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Rio Tinto and Glencore have abandoned plans for a $260bn megamerger that would have created the world’s largest mining group.
Rio said in a statement on Thursday that it had “determined that it could not reach an agreement that would deliver value to its shareholders”.
The announcement marks the end of more than 18 months of on-and-off discussions between the two companies.
One person close to the conversations said “the gap was too big”, while another added that the talks went down to the wire. The two sides could not get close enough on valuation, even after weeks of intensive discussions, according to people close to the negotiations.
The FT reported on Wednesday that significant differences remained between the two sides on valuation and on governance issues.
Glencore said in a statement that it had bridled against both Rio’s demands to retain its chair and chief executive as heads of the combined company, and that Rio’s offer “significantly undervalued Glencore’s underlying relative value”, including not properly valuing its copper business.
Shares in Glencore dropped sharply in late-afternoon London trading after the news, and were down 8.5 per cent to £4.67. Rio’s London-listed shares were largely unchanged, down about 2.5 per cent to £68.39.
The two companies had confirmed they were in deal talks in early January, and had a deadline of February 5 to “put up or shut up” — the date by which Rio had to either make a firm offer or walk away from the deal, unless both sides decided to extend talks. They will now have to shelve any merger discussions for six months.
People close to the discussions did not rule out the possibility that the two companies might return to the negotiating table after a cooling-off period.
Rio’s decision to walk away from talks is the latest in a series of failed megamergers in the mining industry, including BHP’s multiple unsuccessful bids for Anglo American.
The mining sector is being reshaped by a desperate scramble for copper, which is crucial for electrification, as companies seek to buy or build more copper mines to meet growing demand.
Glencore, already the world’s sixth-largest copper producer, announced a strategic shift in December to focus more of its resources on the red metal, with the goal of becoming the largest copper miner in the world.
Rio, which gets most of its profit from iron ore, is working to bolster its copper portfolio through projects such as the Resolution Mine in Arizona.
Data visualisation by Clara Murray in London
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