Rio Tinto-Glencore merger may need asset sales to win over China
Chinese regulators have required asset sales in past deals
Concentration in copper, iron ore marketing could be among top concerns, analysts and lawyers say
Rio Tinto had been exploring asset-for-equity swap with China’s Chinalco before Glencore talks announced
BEIJING/MELBOURNE, Jan 16 (Reuters) – The proposed tie-up between Rio Tinto (RIO.L), opens new tab, (RIO.AX), opens new tab and Glencore (GLEN.L), opens new tab could require asset sales to secure regulatory approval from top commodity buyer China, which has longstanding concerns about resource security and market concentration.
The two mining giants revealed last week that for the second time in two years they were in early merger talks – potentially creating the world’s largest mining company with a market value of more than $200 billion.
But analysts and lawyers said the scale of their sales to China means any deal will need approval from Beijing, as have past mining mega-deals such as Glencore’s $35 billion purchase of Xstrata in 2013.
China’s antitrust regulator is likely to be concerned about a combined entity’s concentration in copper production and marketing as well as iron ore marketing, several analysts and lawyers told Reuters. Beijing may also see an opportunity to force asset sales to friendly entities, they added.
Even before the Glencore talks were made public, Rio Tinto had already been exploring an asset-for-equity swap aimed at trimming the 11% holding of its biggest shareholder, state-run Aluminium Corporation of China, known as Chinalco. Rio Tinto’s Simandou iron ore mine in Guinea and Oyu Tolgoi copper mine in Mongolia were among the assets of interest to Chinalco, sources said then.
To get the Glencore deal over the line, assets in Africa are especially likely sales candidates as Latin America has become less accepting of Chinese investment, according to Glyn Lawcock, an analyst at Barrenjoey in Sydney.
“China will see this as an opportunity to squeeze out assets,” he said.
China’s commerce ministry, its market regulator and Chinalco did not respond to questions about the deal. Glencore and Rio Tinto declined to comment.
GLENCORE PRECEDENT
Glencore has been here before. In 2013, Chinese regulators forced the Swiss-based company to sell its stake in the Las Bambas copper mine in Peru, one of the world’s largest, to Chinese investors for nearly $6 billion in exchange for blessing its takeover of Xstrata.
“The Las Bambas deal is still looked at as a very successful solution and it’s going to be a potential playbook that regulators can draw on,” a China-based partner at an international law firm said on condition of anonymity.
Glencore also agreed to sell Chinese customers minimum quantities of copper concentrate at certain prices for just over seven years as Beijing was concerned the merged group would have too much power over the copper market.
Copper assets are in even higher demand today given the metal’s role in the green transition and artificial intelligence. Rio Tinto and Glencore are shifting their focus to the metal, as are rival miners including Australia’s BHP (BHP.AX), opens new tab.
Copper’s rising importance is politicising the metal. The White House has alluded to China’s dominance over the supply chain as a direct threat to national security, opens new tab and it remains to be seen how it would react to major mineral asset sales to Chinese interests.
A combined Rio Tinto-Glencore would market about 17% of global copper supply, according to Lawcock, although analysts at Barclays say the share of mine production is only 7.5% and unlikely to trigger major antitrust concerns.
Nonetheless politics has doomed deals before.
U.S. chipmaker Qualcomm walked away from a $44 billion deal to buy NXP Semiconductors in 2018 after failing to get approval from Chinese regulators in what was seen as a response to the trade war then underway between Washington and Beijing. The inability to get Chinese regulators on board similarly sank Nvidia’s proposed takeover of Arm Ltd.
In previous resource deals, however, Beijing has given approval as part of a bargain. A year before the sale of Las Bambas, Beijing required major changes to a tie-up between Japan’s Marubeni and U.S. grain merchant Gavilon, citing food security concerns.
“Clearly this would be a long, complicated deal from a regulatory approval perspective,” Mark Kelly, CEO of advisory firm MKI Global Partners, wrote in a note, “and the presence of Chinalco on Rio’s shareholder register always complicates this picture further.”
Reporting by Lewis Jackson and Amy Lv in Beijing and Melanie Burton in Melbourne; Additional reporting by Anousha Sakoui and Clara Denina in London; Editing by Veronica Brown, Tony Munroe and Jamie Freed
Lewis is Reuters’ Chief Correspondent for China Commodities and Energy, based in Beijing. He leads a team covering agriculture, metals, and energy in the world’s largest consumer of commodities. Before moving to China, he wrote for Reuters in Sydney.
Four of South Africa’s biggest long-haul tourism markets, the United States, United Kingdom, Australia and Canada, have all reiterated elevated travel advisories for the country in recent months, highlighting concerns over violent crime, sporadic unrest and targeted attacks on tourists even as visitor numbers continue to recover. Get the latest news straight to your inbox!
We just published the list of the 10 Best Tech Stocks for the Next 5 Years and Micron Technology (MU) ranked 8th on this list. Big Tech just had a week investors will remember. At its low on Friday, Alphabet had lost $477 billion in market value for the week, its worst week ever and
From Menai Bridge closures, AI data centre protests and the pressures on the region’s A&E departments, our reporters Dale Spridgeon and Richard Evans hold the region’s authorities to account Hundreds gather in Caernarfon to protest a bid to build a giant AI data centre on the banks of the Menai Strait From crowded A&Es to
Stock futures tumbled as Democrats swept Congress, then roared back before sunrise, with the Dow (^DJI) on track for its best day since April 8. History says the bounce is easy and the next few weeks are harder. Election night went the way polls and prediction markets said it would. Democrats won control of both
LONDON (AP) — World leaders who have sparred with the “America first” President Donald Trump greeted the rout of his Republican Party in the U.S. midterm elections with a measure of relief on Wednesday, allowing themselves to hope for a less combative U.S. foreign policy. But that hope was seasoned with expectation that American voters’
Quick Read AMZN hit a record 14% operating margin and 39% AWS growth, yet shares have gained just 6% year to date. The consensus price target sits at $332, while the base-case model reaches $377 and a five-year path extends to $518 by 2028. Andy Jassy says Amazon may build two trillion-dollar revenue businesses within
A week ago today, for the second time in nine months, I got in my car and drove south from Madrid to cover a deadly train crash. At 8.53am last Wednesday, a high-speed train operated by Spain’s state-owned rail company, Renfe, smashed into the back of a stationary train run by the private rail company
After almost tripling from its 2022 bear market low point, the technology-heavy Nasdaq-100 index is now facing a big test. Investors are increasingly concerned about the sustainability of the artificial intelligence (AI) spending boom, placing pressure on semiconductor stocks like Nvidia and Micron Technology, which are among the largest members of the index. As a
As Westminster kickstarts plans to shift more money, responsibility, and power away from London and into new regional mayors, scrutinising the local bodies which we trust to deliver our services has never been more important. This week, writers across the country are reminding readers why journalism matters, and today we have the chance to shout
Stocks have been shaky in recent weeks, with the S&P 500 (^GSPC +0.36%), Dow Jones Industrial Average (^DJI -0.38%), and Nasdaq Composite (^IXIC +0.83%) slipping by around 3%, 4%, and 8%, respectively, from their recent all-time highs. Investors are also feeling pessimistic about the future. The Fear and Greed Index measures investor sentiment on a
Shopify’s NASDAQ: SHOP stock sold off following its Q3 earnings release on fears that may be overblown given the company’s fundamental strength. Ultimately, it comes down to valuation: the approximately 80x current-year consensus earnings multiple it traded at before the release was high, pricing in perfection and leaving little room for weakness. The roughly 1%
With the market on edge these days, especially heading into Friday’s jobs report, a question keeps nagging income investors: What will happen to my dividends if stocks crash? The Schwab U.S. Dividend Equity ETF (SCHD -0.97%) has already endured two bear markets since its inception in 2011. The S&P 500 fell about 34% in early
Nov 4 (Reuters) – Governments and politicians around the world reacted to the Democrats winning the US midterm elections, a result that could have major implications for global trade, security and energy prices. Here is a selection of the reactions: SPANISH PRIME MINISTER PEDRO SANCHEZ ON X “Yesterday, the American people voted against policies that
The market has been down over the past month as investors consider higher interest rates, inflation, and artificial intelligence (AI) spending, and now is a good time to think about defensive plays like dividend stocks. Also, $1,000 is enough to start a position in an excellent dividend stock that should pay you well forever. You
WASHINGTON—President Trump said on Tuesday night that the war in Iran was partially to blame for widespread Republican losses in the midterm elections. But he maintained that he didn’t regret launching the war earlier this year. “Iran was a piece of it,” the president said in a WSJ interview, adding that he didn’t regret launching
The official newspaper of the Russian government is an unlikely source of recognition for a European news outlet critical of Vladimir Putin and providing sanctuary to exiled Russian journalists. But in May, two days after Russia tested its new intercontinental ballistic missile system nicknamed “Satan II” by Nato, an article in Rossiyskaya Gazeta prompted celebrations
The S&P 500 (^GSPC +0.36%) and Nasdaq Composite (^IXIC +0.83%) have added 11% and 9%, respectively, year to date. Both indexes remain firmly in bull market territory, but signs of weakness are emerging beneath the surface due to skepticism about the durability of the artificial intelligence boom. According to Morgan Stanley strategist Mike Wilson, about
Jacob ramirez, a 31-year-old operations manager for a café chain, has long struggled to make ends meet. In college he used a credit card to buy textbooks; after graduating, he occasionally did so to pay rent and utility bills. By 2022 he, his wife and their dog were in a one-bedroom flat in Pomona, east
Robert Wolf, a former economic advisor to Obama, and Steve Cortes, a former Trump campaign advisor, discuss the midterm election’s impact on Wall Street. U.S. stock futures fell sharply as Democrats scored key victories in the midterm elections and the Fox News Decision Desk projected the party will take control of both chambers of Congress.
Shares of Capri Holdings (NYSE:CPRI) were on the move last month, jumping at the end of the month on a strong earnings report after earlier gains on speculation of a buyout. Capri also seemed to benefit from a rotation in consumer discretionary stocks as investors sold AI stocks last month. Missed Nvidia in 2009? This
