Rio Tinto and Glencore have decided not to proceed with the merger, with Gary Nagle-led Glencorebelieving the deal would undervalue its businesses.
In January, Rio Tinto and Glencore confirmed that talks were underway to create the world’s largest miner, with a combined market cap exceeding $200 billion (approximately R3.2 trillion at current exchange rates
The companies said they were discussing a potential combination of some or all of their businesses, which would include an all-share takeover.
The deal would have marked another copper-focused merger, following Anglo American and Teck Resources’ merger.
Rio Tinto had until February 5 to confirm whether it will make an offer or walk away for six months, as per UK takeover laws.
The man who leads Glencore is Nagle, who has been at the company for over two decades.
He took over the top role in 2021, following the retirement of fellow South African Ivan Glasenberg. Nagle is often referred to as mini-Ivan.
Nagle worked in the marketing and industrial businesses in Australia, South Africa, Colombia and Switzerland during his two decades at the company.
He previously said that a merger with Rio Tinto was one of the most obvious deals in the mining space.
Many noted that a potential sticking point would be Glencore’s coal operations, given that Rio Tinto no longer has access to the highly polluting commodity.
Deal falls apart
On the deadline, Rio Tinto announced that it does not intend to make an offer for Glencore. The parties were unable to reach an agreement on the terms of the combination.
Glenocre said the key terms of the potential offer were that Rio Tinto retain both the Chairman and CEO roles.
It also required delivering a pro forma ownership of the combined company, which, in Glencore’s view, undervalued the Swiss-based underlying relative value combination of the combined group.
This undervaluation even came before consideration of a suitable acquisition control premium.
“We concluded that the proposed acquisition on these terms is not in the best interests of Glencore
shareholders,” it said.
“It does not reflect our view on long term, through the cycle relative value, including not adequately valuing our copper business, and its leading growth pipeline, and apportioning material synergy value potential.”
Glencore said that its standalone investment case was strong. It said it had a well-diversified business across a range of commodities, supported by one of the industry’s best marketing franchises.
It added that it has a unique position to support modern energy needs whilst providing many of the transition-enabling commodities the world needs.
Glencore noted that it has optimised and simplified its operational structures, which have promoted accountability and delivery.
Thus, the group is set to meet its full-year production guidance for its key commodities for the second straight year.
It said that it has upgraded the quality of our portfolio of assets, invested in new opportunities and has a large portfolio of copper assets.
This would provide a pathway from an already significant copper producer to become one of the world’s largest producers over the next decade, Glencore noted.
“We remain focused on delivering on our 2026 priorities, achieving our operational targets and derisking and successfully progressing our organic growth volumes, all with the objective of supporting long-term value creation for shareholders.”
