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For more than a decade, it was the deal mining billionaire Ivan Glasenberg had sought more than any other: putting Glencore plc together with industry titan Rio Tinto Group.<\/p>\n
(Feb 6): For more than a decade, it was the deal mining billionaire Ivan Glasenberg had sought more than any other: putting Glencore plc \u2014 the sprawling commodity trader-cum-miner he built \u2014 together with industry titan Rio Tinto Group.<\/p>\n
For much of the past month, it looked like Glasenberg was finally going to get his way. The two companies were locked in merger talks for at least the fourth time, and nearly everyone involved agreed that they had never been more serious. And then suddenly, with a deadline for Rio to make a firm bid looming, it all fell apart in less than 24 hours.<\/p>\n
The two sides talked right up to the wire on Thursday, trying to find some common ground on price, before around 3pm UK time Rio decided to pull the plug. Glencore was digging in on a demand for 40% of the combined company, and executives realised extending the talks would be a waste of time.<\/p>\n
This account of how mining\u2019s US$240 billion ($305.74 billion) mega-deal collapsed is based on conversations with more than half a dozen people familiar with the process, who asked not to be identified discussing confidential negotiations. Spokespeople for Rio and Glencore declined to comment.<\/p>\n
The break-up is the latest in a string of attempted takeovers in the mining industry, and the stakes were high for executives on both sides as talks began in mid-December.<\/p>\n
Glencore had seen its copper output drop more than 40% over a decade, and it was in the process of convincing investors that it had turned the business around as prices for the crucial industrial metal soared to all-time highs. Rio Tinto \u2014 which views itself as one of the industry\u2019s sharpest operators \u2014 saw an opportunity to unlock the growth in Glencore\u2019s copper portfolio. Without a deal, its earnings potential would remain hitched to the iron ore market, where prices were buckling under the weight of rising supply and waning demand.<\/p>\n
A combination of the two companies would have allowed Rio to take BHP Group\u2019s crown as the world\u2019s biggest mining company, adding Glencore\u2019s huge coal and copper operations, along with its commodity trading unit, to Rio\u2019s giant iron ore business. Crucially for Rio, it would have doubled its copper output \u2014 potentially establishing it as the world\u2019s top copper miner, and adding a million tons of future growth.<\/p>\n
Prior efforts to fold Glencore\u2019s cut-throat mining and trading business into the conservative corporate culture at Rio had broken down quickly, but with rivals also pursuing major copper acquisitions, the risks of inaction were growing and the opportunity was becoming too big to ignore.<\/p>\n
Story Continues <\/p>\n
Glencore chief executive Gary Nagle \u00a0\u2014 who took over from Glasenberg in 2021 \u2014 had laid the groundwork over the summer last year when he informally reached out to Simon Trott, a Rio Tinto veteran who\u2019d just taken over as CEO. After getting his feet under the desk, negotiations between the two sides formally kicked into gear in December, with Rio chairman Dom Barton also taking a leading role.<\/p>\n
That period of quiet talks ended in early January, when the Financial Times first reported that negotiations were underway. That started the clock ticking: Under UK takeover rules, Rio had until 5pm London time on Feb 5 to make an offer, walk away or secure an extension.<\/p>\n
In the early stages, the heads of the two companies largely took a back seat, while Rio dealmakers and advisers made multiple trips to Glencore\u2019s headquarters in Switzerland to conduct due diligence. That was a herculean task given Glencore\u2019s complicated business that comprises mines, smelters, refineries and huge trading and logistics operations.<\/p>\n
As that process went on, both sides saw an extension as likely given the amount of work that was needed. There were no red flags in the due diligence, and the key sticking point was over the price that Rio would need to pay. Both sides had set the goal of getting a bid on the table before they reported earnings in mid-February.<\/p>\n
Rio was working with Evercore Inc, led by veteran UK rainmaker Simon Robey, as well as JPMorgan Chase & Co and Macquarie Group Ltd. Glencore spoke with banks including Citigroup and Barclays, but never officially appointed any advisers. However, the company did bring in veteran dealmaker Michael Klein, who had previously worked with Glencore on its failed bid to buy Teck Resources in 2023.<\/p>\n
Klein\u2019s core mandate was to convey the value of Glencore\u2019s business to Rio executives, while Glasenberg \u2014 who remains the company\u2019s biggest shareholder \u2014 also became more actively involved as the deadline drew nearer, partly to allay concerns at Rio that he wasn\u2019t committed to doing a deal.<\/p>\n
But with 24 hours before the deadline, things suddenly started to sour. There was a growing realisation within Rio that Glencore \u2014 and Glasenberg \u2014 weren\u2019t going to cede much ground on the demand that Glencore shareholders own about 40% of the combined company.<\/p>\n
On the Glencore side, there was frustration that Rio had tied its bid to the share prices on the day the deal became public. Glencore believed such an arbitrary ratio did not reflect the two companies\u2019 past \u2014 and future \u2014 performance.<\/p>\n
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