Rio Tinto Floats Glencore Merger
- The Rio Tinto marine team ia a leading charterer, chartering and operating a fleet of more than 230 ships to transport over 300 million tonnes of product every year.
Glencore shares rose by 10% on Friday following news it is in talks with Rio Tinto about a takeover that would create the world's largest mining group, valued at almost $207 billion.
While Glencore gained, Rio Tinto shares fell by as much as 3%, reflecting investor scepticism towards a deal and concerns it will overpay.
The two miners have discussed combining their operations before. In 2014, Rio Tinto rejected a merger offer from Glencore, saying it was not in the interest of its shareholders.
Merger talks in late 2024 also ended without a deal.
Since then, Rio Tinto has appointed a new CEO and the competition for reserves of metals including copper, needed for the energy transition and artificial intelligence, has intensified.
Copper prices have hit record levels this week as traders anticipate supply shortages.
The companies said late on Thursday, after the Financial Times newspaper reported the talks, that the expectation was for an all-share buyout of "some or all" of Glencore by Rio Tinto.
Under UK takeover rules, Rio Tinto has until February 5 to make a formal offer for Glencore or say it will not proceed.
Richard Hatch, analyst at Berenberg, said a deal made sense and followed successful mergers, such as that between Anglo American and Teck Resources, whose rationale was access to copper.
Rio needs more copper as "the market (rightly or wrongly) views iron ore as a commodity facing price decline," he said, adding it was better to buy producing assets rather than to wait to build new mines.
George Cheveley, natural resources portfolio manager at investment manager Ninety One, which is a shareholder in Glencore, also said copper was the driver.
He said Rio Tinto's investor day last month "struggled to articulate copper growth beyond 2030," while Glencore had a pipeline of projects.
Cheveley added the uncertainties facing the talks included whether BHP Group BHP.AX, currently the world's biggest miner, would feel the need to get involved.
In addition, Glencore stands apart from Rio and its other peers in that it chose to retain its coal assets, a decision that has generated substantial profits due to soaring prices in recent years, but raises questions of whether Glencore's coal resources would be retained by a combined group.
(Reuters)
