Rio Tinto’s call to reject a deal to become the world’s largest mining company has shown discipline, but it will have to find other ways to bulk up its copper portfolio amid a global scramble for the base metal.
The Australian-UK giant walked away from the merger with commodity rival Glencore, which would have spawned a company worth more than $288 billion.
It’s the fourth time a plan to combine the companies has collapsed, after the idea was floated without an offer in 2008.
Glencore’s first takeover offer was rejected by Rio in 2014. Another approach failed in late 2024 before talks resumed ahead of 2026.
Rio said the pair failed to reach a price that delivered shareholder value, and for Glencore, handing over control of the combined entity to Rio was a deal breaker.
“The key terms of the potential offer were Rio Tinto retaining both the chairman and chief executive officer roles and delivering a proforma ownership of the combined company,” Glencore said in a statement.
“Which, in our view, significantly undervalued Glencore’s underlying relative value contribution to the combined group, even before consideration of a suitable acquisition control premium.”
Both companies’ shares dropped during London trade in the wake of the news, but Rio’s rebounded during the Australian session as analysts tipped their hats to the call.
“We expect Rio’s walk-away to be viewed as positive by equity investors, removing near-term dilution risk and reaffirming capital discipline, while leaving longer-term copper optionality to be pursued more selectively,” RBC Capital Markets analyst Kaan Peker said.
However, with Glencore’s projected 1.6 million metric tonnes of copper by 2035 no longer a part of Rio’s future portfolio, the British-Australian miner would have to look elsewhere to increase its exposure to the base metal.
Global copper demand is expected to rise 50 per cent by 2040, supported by the energy transition and artificial intelligence demand, and global miners are scrambling to build capacity in the highly capital-intensive sub-sector.
While praising Rio’s discipline in holding back from the deal as copper prices hover near all-time highs, Barclays researchers said seasonal weakness in iron ore futures could point to waning earnings ahead.
“We believe the strategic challenge that Rio’s approach to Glencore highlighted – a lack of copper growth options post 2030 – is one that is not easily solved other than via M and A,” Barclays mining and metals equity analyst Ian Rossouw said.
With Glencore fading from view and the deal table gathering dust, Rio could soon be eying off other potential copper asset acquisitions.
“That said, the fact Rio was prepared to walk away from the Glencore discussions should reassure investors that the board is likely to remain disciplined as it pursues any potential future M and A (merger and acquisition) situations,” Mr Rossouw said.
Rio was up 0.3 per cent to $157.60 per share on Friday afternoon.
https://thewest.com.au/business/mining/glen-tinto-deal-dead-as-rio-exits-same-river-thrice-c-21550463
