Rio Tinto rejects Glencore merger Idea

Rio Tinto rejects Glencore merger Idea

Rio Tinto, a British-Australian multinational metals and mining corporation, had been approached by its smaller rival Glencore Plc, an Anglo-Swiss mining company. Glencore's merger approach was to create a $160 billion mining and trading giant. The price of Rio Tinto's iron ore, which is company's most profitable product, had fallen to a five-year low.

On Tuesday, Rio Tinto stated that it was contacted by Glencore about potential merger in July. The company had turned Glencore down in August and after that the Anglo-Swiss mining company did not contact it.

If Rio Tinto had accepted the merger deal, it would have created the world's biggest minor replacing BHP Billiton, world's largest mining company headquartered in Melbourne, Australia.

In a statement given to Australian stock exchange, Rio Tinto stated that it has consulted its legal advisors and found that Rio Tinto's shareholders are not interested in the merger. After the statement, the company share climbed by 4.7% to a nine-day high of A$60.28.

Recently, Bloomberg reported that Glencore had contacted Aluminum Corporation of China Limited, which is Rio Tinto's top shareholder, to measure its interest in merger deal. After Bloomberg's report, Rio Tinto revealed about the approach.

Aluminum Corporation of China Limited has owned about 9.8% of Rio Tinto, and for any bid, Rio will need a 'yes' from the company.

Last year, Glencore had acquired its rival Xstrata in the sector's largest ever takeover. Recently, the mining company has talked about its wish to merge with rival Rio Tinto.

Jason Beddow, managing director of Argo Investments, the sixth-largest holder of Rio's Australian shares, said, "I don't think Glencore would go hostile and try and take out Rio. That would be a big bite".

According to analysts, the merger deal could be beneficial for Glencore as it would provide the company a dual-listed platform to match BHP.


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