The article in the url below reports on the mining giant, Glencore's, hostile bid to acquire Teck Resources of Canada, for $23 billion. What is interesting about Teck's attempt to resist the takeover, however, is the nature of the defense it is employing – specifically, it is using ESG risk as a reason to argue that the acquisition will ultimately damage Teck as a company:
"Teck has rejected Glencore's offer in part because it doesn't want exposure to Glencore's coal business. It also raised concerns about Glencore's oil-trading business and what it said are potential geopolitical risks in certain countries where Glencore operates. … In a presentation to investors laying out its rationale for rejecting Glencore's offer, Teck cited its higher ranking in some ESG indexes relative to Glencore's, pointing to a 'significant ESG misalignment' between the two companies, according to one slide."
Even more interesting, rather than deny or attempt to deflect the accusation, Glencore has instead defended itself on similar terrain:
"Glencore has said the combined metals business would be a leading player in cobalt, copper and zinc, crucial for the transition to less polluting forms of energy. Glencore has said its oil-trading business is becoming a less significant part of its energy-trading division."
For its argument, Teck points to specific aspects of the two companies' business that appear to conflict, from an ESG perspective:
"Teck said earlier this year that it plans to spin off its coal business from its metals business. Glencore, meanwhile, has said it would run down its coal operations by 2050 and spin its coal business off completely if a majority of its shareholders approves. When Glencore came calling, Teck cited Glencore's continued coal business as part of its rationale for rejecting the deal."
Apparently, this is going to be a feature of future M&A activity (and also IPOs):
"Teck's scrutiny of Glencore's ESG bona fides comes as companies increasingly want to know whether deal targets—and suitors—are a match from an ESG perspective, bankers and lawyers say. It is now becoming part of the due diligence process."
Essential, of course, is whether Teck is genuine in its stance, or whether it is just the latest tactic firms will utilize to try and increase their purchase price:
"Teck may change its tune if Glencore sweetens its offer. Last week, Teck called off a shareholder vote on its plan to spin off its coal business, a surprise that analysts said suggested investors are open to a better offer from Glencore or others."
While Glencore, for its part, may deploy a tactic used in the oil and gas industry, whereby companies spin off the dirtiest parts of their operations to appear more sustainable overall. The operations that are spun off, however, are mostly going private and escaping the kind of oversight and accountability to which publicly-traded firms are exposed:
"Glencore's initial bid, which became public last month, proposed two separate companies for Glencore's and Teck's merged metals and coal businesses. It would then spin off the combined coal business."
Take care
David
David Chandler
© Sage Publications, 2023
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
Social Issues Dog Glencore's $23 Billion Merger Fight
By Julie Steinberg
May 6-7, 2023
The Wall Street Journal
Late Edition – Final
B2
