glencore Ups Bid

Glencore has made two unsolicited bids for Teck. The first was $22.5 billion in stock, a premium of 20% to its share price. Shareholders would receive 7.78 Glencore shares for Class B subordinate voting shares and 12.73 Glencore shares for Class A common shares.

Teck rejected the offer.

Glencore wants to acquire Teck, merge Teck’s metals business with parts of Glencore’s marketing and metals business into one company, and Teck’s coal business with Glencore’s into another.

On April 11, Glencore changed its offer to include $8.2 billion in cash to buy out shareholders who don’t want exposure to coal.

“Accordingly, we are prepared, as a modification to the proposed transaction, to introduce a cash element to buy your shareholders out of their coal exposure,” Glencore chief executive Gary Nagle wrote in a letter to the Teck board of directors.

The second offer gives Teck shareholders 24% of the combined metals business and $8.2 billion for the coal business.

Open to Sale

On April 16, Norman Keevil issued a statement suggesting that he was open to selling Teck’s metals business, but not before it was split into two companies.

“There are numerous mining industry parties who have their eyes on Teck and would be interested in partnering or investing in Teck Metals after it separates its base metals and steelmaking coal businesses,” Keevil stated.

“I would support a transaction – whether it be an operating partnership, merger, acquisition, or sale – with the right partner, on the right terms for Teck Metals after separation.  Based on my decades of experience building a successful mining company, I believe that pursuing a sale or merger transaction now would rob our shareholders of significant post-separation value.”

Companies that have approached Teck about a sale of the metals business after the separation include Vale (US:VALE), Anglo American (US:NGLOY), and Freeport-McMoRan (US:FCX).

This article originally appeared on Fintel

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.