Reports involving metals and mining giants BHP, Rio Tinto, Glencore, and Anglo American Plc leave no doubt that the massive multi-billion-dollar industry is on its way to consolidation in 2025. However, reaching an agreement between the long-time rivals might be more challenging than just combining assets.
Recently, Swiss multinational behemoth Glencore disclosed it had been in talks with British-Australian Rio Tinto all through the second half of last year, looking to merge the two companies, which hold different asset exposition and geographical positioning.
The potential deal, which would be the largest ever for the sector, would create a massive over $140 billion market-cap industry leader and open up the way for significant synergies, particularly in the highly disputed copper business, where the combination would catapult the new company to become one of the top-three miners for the commodity in the planet, according to Citi Bank.
While recent reports have poured cold water on the deal’s prospects, citing Glencore’s coal exposure as the main disincentive—Rio Tinto stepped away from coal altogether in 2018 – a Glencore spokesperson reinforced the company’s pro-merger stance. “M&A is something we are good at, and we are always open to doing transactions that are value-accretive for the company,” they said.
This is not the first time the two giants have discussed combining their businesses. In 2014, Glencore tried to make a move for Rio Tinto’s assets but was met with firm and immediate rejection. The reception was reportedly very different this time, as the two companies engaged in months of conversations, albeit without reaching a happy ending so far.
The sense of urgency is mostly justified by industry leader BHP’s recent attempt to take over London-based Anglo American Plc. While talks were ended without an agreement, the British giant’s stance has “turned up the temperature on an already simmering M&A environment,” according to RBC Capital Markets analyst Ben Davis.
“The whole industry has been discussing how the majors consolidate for several years now. But people haven’t worked out quite how to do it yet,” explains George Cheveley, a portfolio manager at Ninety One UK Ltd.
