GLENCORE announced on Thursday evening it was in talks with Rio Tinto about a possible merger between the two companies.
“Glencore notes recent media speculation and confirms that it is in preliminary discussions with Rio Tinto plc and Rio Tinto Limited about a possible combination of some or all of their businesses, which could include an all-share merger between Rio Tinto and Glencore,” the Swiss-headquartered group said.
It added the parties’ expectation was that any merger would be through the acquisition of Glencore by Rio Tinto by way of a scheme of arrangement, adding there was no certainty a deal would be concluded.
Rio Tinto and Glencore are thought to have broached the subject of a possible merger in 2024 but owing to the reluctance of then Rio Tinto CEO Jakob Stausholm it was not progressed. Last year Stausholm was replaced by Simon Trott who told staff the company was looking into a fundamental restructure of the business.
The Financial Times reported earlier today that the two companies had restarted discussions last year, adding it would result in the creation of the world’s largest miner with an enterprise value of more than $260bn.
It was unclear whether Glencore’s marketing division would form part of the combined unit although the groundwork had already been laid for the possible spin out of Glencore’s coal assets – a mineral from which Rio Tinto has distanced itself. Last year Glencore formed an Australian subsidiary to hold its coal making it easier to sell or spin out.
Glencore’s share price has risen 35% over the past six months, buoyed by rising commodity prices and plans to double copper production by 2035. Shares in Rio Tinto have gained 41% over the same period.
Glencore CEO Gary Nagle has said previously that the mining industry lacked scale and relevance because of the size of its companies. “It makes sense to create bigger companies,” he said recently. “Not just for the sake of size, but also to create material synergies, to create relevance, to attract talent, to attract capital.”
Under the terms of the UK takeover code, Rio Tinto has until February 5 to either make an offer for Glencore, or state that it does not intend to do so, said the Financial Times.
