Clara Denina and Pratima Desai
Updated ,first published
Rio Tinto ended takeover talks with rival Glencore, saying the two companies were unable to reach an agreement that would deliver sufficient value to shareholders.
The proposed merger, first announced in January, would have created the world’s largest mining company, with a market value of around $300 billion.
It is the second round of failed discussions in just over a year, following an earlier approach by Glencore in late 2024. Talks late last year were also initiated by Glencore, according to a source familiar with the matter.
Glencore’s shares lost 7 per cent while Rio Tinto’s London-listed shares lost 2.6 per cent.
Rio also rejected a merger approach from Glencore in 2014, saying it was not in the best interests of shareholders.
However, the latest round of discussions marked a departure from past efforts. The source described it as “the first time there has ever been a really serious, rigorous due diligence process”.
Although transition metal copper was an obvious motivation for a deal, Rio Tinto was seeking to acquire Glencore in its entirety, including its coal assets and marketing business.
“We concluded that the proposed acquisition …does not reflect our view on long-term, through the cycle relative value, including not adequately valuing our copper business, and its leading growth pipeline,” Glencore said in a statement.
Glencore talked up its copper assets at an investor day in December, when it said it aims to reach 1.6 million metric tonnes by 2035 through new and restarted mines and streamlined operations, from 852,000 tonnes last year.
Global copper demand is expected to rise 50 per cent by 2040, benefiting from the energy transition and artificial intelligence demand, and global miners are racing to bulk up.
Analysts at HSBC had estimated an average deal premium of 30 per cent, which would have given Glencore’s shareholders 38 per cent of a combined company.
Another source said that Glencore wanted its shareholders to have 40 per cent of the company.
“Just wasn’t a big enough premium for Glencore,” that source said.
The companies did not reveal the terms proposed and rejected.
“It is possible that the two companies re-engage at some point in the future, but that is not our base case,” said Jefferies analyst Christopher LaFemina, adding that Rio would likely go it alone.
“There are various ways for Glencore to unlock value, but getting acquired at a premium in an all-share deal to form a combined company that could have been the “go-to” stock in the sector would have been the simplest and most elegant path to a significantly higher share price,” he said.
The abandoned talks echo other ambitious mining deals that have faltered, including BHP’s $US49 billion ($70.4 billion) approach for Anglo American, which unravelled over concerns about the structure of the offer, even as the sector pushes to consolidate amid rising demand for metals.
The only deal still proceeding is a plan for a $US53 billion all-stock, nil-premium merger between London-listed Anglo American and Canada’s Teck Resources that would create the world’s fifth-largest copper producer.
Reuters
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