Rio Tinto drops on 'surprise' Glencore merger talks
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More news: Rio Tinto shares pared some early losses as RBC Capital Markets analysts described the miner's merger talks with commodities giant Glencore as surprising.
Rio shares were last down 0.9% to $118.55 as the ASX 200 index added around 0.2%.
RBC analysts Kaan Peker and Ben Davis said BHP's pursuit of Anglo American last year may have catalysed talks between Rio and Glencore.
Rio is seeking to gain more copper exposure and Glencore wants an exit strategy for its large shareholders, they said. However, Peker and Davis believe a straight merger between the pair is unlikely, as Rio shareholders may see the move favouring Glencore.
What they said: "Despite Glencore once approaching Rio Tinto's key shareholder Chinalco in July 2014 for a potential merger, it still comes as a surprise," the analysts said.
"... The [merger and acquisitions] parlour games that we saw last year, will undoubedly start again in earnest," they said.
Rio Tinto shares fall on Glencore merger talks
More news: Rio Tinto shares fell at market open, following reports that it and commodities giant Glencore were in early stage merger talks.
Rio Tinto’s shares were down 1.32% to $118.03 in early trading.
Rio Tinto, Glencore hold early stage merger talks: Bloomberg
The news: Global miner Rio Tinto and commodities giant Glencore have held early-stage talks about combining their businesses, Bloomberg reported.
The numbers: A potential merger between the two mining heavyweights could create a combined company with a market value surpassing top miner BHP's USD126 billion ($203 billion) valuation. Rio Tinto is the world’s second-biggest miner, with a market value of USD103 billion, while Glencore is valued at about USD55 billion.
Glencore’s US-listed American Depositary Receipts (ADRs) rose more than 5% on the news, while Rio Tinto ADRs were down 0.1%.
The context: Early-stage talks about a deal were recently held, the report said citing people familiar with the matter, but added it is unclear whether the talks are still live.
Both Glencore and Rio own some of the best copper mines in the world. However, Rio — like BHP — still depends heavily on iron ore to drive its profits, at a time when China’s decades-long construction boom is drawing to an end.
Glencore had previously proposed a merger with Rio in 2014, but that offer was rejected by the miner.
Rio last year agreed to buy US-listed lithium producer Arcadium for USD6.7 billion as the world's largest producer of iron ore seeks to boost its presence in the supply of battery minerals.
The source: Bloomberg
