For more than a decade, billionaire Ivan Glasenberg chased the White Whale of mining M&A, a merger between Glencore (OTC:GLCNF) and Rio Tinto (NYSE:RIO).
For much of the past month, it looked like Glasenberg, a former Glencore CEO and the largest shareholder, would finally succeed. The two companies were locked in the most serious talks, discussing a $200 billion+ merger, the fourth in 20 years. And then, with a U.K. takeover deadline looming, it all collapsed within 24 hours.
Close, but No Cigar
The most recent round began quietly in mid-December, when the two companies entered formal discussions. Talks accelerated in January once the approach became public, triggering U.K. takeover rules. The confirmation forced Rio to either make a formal offer or walk away by February 5. By that point, advisers had already spent weeks digging through Glencore’s operations, and both sides believed the deal had never been closer.
Yet on the day of the deadline, the negotiations broke down over a familiar issue: valuation. Glencore was pushing for its shareholders to own about 40% of the combined company. It reflected the company’s view of the long-term value of its copper assets and trading business.
Rio’s executives, unwilling to concede that level of ownership, concluded that the gap was too wide to bridge. The firm issued an announcement stating it” has determined that it could not reach an agreement that would deliver value to its shareholders.”
Under U.K. takeover rules, the two sides can’t talk again for 6 months unless a third party intervenes or Glencore formally requests a reopening of discussions.
The Strategic Logic—And Why It Keeps Failing
On paper, the deal made overwhelming sense as Rio Tinto is dangerously overexposed to iron ore. Yet, that market faces oversupply, falling prices, and total dependence on Chinese demand. It’s also stuck with a 14.5% stake held by China’s state-owned Aluminium Corp, a shareholding agreement that limits buybacks and strategic flexibility.
Meanwhile, Glencore has seen its copper output drop by more than 40% over the past decade and is now betting big on a massive greenfield project in Argentina. It’s exactly the kind of capital-intensive, high-risk venture that Glasenberg spent years warning against.
A merger would have solved both problems. Rio would have become the world’s top copper producer with a million tons of future growth, gaining exposure to the metal at the heart of the electrification era. Glencore would have diversified away from coal, gained access to Rio’s operational discipline, and benefited from a stronger balance sheet.
This merger is so compelling that every Rio CEO since Tom Albanese has supported it. That strategic race for copper has been a major driver of the latest talks. As rivals pursue large acquisitions in the sector, both companies face the risk of being left behind.
Winners and Losers
But the same obstacles kept resurfacing: valuation, governance, and culture. This time, Glencore showed flexibility, willing to cede both the CEO and chair roles to Rio. In exchange, it demanded a share-exchange ratio that would give its investors roughly 40% of the combined company.
Yet Rio’s advisers tied the bid to share prices on the day the deal went public. Glencore saw it as arbitrary and a material undervaluation of its copper portfolio. With neither side willing to budge, the talks ended as they had before.
Both companies are now facing, alone, the exact problems they hoped to solve together, Bloomberg’s columnist Javier Blas noted in an analysis. Rio is left with an expensive diversification into lithium that isn’t yet delivering, and a Chinese state shareholder.
Glencore remains overexposed to coal, a market temporarily propped up by Indonesian production cuts but facing a long-term structural decline. It also faces a hefty bill for the risky Argentine copper mine and a concentrated shareholder structure. Glasenberg and a Qatari sovereign wealth fund hold nearly 20% of the company.
Although both sides were dismissive about trying again, time will heal, egos will soften, and the problems both companies face aren’t going away. However, Glasenberg is now 69. And despite being a former Olympic-caliber athlete, even he must think about how many harpoons he has left in the deck rack.
RIO Price Action: Rio Tinto shares were up 1.85% at $92.81 during premarket trading on Friday, according to Benzinga Pro data.
Photo by Adwo via Shutterstock
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