Rio Tinto and Glencore resume negotiations over mega-merger

glencore‘s London-listed shares soared 10% on Friday after confirmation of a potential $260 billion takeover offer. rio tinto I was back at the table.

The stock price was most recently up 9.9%. Meanwhile, Rio Tinto’s London-listed shares fell 2.3% after its Australian shares closed down 6.3% on Friday.

“Rio Tinto and Glencore are in preliminary discussions regarding the potential combination of some or all of their businesses, which could include an all-stock merger of Rio Tinto and Glencore,” the larger of the two companies, Rio Tinto, said in a statement early Friday.

“The parties’ current expectation is that any merger transaction will be realized through the acquisition of Glencore by Rio Tinto through a court-approved scheme of arrangement.”

If the deal is completed, it will create the world’s largest mining company. Rio Tinto’s market capitalization is approximately A$209 billion ($139.7 billion) and Glencore’s market capitalization is approximately GBP 48.5 billion ($65.1 billion), for a combined total of $204.8 billion.

Rio Tinto and Glencore had discussed a possible merger in late 2024, but talks broke down over issues including valuation and the future of Glencore’s mines.

European mining stocks rose on Friday, with the Stoxx Europe Basic Resources index up about 2%. copper mining company antofagasta Although it increased by 3.5%, anglo american It rose by 2.8%.

CNBC has reached out to both companies for further comment. Rio Tinto said it had until 5pm London time (12pm ET) on February 5 to declare its firm intention to make a takeover offer to Glencore, or announce that it had no intention of making a takeover offer.

Back in August, Rio Tinto CEO Simon Trott announced a restructuring of the company. Trott promised to reduce costs and free up up to $10 billion from the asset base by focusing on three core product groups: iron ore, aluminum, lithium and copper.

Rio Tinto’s deal with Glencore adds to recent M&A activity in the mining sector, after Anglo American and Canada’s Teck Resources agreed to a $66 billion merger last September. The merger is expected to create one of the world’s top five copper producers.

The renewed talks between Glencore and Rio Tinto are also due to rising demand for copper, with prices for the red metal hitting an all-time high of $13,000 a tonne this week. Three-month copper prices on the London Metal Exchange were last trading 1.5% lower at $12,702 per tonne.

Cole Smead, chief executive officer of Smead Capital Management, told CNBC’s “Squawk Box Europe” on Friday that he was not surprised that talks had resumed and said that while Glencore’s metals division would likely be included in the merger, it was uncertain what would happen to other parts of the business.

Smead Capital Management owns Glencore, and its shares represent about 5% of the company’s international portfolio.

“Coal is a dirty, dirty business that no one wants to own, so I wouldn’t be surprised to see Glencore run its coal business tax-free,” he said. “This is something that’s been talked about. They’ve approached shareholders about spinning off the U.S. coal business. That would also fit into President Trump’s framework. He’s talked a lot about reviving the coal business, but I think the coal business is likely to end up on its own. They’re negotiating, but nothing has been resolved.”

He said this could lead to further consolidation, pointing to South Africa’s Tendere and Australia’s coal sector players. white haven.

Smeed added that the merger with Rio Tinto will create a marketplace for one of the world’s largest and most liquid public mining companies, creating attractive opportunities for investors.

“So if an investor goes out and says, ‘I want to find an attractive commodity-oriented business and I have to put $10 billion into it,’ there are very few securities that an investor can go out and own, and this would be one of them,” he told CNBC. “The multiples for these businesses will rise because that liquidity exists for large institutional investors around the world.”