Rio Tinto and Glencore restart talks over mega-merger

Glencore‘s London-listed shares popped 10% on Friday, after it was confirmed a possible $260 billion takeover bid from Rio Tinto was back on the table.

Shares were last seen 9.9% higher. Meanwhile, London-listed shares of Rio Tinto fell 2.3%, after its Australian shares ended Friday’s session 6.3% lower.

“Rio Tinto and Glencore have been engaging in preliminary discussions about a possible combination of some or all of their businesses, which could include an all-share merger between Rio Tinto and Glencore,” Rio Tinto, the larger of the two companies, said in a statement early Friday morning.

“The parties’ current expectation is that any merger transaction would be effected through the acquisition of Glencore by Rio Tinto by way of a Court-sanctioned scheme of arrangement.”

If completed, the deal would create the world’s largest mining company. Rio Tinto’s market cap is around 209 billion Australian dollars ($139.7 billion), while Glencore’s is around £48.5 billion ($65.1 billion) — a combined $204.8 billion.

Rio Tinto and Glencore discussed a merger in late 2024, but talks collapsed over issues such as valuation and the future of Glencore’s coal mines.

European mining shares rose on Friday, with the Stoxx Europe Basic Resources index adding around 2%. Copper mining firm Antofagasta jumped 3.5%, while Anglo American was up 2.8%.

CNBC has approached both companies for further comment. Rio Tinto said it had until 5 p.m. London time (12 p.m. ET) on Feb. 5 to either announce a firm intention to make an offer for Glencore or announce that it does not intend to make an offer.

Back in August, Rio Tinto CEO Simon Trott announced a reorganization of the business. Trott promised to cut costs and unlock up to $10 billion from its asset base by making the company focus on three core product groups — iron ore, aluminium and lithium and copper.

A deal between Rio Tinto and Glencore would add to recent M&A activity in the mining sector, after Anglo American and Canada’s Teck Resources agreed to merge in a $66 billion deal last September. The merger is expected to create one of the world’s top five copper producers.

Renewed talks between Glencore and Rio Tinto have also been by rising demand for copper, with prices of the red metal hitting an all-time high of $13,000 a ton this week. Three-month copper prices on the London Metal Exchange were last seen trading 1.5% lower at $12,702 per metric ton.

Cole Smead, CEO of Smead Capital Management, told CNBC’s “Squawk Box Europe” on Friday that he was not surprised the talks had resumed, and said that while Glencore’s metals arms would likely be included in any merger, it was less certain what could happen to other divisions of the business.

Smead Capital Management holds Glencore, whose stock makes up around 5% of its international portfolio.

“The dirty, dirty business nobody wants to own is coal. So I wouldn’t be surprised to see Glencore do a tax-free spin on the coal business,” he said. “This is something that’s been talked about, they asked shareholders about doing a U.S. coal business spin, that would fit with the Trump framework as well, he’s talked a lot about coal businesses coming back, but I think the coal business is likely to end up on its own. They’re in these talks, but there’s nothing settled.”

He said that this could lead to further consolidation, pointing to players in the coal sector like South Africa’s Tendele and Australia’s Whitehaven.

A merger with Rio Tinto would set markets up with one of the largest, most liquid public mining companies in the world, Smead added, creating an attractive opportunity for investors.

“So if an investor goes out and says, hey I want to find an attractive commodity-oriented business and I’ve got to put $10 billion to work, well there’s very few securities they’d be able to go out and own, and this would be one of them,” he told CNBC. “You’d see multiples go up on these businesses because that liquidity’s out there for the large institutional investors of the world.”