In Hollywood, the characters of heroes and villains are usually cleanly defined–but the business world is generally more nuanced. However, the predatory campaign against Teck, the responsible North American mining company producing critical minerals such as copper and zinc that are vital to decarbonization and EV supply chains, by the scandal-ridden, short-sighted Glencore trading shop is the exception to the rule.
Glencore’s history begins with Marc Rich, who launched a shadowy business culture of tax fraud, sanctions evasion, bribery, and support for the cruelest autocratic regimes in the world, keeping Iran afloat during the 1979 hostage crisis and continuing right through their ongoing dealings with Putin’s brutal regime.
Teck, by contrast, has been a poster child within the mining industry for responsible growth, transparency, sustainability, and collaborative community relations. Just this week, Teck’s patriarch and controlling shareholder, trained technical geoscientist Norman Keevil published the second edition of his book Never Rest on Your Ores: Building a Mining Company, One Stone at a Time. In the book, Keevil discusses the longstanding values, culture, and leadership that grew Teck’s value 50-fold over the course of his 70-year control.
Another book, The World for Sale, captures Glencore’s swashbuckling history of deceit and illegal activity. Interestingly, some of the same voices who wrote this aptly titled history of Glencore are now writing articles trumpeting the potential of Glencore’s acquisition offer.
If a flurry of breathless headlines, each one more sensational than the last, were to be believed Swiss trading house Glencore has seen momentum swing in its favor in its unsolicited $23 billion bid to merge with Teck. The fawning coverage trumpets how leading shareholders are supposedly “favoring” Glencore’s proposal while “check-all-the-boxes” proxy advisory firms ISS and Glass-Lewis have mindlessly rubber-stamped Glencore’s takeover bid, fed by sell-side investment banking analysts salivating at the prospect of a massive bidding war.
But this breathless horse-race narrative has it all wrong: this is not even a bona fide takeover bid. Rather, Glencore’s bid is nothing more than a cleverly disguised, cynical Trojan horse ploy to undercut a rival–and it has successfully confused business media and proxy advisers.
Glencore’s opportunistic disruption of a strong competitor
Beneath Glencore’s rhetorical bravado, enabled by naïve media seeking “exclusives,” the Swiss firm knows there is no way its takeover bid can succeed, since, as Glencore’s own CEO acknowledged, “one cannot possibly go hostile under the current shareholder structure.” There is no acquisition possible without the assent of Teck’s “A-class” shareholders–controlled by Dr. Norman Keevil alongside his longtime trusted partners Sumitomo–who have made it clear the company is not for sale in its current form.
So what is Glencore really up to then? The answer seems to be using the impeccably timed takeover bid as an opportunistic diversion to sow chaos at Teck at a transitory moment of vulnerability, with Teck’s non-controlling Class-B shareholders voting right now on whether to split the company into a free-standing Teck Metals, separate from its legacy Elk Valley Resources coal operation.
If Teck were a U.S. company, this would be a non-event as no shareholder approval would be required, but an obscure quirk in Canadian law requires a forbiddingly high two-thirds vote of approval from the voting (but not the total outstanding) B shares, providing a fleeting opportunity for Glencore’s gambit.
Glencore has nothing to lose and everything to gain by mischievously offering a Trojan horse bid, even knowing they will never actually own Teck. After all, if the split Teck’s leaders want is successfully approved, Glencore knows that the new Teck Metals–a crown jewel asset with years of organic growth ahead that has already drawn preemptive serious interest from dozens of potential acquirers, from Freeport to Vale to Anglo to BHP–will be a significantly strengthened rival, insurmountably expensive, and out of Glencore’s clutches forever.
Glencore has cleverly set up its bid as an ostensible foil to distract some of Teck’s B-shareholders, drive wedges against Teck management, and stop Teck’s split. For example, Bloomberg quoted unnamed sources as saying that Teck’s largest B shareholder, China Investment Corp., was working in cahoots with Glencore when in reality the CIC had refused to even meet with Glencore’s team, as reported by the Globe & Mail’s Niall McGee. Furthermore, unnamed sources claimed some of Teck’s B shareholders might turn activist against management when in reality the hedge funds in Teck’s stock, such as David Einhorn’s Greenlight Capital, are lining up in support of Teck’s split. Glencore has also spun the vote on Teck restructuring plan to be held on Apr. 26 as a referendum on its own takeover bid, claiming that “shareholders want Glencore.”
Trader-raiders are no white knights
In reality, even without the veto of the A-shareholders, Teck’s board and management would in all likelihood face a revolt from angry Teck shareholders–and even more importantly, regulators, governments, and other stakeholders–were it ever to inexplicably sell to Glencore without running a competitive bidding process–no matter what the ill-advised analysts are saying.
Glencore’s skimpy bid is bad economics. It offers a price below where Teck stock has been trading, offering mainly volatile Glencore stock that has been artificially inflated by a transitory windfall from thermal coal, an industry in terminal decline. Glencore also has a track record as a terrible operator, with a reputation of knowing how to trade but not how to run mines, while needlessly inflaming local communities. For example, Polymet, a Minnesota-based mining company, has seen its stock fall by 80% since Glencore took majority control, in part because vehement community opposition to Glencore lead to permitting delays.
Even more importantly, Glencore has been repeatedly condemned over bad business practices. In the last year alone, Glencore paid $3 billion–or the entirety of Teck’s expected profit in 2020 and 2021 combined–in criminal penalties and fines, pleading guilty to a smorgasbord of charges ranging from bribery of officials by the U.S. Department of Justice, market manipulation by the U.S. CFTC, bribery by Brazilian public officials, corruption by the U.K.’s Serious Fraud Office, corruption by the Attorney General of Switzerland, and corruption by the Dutch Public Prosecution Service–all in just 2022. These are not mere accusations, but bona fide guilty pleas. Former Glencore executives not only admit but also openly brag about paying bribes to top officials and boast about how they “fly the world carrying briefcases full of cash.”
2022 was not a bad year for Glencore–but rather just business as usual for a shop that prides itself on its savviness and yet whose own history reflects a tendency to overplay its hand by being too aggressive for its own good. Glencore has flouted U.S. sanctions by loudly and proudly paying off sanctioned individuals such as Dan Gertler, a foolish overstep which helped lead to former CEO Ivan Glasenberg’s resignation from the CEO job after pressure from Western governments. Glasenberg remains Glencore’s largest shareholder–and the Globe & Mail reported that he’s “working hard” on the Canadian takeover plans.
Teck’s shareholders may or may not care about Glencore’s bad business practices–but Western governments certainly do, especially because they increasingly care about securing a “Made in North America” supply chain for rare earth minerals, which is crucial to the clean energy transition. No wonder those governments, across federal, state, and local levels in both the U.S. and Canada, have already expressed serious misgivings about letting the second-largest remaining independent copper miner in North America fall into the hands of a company with a history of ties to authoritarian dictators. Glasenberg, after all, was one of the only Westerners to ever receive Russia’s Presidential Order of Friendship from no other than Vladimir Putin after the former Glencore CEO personally helped save the Russian strongman’s political career. Glencore continues to do some business in Russia today–even as it declares having “no operational presence” on the ground.
For a business that prizes secrecy, it is incredible that Glencore has all but invited a barrage of unwanted scrutiny from governments and media by waging an all-out public war over Teck. Perhaps the Swiss firm forgot its own vulnerabilities as it became too used to soft coverage from the usual cast of beat reporters.
Glencore’s own newly hostile activist investors are unamused by these shenanigans. Regardless of the outcome of the vote to split Teck next week, Glencore might be hitting its limits. In the clash between Teck’s philosophy of building a business “one ore at a time” and the transactional, short-sighted opportunism of trader-raiders, Glencore seems to have bitten off more than it can chew–even if the media narrative is slow to catch up.
Jeffrey Sonnenfeld is the Lester Crown Professor in Management Practice and Senior Associate Dean at Yale School of Management.
Steven Tian is the director of research at the Yale Chief Executive Leadership Institute and former investment analyst at Rockefeller Capital.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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