Rio jumps after rejecting Glencore offer
LONDON: Rio Tinto Group jumped the most in more than a year in London after saying it rejected a merger approach from Glencore Plc that would have created the world’s largest miner.
Glencore made a merger proposal in July, which was unanimously rejected by Rio Tinto’s board, London-based Rio said in a statement yesterday. After being rebuffed by the board, Glencore has reached out to Rio’s biggest investor, Aluminum Corp of China, to gauge its interest in a potential deal in the next year, according to people familiar with the matter.
By acquiring Rio Tinto, Glencore chief executive officer Ivan Glasenberg would create a mining company worth more than US$160bil, usurping BHP Billiton Ltd as the world’s biggest. It also would be the largest mining deal ever completed, topping Rio’s takeover of Alcan Inc for about US$38bil in 2008.
“Next year provided potentially the best opportunity for such a move, but today’s (yesterday’s) news should put a relative floor under Rio’s shares, preventing an opportunistic bid,” Ben Davis and Richard Knights, analysts at Liberum Capital Ltd in London, wrote in an emailed note.
Rio, the world’s second biggest iron-ore exporter, climbed as much as 6.2% in London, the biggest intraday gain since July 2013. The stock traded at 3,152p at 8.19am.
Chinalco, as the state-owned company is known, controls about 9.8% of Rio, and talks took place in recent weeks, one of the people said.
Despite the July approach, no talks were under way between the two companies, no formal offer had been made, none was likely before the end of 2014, and Glencore could decide against an offer, the people said.
Spokesmen for Glencore and
Chinalco declined to comment.
“With falling commodity prices and falling share prices, deals like this are going to get mooted more and more,” Evan Lucas, a markets strategist in Melbourne at IG Ltd, said by phone yesterday. Still, a potential merger would be a “regulatory nightmare”, he said. — Bloomberg