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ROME — Is Glencore CEO Ivan Glasenberg about to strike again? The great white shark of the global commodities industry is laying the groundwork for a blockbuster deal that would see Glencore Xstrata PLC merge with Rio Tinto Group to create a mining giant that would displace BHP Billiton Ltd. as the world’s top mining company, Bloomberg reported on Monday.
A Glencore spokesman in Switzerland would not confirm or deny that Glencore, the world’s biggest trader of commodities, from coal to grain, is contemplating a merger with Rio Tinto. “No comment,” he said.
Rio Tinto said late Tuesday that it had rejected a merger approach from its smaller rival in August, finally responding to a string of media reports over the past month that have said Glencore wanted to merge with Rio. It also said there had been no further contact between the companies on a merger.
“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’s shareholders,” Rio Tinto said in a statement to the Australian stock exchange.
The American depository receipts (ADRs) of Rio shot up 18 per cent after the Bloomberg story appeared, then slipped back for an 8 per cent gain. On the London exchange, Rio shares rose 1.6 per cent, giving it a market value of £56.3-billion.
While Bloomberg said that no talks are under way between the two companies, it is an open secret that Mr. Glasenberg, a multibillionaire South African, has every intention of using mergers and takeovers to greatly extend Glencore’s reach along the commodities value chain. Glencore’s strategy is to control the mines, the warehouses, the ports, the ships and the trading networks that produce and distribute commodities.
The question is whether Rio’s management and shareholders would endorse a deal that could come with no takeover premium. Some analysts think not.
In a note published late Monday, Jake Greenberg, global natural resources specialist at Bank of America Merrill Lynch, said “Nil premium hostile mergers don’t work.
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