Rio Tinto has walked away from a potential $300 billion-plus mega-merger with fellow commodities behemoth Glencore, claiming an agreement could not be reached on the terms of the proposed combination.
News broke in January that the pair had revived discussions for a deal that would bring Glencore's high-value copper assets brought into Rio's portfolio as demand for the metal surges.
It is the fourth time talks of a merger have fallen through. The idea was first floated in 2008, shortly before the global financial crisis. Rio then rejected a $182 billion advance by Glencore in 2014, while another attempt in 2024 also came to nothing.
This time it was a matter of pricing.
In an eleventh-hour statement yesterday, Rio said it had assessed the opportunity and ultimately decided it "could not reach an agreement that would deliver value to its shareholders".
That was partly due to the hard-ball position taken by newly appointed Rio chief executive Simon Trott, who insisted the deal terms be based on the relative valuations of the two companies on January 8 – the last trading day before expectations of a merger emerged.
For its part, Glencore was of the view that Trott's was an early stance that would be relaxed as negotiations progressed. After all, prices for some of its major revenue-driving products, such as coal, were labouring under a cyclical low.
A longer-term assessment of value, Glencore believed, would eventually give its shareholders around 40% of the combined entity. Under Trott's plan, that figure was closer to 32%.
Then there was the matter of control.
As the bigger player, Rio was surely pushing to retain management control, including the chairman and chief executive positions. Glencore argued such a scenario would be heading into takeover territory and that Rio would need to pay a premium.
"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 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," Glencore said.
"We concluded that the proposed acquisition on these terms is not in the best interests of Glencore shareholders.
"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."
In any case, Glencore maintains its standalone investment case is a strong one.
Earlier this month it signed a memorandum of understanding for the potential acquisition by Orion Critical Mineral Consortium of a 40% stake in in a package of assets in the Democratic Republic of Congo, including Mutanda Mining and Kamoto Copper Company.
Orion CMC was established in October and is led by Orion Resource Partners in partnership with the US government.
Both Mutanda and Kamoto produce copper and cobalt.
"We have optimised and simplified our operating structures, which has promoted accountability and delivery, and supported our achieving, for the second consecutive year, full year production for our key commodities within guidance ranges," Glencore said yesterday.
"We have continued to upgrade the quality of our portfolio of assets, have invested strategically in new opportunities, and now have an exceptional portfolio of copper projects, which provides a pathway from an already significant copper producer, to become one of the world's largest producers over the next decade.
"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."
