Sometimes the power of “no” is stronger than you can imagine. Just look at Teck Resources (NYSE:TECK), which said “no” to a buyout offer and saw its stock price shoot up over 18% in Monday afternoon’s trading.
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The wholly-unsolicited proposal submitted by Glencore (OTC:GLCNF) called for Glencore to offer up 7.78 of its own shares for each class B share of Teck and 12.73 of its own shares for each class A share of Teck. The Glencore proposal would have opened up Teck shareholders to a major thermal coal operation, as well as oil trading and even some “jurisdictional risk,” reports noted. Further reports noted that the deal’s total value would have been around $22.5 billion.
Teck rejected the proposal largely on philosophical grounds, as Glencore’s oil and coal operations would have violated Teck’s own Environmental, Social, and Governance (ESG) values. There was also a note of self-preservation in there too; Jonathan Price, Teck’s CEO, noted that this deal would “…transfer significant value to Glencore at the expense of Teck shareholders.” But Glencore won’t take this rebuff lightly; reports suggest that the company will likely enhance its bid from here. Christopher LaFemina with Jefferies noted that a “cash kicker” would likely be called for to augment the deal properly.
Still, analysts are very much behind Teck Resources. Analyst consensus calls it a Strong Buy, with 14 Buy recommendations to just four Holds. Further, TECK stock offers up 8.79% upside potential thanks to its average price target of $47.02.
