Rio Tinto, Glencore walk away from $300 billion deal to create the world’s biggest miner
Clara Denina And Pratima Desai
Updated ,first published
Rio Tinto has ended takeover talks with rival Glencore, saying the two companies were unable to reach a deal that would deliver sufficient value to shareholders.
The proposed merger, first announced in January, would create the world’s largest mining company with a market value of approximately $300 billion.
This is the second round of unsuccessful discussions in just over a year, following an earlier approach by Glencore in late 2024. Talks were also initiated by Glencore late last year, according to a source familiar with the matter.
Glencore’s shares lost 7 percent and Rio Tinto’s London-listed shares lost 2.6 percent.
Rio also rejected Glencore’s merger approach in 2014, saying it was not in the interests of shareholders.
But the latest round of discussions marked a departure from past efforts. The source described it as “the first time there has been a truly serious and rigorous due diligence process.”
Although transition metal copper was an obvious motivation for a deal, Rio Tinto wanted to buy all of Glencore, including its coal assets and marketing business.
“We conclude that the proposed acquisition does not reflect our long-term view through cyclical relative value, including undervaluation of our copper business and its leading growth pipeline,” Glencore said in a statement.
At an investor day in December, Glencore talked about its copper assets, which it said were aiming to reach 1.6 million metric tons by 2035, up from 852,000 tons last year, through new and restarted mines and modernized operations.
Leveraging the demand for energy transition and artificial intelligence, global copper demand is expected to increase by 50 percent by 2040, and global miners are trying to increase this demand.
Analysts at HSBC were predicting an average deal premium of 30 percent; This would give Glencore’s shareholders 38 percent of a combined company.
Another source said Glencore wants its shareholders to own 40 percent of the company.
“It wasn’t a big enough premium for Glencore,” this source said.
The companies did not disclose the proposed and rejected terms.
“It’s possible the two companies could come back into play at some point in the future, but that’s not our base case,” said Jefferies analyst Christopher LaFemina, adding that Rio will likely go it alone.
“There are a number of ways Glencore could unlock value, but being acquired at a premium in an all-share deal to create a combined company that could be the ‘go-to’ stock in the industry would be the simplest and most elegant path to a significantly higher share price,” he said.
The abandoned talks echo other ambitious mining deals, including BHP’s US$49bn ($70.4bn) approach to Anglo American, that have unraveled over concerns about the structure of the bid even as the sector looks towards consolidation amid rising demand for metals.
The only deal currently in progress is a $53 billion all-stock, zero-premium merger plan 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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