Mining titans scrap £200bn mega merger: Footsie rivals Rio Tinto and Glencore in conflict of egos over who would run agency

Glencore and Rio Tinto have abandoned talks over a £200billion mega-merger to create the world’s largest mining firm.

The FTSE 100 giants last month said they were in discussions to forge an industry powerhouse as global players fight for dominance in the lucrative copper market.

A deal would have seen Rio buy Glencore, with takeover rules dictating that a formal offer would have to be tabled by 5pm yesterday.

But Rio said it was ‘no longer considering a possible merger or other business combination’ as it ‘could not reach an agreement that would deliver value to its shareholders’.

Glencore said negotiations faltered because Rio wanted its chairman Dominic Barton and chief executive Simon Trott to run the combined firm.

It said that this would have ‘significantly undervalued’ Glencore’s ‘relative value contribution to the combined group’ even before a ‘suitable’ price could be agreed.

Dumped: Glencore and Rio Tinto announced they were in discussions less than a month ago about a ‘combination’ of the businesses

The news sent Glencore shares tumbling 7 per cent while Rio fell 2.6 per cent.

‘A deal of this size, and with the egos involved, was always going to be a significant challenge,’ said Ben Davis, an analyst at wealth manager RBC.

The collapse of official talks came after around 18 months of on-off, behind-the-scenes negotiations. This followed a failed move by Glencore to buy Rio in 2014.

The latest talks came amid a desperate scramble for copper, which is crucial for electrification, by miners as its price has soared to fresh highs this year.

Glencore chief executive Gary Nagle said he wanted to turn it into the ‘biggest copper producer in the world’.

The recent tie-up between London-listed Anglo American and Canada’s Teck Resources – to create a £40billion miner in Vancouver – has piled pressure on others to beef up operations.

That came after Anglo fended off a takeover bid by BHP, the world’s largest miner. Under takeover rules, Rio and Glencore must shelve any further merger discussions for six months.

Analysts suggested the pair may then once again seek a deal. Lucinda Guthrie, head of Mergermarket, said: ‘One thing is for sure – the race for copper will continue and there will be further deals to follow.

‘Rio is bound for six months by its no-bid statement unless conditions, such as another bidder, emerge for Glencore. 

‘Perhaps things will evolve and there will be a third time lucky for talks on creating a mega-corp.’

Chris Beauchamp, chief market analyst UK at trading platform IG, said: ‘This deal seemed to make much more sense for Glencore than for Rio.

‘Both have enjoyed solid rallies in recent months, but today’s outbreak of commodity weakness and the abandoned merger seem to point to some more near-term weakness.’

AJ Bell analyst Danni Hewson said: ‘It’s understandable that the spectre of consolidation keeps popping up, but so far deals have been hard to strike.’

A deal would have been one of the largest takeovers ever, alongside Vodafone’s takeover of German conglomerate Mannesmann AG in 2000 and Budweiser owner’s takeover of South African brewer SAB Miller in 2016.

It would have raised questions over the miners’ future on the London stock market as Rio’s main listing is in Australia.