Glencore has pushed its Rio Tinto takeover aside, saying overnight it’s no longer actively considering the deal. For now.
The Swiss-based miner and commodities trading firm said it reserved the right to make a future bid for Rio Tinto. The comments activated Britain’s Takeover Code which means Glencore now cannot make another bid for six months.
Rio was forced to make a statement on Tuesday after Bloomberg reported Glencore had held talks with Rio’s biggest shareholder Chinalco and had started crunching the numbers on a deal. More on that here.
There were also reports that Ivan Glasenberg, who holds an 8.3% stake in Glencore, directly approached Rio chairman Jan du Plessis in London.
In a statement released overnight, Glencore said: “In July 2014 it made an informal inquiry by telephone call to Rio Tinto, seeking to gauge whether there might be any interest at Rio Tinto in investigating some form of merger between the two companies.”
“Rio Tinto responded that it was not interested in pursuing these discussions.
“Glencore confirms that it is no longer actively considering any possible merger transaction with, or offer for the shares of, Rio Tinto.
“Glencore, however, reserves its rights to make an offer in the future with the consent of the Takeover Panel, either with the recommendation of the board of Rio Tinto, in the event of a third party offer for Rio Tinto, or in the event of a material change in circumstances.”
Bloomberg reported this week the merger could value the new juggernaut at up to $180 billion and it would become the biggest mining company in the world.
In its statement, Rio didn’t mention anything about value but rather told the market the board didn’t think the merger was a good idea.
“The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto shareholders,” the company said.
The war of the statements doesn’t strike out speculation Glasenberg could be sizing up a 2015 bid and this courtship could actually be playing out exactly as he had hoped.
The revelation of the gutsy approach saw Rio’s shares close up 4.31% to $60.070 a piece – it’s best one-day percentage point gain this year.
And consensus was the deal will probably never happen.
Analysts have said the deal could deliver $US2 billion of annual savings, with one of the opportunities to be realised being a joint venture between the companies’ NSW coal assets.
Glencore has openly called for a JV over the Hunter Valley assets and some speculated yesterday this bigger merger deal could be a way to put pressure on getting that deal, or perhaps another, done.
The chart below shows Rio’s share price has been under pressure from the falling iron ore price this year. The spike in this financial year came after the miner posted stellar first half results, despite a tougher commodity price environment.
However, the share price has surely stumbled back to where it was pre-results announcement until yesterday’s confirmation Glencore had approached it. Investors could be thinking there’s a bit of value to be had in Rio shares.
It’s expected Glencore’s announcement will affect Rio’s shares when the ASX starts trading today.
Here’s the chart: