Glencore-Rio Tinto is a big deal

The year has barely kicked off and there is already a blockbuster deal on the table making investors salivate. Will it happen or will it fizzle out? Either way, it is going to be a feature of some major headlines this year

- 

Glencore got the market all hot under the collar with an announcement regarding a potential deal with Rio Tinto.

The mining giants aren't being very precise at all — they are looking at a “possible combination” of “some or all of their businesses”. This is deliberate, as the public announcements are designed to give as much wriggle room as possible.

But it is expected that any such merger would take the form of Rio Tinto acquiring Glencore via a scheme of arrangement. Based on this comment, it sounds like the deal on the table would be a mega-merger that might carve out some unwanted parts of the group along the way. Again, nothing is certain at this stage and everything is subject to the final negotiations.

Still, we know that Glencore’s market cap is R1.33-trillion and Rio Tinto is worth more than R2.2-trillion. It would make sense for Rio Tinto to be seen as the acquirer here. If the deal goes ahead, it looks like it could create the world’s largest mining company (BHP’s market cap is roughly R2.6-trillion).

The great divide in mining