Glencore buy of Rio ‘inevitable’
HEDGE funds, including GLG Partners, DE Shaw and Pentwater Capital Management were told this month by a prominent London mining banker to prepare for an all-but-inevitable takeover of Rio Tinto Group by Glencore, according to people familiar with the meeting.
Former JPMorgan Chase dealmaker Ian Hannam, who now runs a boutique advisory firm, convened representatives of more than 20 investors at Corrigan’s Mayfair restaurant in the British capital in mid-November to share his views on the potential deal, the people said, asking not to be identified discussing a private matter.
The meeting was intended in part to help position Hannam’s firm, Hannam & Partners, to win a role in the transaction, the people said.
“If not today, this deal will happen some time in the near future,” Hannam said in his presentation. “Glencore is M&A savvy and times deals well. The combination will create a super-major with a diversified portfolio of worldclass mining assets.”
Neil Passmore, chief execu- tive of Hannam & Partners, said the firm was not working for Glencore or Rio Tinto nor was it in discussions to do so.
Spokesmen for Rio Tinto and Glencore declined to comment, as did representatives for Pentwater and DE Shaw. GLG could not be immediately reached.
The three funds have more than $70 billion (R768bn) in assets under management, according to their websites and regulatory filings.
Hannam’s presentation dwelled heavily on his dealmaking experience, describing the banker as “responsible” for the merger of BHP and Billiton that created the world’s largest mining company. It also highlighted his work alongside Xstrata, which he advised on its 2012 takeover by Glencore and earlier transactions.
Baar, Switzerland-based Glencore said last month it had abandoned a bid for Rio Tinto after a July proposal to create the world’s largest mining firm, worth about $160bn, was rebuffed. The company made the statement after Bloomberg News reported it was laying the groundwork for a potential merger next year.
“Rio’s shareholders will demand a material premium,” the presentation said, under a subheading entitled “Headwinds”. Other obstacles could include Glencore’s relatively high level of debt, and winning approval from antitrust regulators, it said.
Rio fell 0.7 percent to 2 955.5 pence yesterday morning in London trading, valuing it at about $87bn. Glencore declined 0.3 percent to 331.45 pence, giving it a market value of about $69bn.
Hannam’s presentation predicted potential cost savings from a deal would be $1.8bn, due largely to assumed benefits of selling Rio Tinto’s resources through Glencore’s trading network. – Bloomberg
A mineworker walks past a train loader at Rio Tinto Group’s West Angelas iron ore mine in Pilbara, Australia. A takeover by Glencore has been said to be inevitable.