Rio Tinto and Glencore have announced they are in preliminary merger discussions to form the world’s largest mining group, which would have a combined market capitalisation of almost $207bn.
Mining companies worldwide are racing to expand their holdings in metals such as copper, which are poised to gain from the shift to cleaner energy and the growing demand driven by AI, reported Reuters.
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Talks between Rio Tinto and Glencore come on the heels of a series of expansion projects and acquisition efforts across the mining industry.
Among these is the planned merger of Anglo American and Teck Resources, which is expected to form a major copper-focused powerhouse.
Both companies have released only sparse information about how the deal might be structured, including which assets could be part of it.
They indicated that the current plan is for an all-share acquisition in which Rio Tinto would buy “some or all” of Glencore.
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By GlobalDataThe companies also stressed that there is no guarantee they will reach agreement on any terms or proceed to a formal bid. This follows an earlier report by the Financial Times revealing that merger discussions had resumed.
In line with UK takeover rules, Rio Tinto has until 5 February to either submit a formal offer for Glencore or state that it does not intend to pursue the transaction.
Investor response to the news of the Rio Tinto-Glencore talks was mixed. Glencore’s US-listed shares climbed around 6% once the discussions were confirmed.
By contrast, Rio Tinto’s shares on the Australian exchange fell 6.3%, signalling investor doubts about the transaction and worries that the company might be overpaying.
Atlas Funds Management chief investment officer Hugh Dive, a Rio Tinto shareholder, said: “The share market tells you what you want to know. Investors are not happy with this.
“I like the concept of going to copper, but the record is dreadful for the big majors making acquisitions or even mergers. We have seen a lot of these big mergers occur at the top of the market, and they end up being very dilutive over time.”
