Rio Tinto CEO: never a merger with Glencore

Feb 25, 2015, 1:15 PM EST
Sam Walsh, chief executive officer of Rio Tinto Group, poses for a photograph ahead of the company's full-year results announcement at the London Stock Exchange in London, U.K., on Thursday, Feb. 12, 2015.
Bloomberg/Bloomberg via Getty Images

Rio Tinto’s CEO Sam Walsh said that a merger with Glencore will never happen because regulators would never allow it. Rio rebuffed a takeover approach from Glencore last August to create a $160 billion mining and trading goliath and revealed the approach in October, writes Reuters. Glencore did not rule out making a fresh attempt. Under UK rules, it could return with an offer from April onward. But since October Glencore's shares have slid relative to Rio's, leading investors to play down the chances of it making a fresh bid in the near term.
At a Chatham House event in London, Mr. Walsh said the much-hyped prospect of Glencore making a bid for Rio when a six-month “put up or shut up” moratorium ends, and then somehow taking Rio over, was fantasy, reports the Australian. “Part of the reason is value but part of the reason is the anti-trust and people who collect tax and what have you, they’re simply not going to let it happen,” he said. Mr. Walsh added that BHP’s failed $US160 billion takeover of Rio in 2007 fell over primarily because anti-trust regulators would not let it happen.
Walsh has said a merger of the firms will not work because of a clash of cultures: Rio is a mining firm focused on developing low-cost, long-life mines, while Glencore is a trading firm operating on a short-term horizon, notes the International Business Times.
Investors say the key obstacle to a deal would be whether Glencore, which is 8.4 percent owned by chief executive Ivan Glasenberg, would offer a big enough premium, continues Reuters. "Given Glasenberg's reputation and large personal stake in Glencore, the company is unlikely to offer meaningfully over what the market believes, rightly or wrongly, Rio is worth," said Ric Ronge, a portfolio manager at Pengana Capital. "But I think it is foolish to underestimate Glencore, given the success of the company to date," he added.