The mining companies Rio Tinto and Glencore have ended discussions over a potential merger after failing to reach agreement on key transaction terms, Glencore said in a statement.
Rio Tinto had previously declared that it did not intend to make a takeover bid for Glencore. This means that a potential mega-merger, which would have created by far the largest mining group in the world with a market capitalization of around $260 billion, is off the table. According to Glencore, Rio Tinto is now subject to the restrictions of the British takeover rules as a result of the declaration.
From Glencore’s point of view, the merger failed primarily due to the conditions proposed by Rio Tinto. According to these, the Australian-British group would have provided both the Chairman and the CEO of the combined company and thus effectively taken control. The proposed ownership share “significantly undervalued” Glencore’s relative value contribution in the merged group, the Swiss company’s board of directors announced.
In particular, Glencore criticized that its copper business, including the growth pipeline, had not been adequately taken into account. Potential synergies had also not been shared fairly between the parties. Under these circumstances, a takeover was not in the interests of Glencore shareholders.
At the same time, Glencore emphasized its independent strategic position. The company referred to its broadly diversified raw materials portfolio, its strong market position in trading and the progress it had made in simplifying its corporate structures. In addition, Glencore achieved the production targets for its most important raw materials within the forecast ranges for the second year in a row. The Group attaches particular importance to its copper portfolio, which should enable further growth in the long term.
Glencore announced that it will continue to focus on achieving its corporate targets up to 2026. These include achieving operational targets, reducing risks and further developing organic growth with the aim of creating long-term value for shareholders.
According to market observers, there is increasing pressure in the industry to achieve economies of scale through mergers. Rival Anglo American already took over the Teck Resources Group last fall. In the meantime, competitor BHP had also shown interest in taking over Anglo, but failed repeatedly.
There had already been a clear rapprochement between the two groups in 2017, when Glencore attempted to take over Rio Tinto’s Australian coal business. At the time, however, Rio Tinto opted for the competing offer from Chinese company Yancoal, partly due to the antitrust risks associated with a sale to Glencore.
