The quarter-century grip by South African executives on the C-suite of Glencore is set to loosen as Rio Tinto circles the group in a proposed merger that would create a $260bn mining behemoth.
Should the deal, which has been in the pipeline since 2014, go through, attention will focus on who will lead the merged entity, after similar 2024 talks collapsed due to disagreement on who will be the CEO, among other reasons.
Complicating the matter is that both companies are led by highly ambitious executives: Simon Trott for Rio and Gary Nagle for Glencore.
Both are in their early 50s with Trott having taken over the role of group CEO five months ago.
Glencore, the world’s largest commodities trader, has been led by South African executives since 2002 when Ivan Glasenberg took over the helm of the group until stepping down in 2021, making way for fellow South African and Wits alumnus Nagle.
Glasenberg is the single largest shareholder in Glencore with a stake of about 10% — an investment that has made him extremely wealthy, valued at more than $11bn by Forbes.
Analysts from Deutsche Bank on Friday flagged that culturally Rio and Glencore are very different “and so management structure and leadership could be issues”.
The offer saw Glencore’s price rise the most since November 2016, up more than 10%, giving it a R1.33-trillion market cap.
The surge came after the mining majors confirmed to the market that they were in talks with Rio to buy Glencore in an all-share transaction.
Two previous merger attempts, in 2014 and 2024, were made by Glencore, with Rio now flipping the script in what will be the biggest mining deal yet, dwarfing the $90bn merger of Glencore and Xstrata in 2013.
‘Acquisitive’
“Glencore has always been acquisitive. It approached Rio Tinto more than a decade ago and was rejected. Today, Rio Tinto’s market value is meaningfully larger and that determines who sets the terms,” said MP9 asset management chief investment officer Aheesh Singh.
The mooted deal comes amid a huge consolidation in the copper industries as mining supermajors look to take advantage of rising global demand for copper, driven by the green energy transition.
Demand for the metal is expected to increase 50% by 2040 with the copper price up 40% over the past year.
Anglo American is also pursuing a merger with a Canadian copper producer in an about $50bn deal.
The Anglo and Teck merger, which has already been endorsed by both sets of shareholders, would create the world’s fifth-largest copper producer.
BHP, the world’s largest mining house, failed in three attempts to buy Anglo.
Rio has until February 5 to announce its decision on whether it will submit an offer.
The market is also looking at what Rio plans to do with Glencore’s vast coal assets, some of which are in South Africa.
“The issue of coal could also be important for the success of the transaction. While Rio Tinto sold its last coal mines in 2018 and its shareholders are emphasising decarbonisation, Glencore owns about 20 coal mines in Australia and South Africa,” David Paleček from Deloitte said.
The issue of coal could also be important for the success of the transaction.
— David Paleček, Deloitte
“In addition, in 2023, it expanded its portfolio with Canadian steel coal mines worth $9bn. The possible sale of these assets would be a significant transaction opportunity.”
Glencore last year consolidated its global coal assets under its Australian entity, Glencore Investment, a move some pundits at the time said was for potential corporate action or spin-off.
Glencore impaired its South African coal assets by $611m in 2024 due to lower thermal coal price forecasts and persistent export logistics challenges.
Glencore also has a big presence in South Africa’s chrome industry.
The mooted transaction will pressure South African authorities to find long-term solutions to the energy cost crisis facing the sector, with many smelters on the ropes.
Analysts from Deutsche Bank said there is room for Glencore’s coal assets to be a value unlock, depending on the final structure of the deal.
“The ultimate plan could involve … the formation of a major bulks company (Rio’s iron ore assets with Glencore’s coal assets) listed in Australia and a base metals vehicle listed in London. If so, a merger of equals-type structure/price could be more likely…,” the analysts said.
“The deal structure will determine the level of premium. Glencore has been a proponent in the past of mergers of equals to create large-scale, globally relevant companies. If the structure involves breaking up Glencore, we think Rio may need to pay a sizeable premium.”
Barclays analysts said the mega merger’s industrial logic was “stronger than ever” given Rio Tinto’s difficulty securing more copper through organic growth and given Glencore’s coveted portfolio, which includes the Peruvian Antapaccay and Antamina, and Chilean Collahuasi.
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