Glencore’s years-long pursuit of Rio ended in just 24 Hours

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That period of quiet talks ended in early January, when the Financial Times first reported that negotiations were underway. That started the clock ticking: Under UK takeover rules, Rio had until 5 p.m. London time on Feb. 5 to make an offer, walk away or secure an extension.

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In the early stages, the heads of the two companies largely took a back seat, while Rio dealmakers and advisers made multiple trips to Glencore’s headquarters in Switzerland to conduct due diligence. That was a herculean task given Glencore’s complicated business that comprises mines, smelters, refineries and huge trading and logistics operations.

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As that process went on, both sides saw an extension as likely given the amount of work that was needed. There were no red flags in the due diligence, and the key sticking point was over the price that Rio would need to pay. Both sides had set the goal of getting a bid on the table before they reported earnings in mid-February.

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Rio was working with Evercore Inc., led by veteran U.K. rainmaker Simon Robey, as well as JPMorgan Chase & Co. and Macquarie Group Ltd. Glencore spoke with banks including Citigroup and Barclays, but never officially appointed any advisers. However, the company did bring in veteran dealmaker Michael Klein, who had previously worked with Glencore on its failed bid to buy Teck Resources Ltd. in 2023.

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Klein’s core mandate was to convey the value of Glencore’s business to Rio executives, while Glasenberg — who remains the company’s biggest shareholder — also became more actively involved as the deadline drew nearer, partly to allay concerns at Rio that he wasn’t committed to doing a deal.

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But with 24 hours before the deadline, things suddenly started to sour. There was a growing realization within Rio that Glencore — and Glasenberg — weren’t going to cede much ground on the demand that Glencore shareholders own about 40 per cent of the combined company.

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On the Glencore side, there was frustration that Rio had tied its bid to the share prices on the day the deal became public. Glencore believed such an arbitrary ratio did not reflect the two companies’ past — and future — performance.

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As talks rolled on over Thursday morning, there were still hopes within Rio that Glencore would show some willingness to lower its asking price, and Nagle and Trott spoke twice in a bid to break the impasse. Yet as the deadline neared, it became clear that an extension would be fruitless. The final time Nagle and Trott spoke, it was to discuss how they would announce to their investors that the deal was dead.

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Bloomberg reported the news with less than two hours before the deadline, just minutes before Rio released a statement saying it was walking away. Under UK rules the two cannot talk again for at least six months, unless a rival bidder emerges or Glencore formally requests to reopen talks.

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A seven per cent drop in Glencore’s shares underscored the stakes for its executives and investors, as analysts questioned whether the company will be able to develop its copper business itself. For Rio, an ongoing slide in the iron ore price offered a reminder of the risks in backing out of the industry’s biggest ever deal, and talk in the industry soon turned to the question of whether a competing bidder will arrive.

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Glencore rose 1.3 per cent on Friday, while Rio’s shares were little changed after falling 2.6 per cent on Thursday when it walked away from the deal.

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“We have always believed BHP to be the most likely interloper,” RBC Capital Markets analyst Ben Davis said in an emailed note. “There is a chance that BHP now steps in, but the challenge will be explaining to value conscious Australian investors how they see the value in Glencore when Rio Tinto didn’t.”

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