Rio and Glencore merger talks
Our view on the potential combination of mining giants.
Rio (ASX: RIO) and Glencore (LON: GLEN) are again discussing a potential combination, including the possible acquisition by Rio of some or all of Glencore’s business via an all-share merger. But details are scarce. Rio has not yet made a firm offer to Glencore, and no deal is agreed.
Why it matters: It appears to be a friendly approach for now, given Rio is seeking a scheme of arrangement. The talks are likely driven by optimism over rising copper demand due to the rollout of renewables, electric vehicles, data centers, and investment in electricity grids.
- Rio is also likely hoping to further reduce the dominance of its iron ore business, which makes up two-thirds of our forecast 2025 EBITDA of about USD 23 billion.
The bottom line: We retain our $120 and GBX 460 per share fair value estimates for no-moat Rio and Glencore, respectively. Rio’s Australian-listed shares are down 6% at the time of writing but still trade around 20% above fair value.
- Glencore’s London-listed shares closed 2% lower overnight at 10% below fair value before news of the talks leaked. However, its US over-the-counter shares (not covered) closed 9% higher, and we expect a material rise in its London shares closer to fair value when trading resumes on Friday.
Coming up: Under UK takeover law, Rio now has until Feb. 5, 2026, to either announce a firm intention to make an offer for Glencore or walk away.
Between the lines: A full acquisition of Glencore would be surprising, given Rio has previously sold its thermal and metallurgical coal operations due to environmental, social, and governance considerations. Though attitudes toward metallurgical coal in particular may have changed under new CEO Simon Trott.
- We think Glencore should take advantage of the near-historical-high copper price to sell its base metals business, including its smaller zinc and nickel operations, but potentially spin out its moaty marketing and attractive metallurgical and thermal coal businesses, which Rio may be reluctant to own.
