Glen­core buy of Rio ‘in­evitable’

The Star Early Edition - - NEWS - Matthew Camp­bell, Di­nesh Nair and Jesse Rise­bor­ough London

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

PHOTO: 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.

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