Jesse Riseborough London
THE SHACKLES keeping Glencore chief executive Ivan Glasenberg from grabbing control of the world’s second-biggest mining company will be removed next week when a UK takeover rule barring a hostile offer expires. The financial restraints, though, remain.
Glencore’s stock has slumped since Bloomberg reported six months ago that it was preparing a bid for Rio Tinto Group. It would have been the largest mining deal in history, creating a company worth about $160 billion (R2 trillion).
While both companies are weathering a rout in commodities that sent prices tumbling, Glencore is down 15 percent since its approach was revealed in October. That compares with a 6 percent drop in Rio Tinto, giving it a market value about £14bn (R246bn) more than its competitor.
Takeover rules
“The share price moves have not gone in Glencore’s favour yet,” Richard Knights, a London-based mining analyst at Liberum Capital, said.
Glencore’s stock plummeted to a record in January as the price of copper fell to the lowest since 2009. That weakens the Swiss commodity trader’s firepower for what would probably be an all-share offer.
After its approach was revealed, Glencore said it was no longer actively considering an offer, effectively barring it from bidding for six months under UK takeover rules. With that ban lifted next week, some have pondered whether Glencore will revisit the idea.
Rio Tinto rejected Glencore’s approach after taking it to the board in August and chief executive Sam Walsh declared in December the two were “totally different organisations”.
Rio Tinto announced a $2bn share buy-back in February when it reported a 9 percent decline in underlying profit for 2014.
Glencore traded at 284.1 pence on Wednesday in London, valuing the Switzerland-based company at £37.1bn. Rio was valued at £51.6bn.
Buying Rio Tinto would add its iron ore mining hub in Western Australia, as well as copper, coal and aluminium assets to Glencore’s global commodity trading and mining operations. That would catapult Glencore from a minnow in the trade to owner of one of the most profitable mining operations on the planet in the Pilbara mine, port and rail hub in Australia.
Rio Tinto, based in London, sold $23bn of iron ore last year, accounting for about 81 percent of its net income. Still, prices for the steelmaking raw material fell below $50 a ton on Wednesday, the lowest in 10 years, signalling lower profit ahead from the commodity. – Bloomberg