Teck sunsets dual class share structure and withdraws separation proposal
On February 21, 2023, Teck Resources Limited (“Teck”) announced both
- a proposed six-year sunset for the multiple voting rights attached to its Class A common shares (“Dual Class Amendment”); and
- the proposed reorganization of its business (the “Separation”) to separate into two independent, publicly-listed companies: Teck Metals Corp. (“Teck Metals”) and Elk Valley Resources Ltd. (“EVR”).
Sunset of dual class share structure
Implemented through a plan of arrangement under the Canada Business Corporations Act (“CBCA”), the Dual Class Amendment introduced a six-year sunset for the multiple voting rights attached to Teck’s Class A common shares. Pursuant to the arrangement, on May 12, 2029, the effective date of the Dual Class Amendment, each Teck Class A common share was acquired by Teck in exchange for one new Class A common share and 0.67 of a Class B subordinate voting share. The terms of the new Class A common shares were identical to the current terms of Class A common shares, but provide that, on the sixth anniversary of the effective date of the Dual Class Amendment, all new Class A common shares will automatically be exchanged for Class B subordinate voting shares, and renamed “common shares”.
The Class A common shares carry 100 votes per share and Class B subordinate voting shares carry 1 vote per share. As of February 17, 2023, there were 7,765,503 Class A common shares and 506,276,448 Class B subordinate voting shares issued and outstanding.
The terms of the proposed Dual Class Amendment were negotiated with holders of a majority of the Class A common shares by a Special Committee of independent directors of the Teck Board of Directors that was advised by independent financial and legal advisors.
Completion of the plan of arrangement was announced on May 12, 2023.
Further information can be found on Globe Newswire’s website.
Proposed Reorganization and Steelmaking Coal Business Spin-off
To be structured as a spin-off of Teck’s steelmaking coal business by way of a distribution of EVR common shares to Teck shareholders, the proposed Separation was to be implemented through a plan of arrangement under the CBCA.
Under the plan of arrangement, Teck shareholders of record would receive common shares of EVR in proportion to their Teck shareholdings at an exchange ratio of 0.1 common share of EVR for each Teck share (or approximately 51.9 million total EVR common shares) and approximately C$0.39 cash per share for an aggregate of C$200 million in cash. Shareholders would be able to elect to maximize the amount of cash or common shares of EVR received, subject to proration, through a Dutch auction election process.
The Separation was to create two world-class resource companies and provide investors with choice for allocating investment between two businesses with different commodity fundamentals and value propositions. As part of the Separation transaction, Teck planned to change its name to Teck Metals Corp. and would continue to be listed on the Toronto and New York stock exchanges (“TSX” and “NYSE”). EVR applied to have its common shares listed on the TSX.
As part of the Separation, Teck Metals would retain a substantial interest in steelmaking coal cash flows through a transition period in the form of an 87.5% interest in a gross revenue royalty (the “Royalty”)—a 60% gross revenue royalty that would be paid quarterly from EVR’s steelmaking coal revenue—and preferred shares of EVR.
In consideration for the transfer of assets to EVR, EVR was to grant the Royalty and issue preferred shares and common shares to Teck Metals. The Royalty would be payable until the later of (a) an aggregate amount of C$7.0 billion in royalty payments having been made, or (b) December 31, 2028. The preferred shares would have an aggregate C$4.4 billion redemption amount and a 6.5% cumulative dividend.
Teck’s Board of Directors formed a Special Committee of independent directors to oversee the consideration of various potential transactions involving Teck’s steelmaking coal assets. As with the sunset of dual class share structure, the Special Committee was advised by independent financial and legal advisors and received opinions from each of Origin Merchant Partners and BMO Capital Markets.
On April 26, 2023, Teck announced that it determined not to put forward the above proposal for Separation for consideration by its shareholders at its annual and special meeting, opting instead to pursue a simpler and more direct separation.
Further information on the reorganization and spin off can be found on Globe Newswire’s website and teck.com.
Teck is one of Canada’s leading mining companies, focused on providing products that are essential to building a better quality of life for people around the globe.
Origin Merchant Partners is Canada's largest independent investment banking boutique. With a presence in Toronto, Montreal, Chicago, Atlanta and Denver, it provides mergers and acquisitions, capital raising, and restructuring/recapitalization advisory services delivered by a team of more than 40 professionals.