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Introduction: Rio and Glencore in talks over mega-merger
Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.
Talks are underway to create the world’s largest mining company.
Rio Tinto is in talks to buy rival Glencore, a move which could create a company with a combined value of over $200bn (£152bn).
The two companies confirmed in statements overnight that they have been discussing a potential combination of some or all of their businesses, which could include an all-share takeover.
Both companies hold significant copper mines, which are profiting from prices hitting record levels; a combination could create a powerful rivalt to the world’s largest miner, BHP Group.
Glencore told shareholders:
Glencore notes recent media speculation and confirms that it is in preliminary discussions with Rio Tinto plc and Rio Tinto Limited about a possible combination of some or all of their businesses, which could include an all-share merger between Rio Tinto and Glencore
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.
Rio Tinto confirmed that the two companies have been “engaging in preliminary discussions about a possible combination of some or all of their businesses”, and that any merger transaction would involve it buying Glencore.
The two companies have previous; back in 2014, Rio rejected a merger approach from smaller rival Glencore.
The mining sector is no stranger to talkover talks, and indeed failed approaches! BHP has been rebuffed in its attempts to take over rival miner Anglo American, which is itself taking over Teck Resources.
The agenda
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7am GMT: German trade and export data
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9am GMT: UN food price inflation report
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1.30pm GMT: US non farm payrolls
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3pm GMT: University of Michigan’s US consumer confidence report
Key events Show key events only Please turn on JavaScript to use this feature
On Sainsbury’s results, retail analyst Nick Bubb says:
Sainsbury’s core Grocery business looks to have done better than Tesco at Christmas, but Argos let the side down and looks to have prevented the group from upgrading its full-year profit guidance...
Indeed, Sainsbury’s continue to expect to deliver an underlying operating profit of more than £1bn, after upgrading its guidance in November.
There is one upgrade to guidance, though; the company now predicts free cash flow of more than £550m (previous guidance: more than £500 million), which it says reflects “strong working capital performance”.
Sainsbury's shares fall after Christmas trading report
UK supermarket chain J Sainsbury appears to have disappointed the City with its Christmas trading performance.
Shares in Sainsbury’s have dropped by almost 4% at the start of trading in London, after the company reported weaker-than-expected sales growth over the crucial festive period.
Like-for-like sales excluding fuel across the company, which includes Sainsbury’s supermarkets and the Argos catalogue chain, rose 3.4% in the last quarter (to 3 January), below analyst forecasts according to Bloomberg.
Simon Roberts, chief executive of J Sainsbury, says the company won grocery market share for the sixth consecutive Christmas period, adding:
Fresh food sales grew by 8% and Taste the Difference was the fastest growing Premium Own Label brand in the market, with our best ever ranges of Christmas innovation driving Taste the Difference Fresh sales growth of 15%.
Grocery sales at Sainsbury’s supermarkets rose by 5.4% in the quarter, but general merchandise and clothes sales fell by 1.1%.
Argos also struggled, with its sales falling by 1% in the quarter.
Roberts insists Argos is making progress, telling the City:
The Argos transformation plan continues to make progress, delivering volume growth across the whole quarter despite significant headwinds from online traffic trends, a tough and promotional general merchandise market and weak consumer confidence.
Coal could be a potential stumbling block in these latest Rio Tinto/Glencore talks.
Rio divested itself of the dirty, polluting fossil fuel in the last decade; in 2018 it became the only major global mining company to have no coal assets.
Glencore, though, is one of the world’s largest producers and exporters of seaborne traded thermal and steelmaking coal.
Rio and Glencore also held talks in 2024 about a possible tie-up, but were unable to reach agreement on issues such as valuation.
Since then, Rio Tinto has appointed a new chief executive, Simon Trott, who has been focusing on cost-cutting and asset sales.
John Ayoub, a portfolio manager at Rio shareholder Wilson Asset Management, says (via Bloomberg):
“This is Simon’s first test as CEO and I would expect his disciplined approach to be carried through to M&A.
Introduction: Rio and Glencore in talks over mega-merger
Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.
Talks are underway to create the world’s largest mining company.
Rio Tinto is in talks to buy rival Glencore, a move which could create a company with a combined value of over $200bn (£152bn).
The two companies confirmed in statements overnight that they have been discussing a potential combination of some or all of their businesses, which could include an all-share takeover.
Both companies hold significant copper mines, which are profiting from prices hitting record levels; a combination could create a powerful rivalt to the world’s largest miner, BHP Group.
Glencore told shareholders:
Glencore notes recent media speculation and confirms that it is in preliminary discussions with Rio Tinto plc and Rio Tinto Limited about a possible combination of some or all of their businesses, which could include an all-share merger between Rio Tinto and Glencore
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.
Rio Tinto confirmed that the two companies have been “engaging in preliminary discussions about a possible combination of some or all of their businesses”, and that any merger transaction would involve it buying Glencore.
The two companies have previous; back in 2014, Rio rejected a merger approach from smaller rival Glencore.
The mining sector is no stranger to talkover talks, and indeed failed approaches! BHP has been rebuffed in its attempts to take over rival miner Anglo American, which is itself taking over Teck Resources.
The agenda
-
7am GMT: German trade and export data
-
9am GMT: UN food price inflation report
-
1.30pm GMT: US non farm payrolls
-
3pm GMT: University of Michigan’s US consumer confidence report
