Rio turned down Glencore merger idea
Rio Tinto said Glencore put forward the idea of a potential merger of the two companies to create the world’s largest miner and commodities trader, before Rio’s board rejected the idea.
Glencore approached Rio in July regarding a potential tie-up but Rio’s board concluded unanimously that a “combination was not in the best interests of Rio Tinto’s shareholders”.
“The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter,” Rio said in a statement to Australia’s stock market prompted by speculation of a deal.
A deal with Rio would fill one of the largest gaps in Glencore’s mining operations: it produces no iron ore, whereas Rio is the world’s second-largest miner of the commodity and gets almost all of its earnings from iron ore.
A share-based merger could also get easier if the gap in market capitalisation between Rio and the smaller Glencore continues to close.
Glyn Lawcock, analyst at UBS, said there was logic in Glencore trying to pick up Rio cheaply in current market conditions with a weak iron ore price. He said a “merger of equals” was unlikely to take place as Rio’s board feel the company is currently undervalued by equity markets.
Source: FT- Rio turned down Glencore merger idea
