Bruised Rio Tinto rebuffs Glencore takeover approach

Tue Oct 7, 2014 11:11am EDT
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By Sonali Paul and Clara Ferreira-Marques

MELBOURNE/LONDON (Reuters) - Rio Tinto has rejected a takeover approach from smaller rival Glencore Plc, snubbing a blockbuster deal that would have created a $160 billion mining and commodities trading giant.

Rio said on Tuesday that it was contacted about a potential deal in July, as the price of its most profitable product, iron ore, was heading toward five-year lows. Glencore confirmed later that it had made a telephone call to gauge interest in "some form of merger".

"Rio Tinto responded that it was not interested in pursuing these discussions," Glencore said in a statement.

Glencore's billionaire chief executive Ivan Glasenberg, who sources say had made the approach personally, was turned down in August, and Rio said there had been no further contact.

"The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto's shareholders," Rio Tinto said in a statement to the Australian stock exchange.

Market speculation about a potential Glencore approach for Rio has been simmering for weeks, fueled by the sharp drop in iron ore, the material which accounts for more than 90 percent of Rio's profits. Industry bankers say Glencore has recently talked openly about wanting to take over Rio, coveting its low-cost, high-quality iron ore.

The rebuff may have ended the prospect of a deal in the short term, and Glencore said in its statement that it was no longer actively considering a bid. But both sides failed to dampen questions about future acquisitions for Glencore's Glasenberg, one of the industry's most ambitious dealmakers -- including the potential for another run at Rio.

"This is the most obvious deal you could think of, especially if (Rio Chief Executive) Sam Walsh is on his way out. But the Xstrata experience shows it could take 3 years," one of the sources said, referring to Glencore's protracted 15-month tussle to buy miner Xstrata. Walsh's contract runs until 2015.   Continued...

A stack reclaimer with a pile of iron ore at the Rio Tinto Parker Point ship loading terminal in the Pilbara region of West Australia is seen in this undated handout photo. 
 REUTERS/Rio Tinto