Rio Tinto Not Planning Glencore Bid
14 October 2015 - 06:10AM
Dow Jones News
LONDON—Rio Tinto PLC Chief Executive Sam Walsh said he isn't
interested in making a bid for Glencore PLC despite the sharp
decline in the embattled Swiss miner's stock in the past few
months.
Mr. Walsh said in an interview Tuesday that he doesn't think
Rio's and Glencore's businesses are well aligned and that Glencore
operates in different geographic areas than does Rio.
"It is a different culture" at Glencore, Mr. Walsh said.
A Glencore spokesman declined to comment.
Rio last year rebuffed a proposal by Glencore CEO Ivan
Glasenberg to merge the two mining giants. Industry watchers
thought Mr. Glasenberg would likely make another move for Rio this
year, but the company's sharp stock decline has sidelined any plans
for big deals at Glencore for now.
With Glencore laid low in recent weeks by concerns over its
debt, speculation has swirled about it becoming a takeover target.
The firm's market value has dropped to about $26 billion, down from
$61 billion at the beginning of 2015.
Rio, the world's second-largest mining company by market value,
is among a handful of players big enough to make such a move. Mr.
Walsh dismissed such talk, pointing to Glencore's structure.
Glencore, unlike other big miners, has a vast trading arm that
deploys nearly $18 billion in short-term debt to buy and sell
commodities around the world. The firm is widely seen as more
aggressive and less risk averse than other mining giants. Glencore
is willing to operate in unstable regions such as the Democratic
Republic of the Congo, where it owns several copper mines.
While that strategy proved successful during the commodity boom,
it has come under pressure as prices have tanked for copper, coal
and other commodities it produces and sells. Glencore in September
announced the temporary shutdown of two unprofitable copper mines
in Africa.
Glencore's shares have been battered as investors grew concerned
about the heavy debt load shouldered by the company. Glencore in
September said it planned to trim net debt by $10 billion, which it
said would "bulletproof" the company even if commodities slide
further into "doomsday" scenarios.
Investors initially seemed unconvinced, sending the stock down
nearly 30% on Sept. 28, the biggest single-day decline in
Glencore's stock since it went public in 2011. The stock has
bounced back since but remains volatile, falling 5% Tuesday amid a
broad selloff of miners' stocks.
Rio Tinto's shares have fared better than most other big miners,
in part because the Anglo-Australian miner carries relatively low
debt. In the first half, Rio held $13.7 billion in net debt,
compared with Glencore's net debt of nearly $30 billion. Rio's
shares have slid 19% in the past 12 months, compared with the 64%
decline in Glencore's stock. BHP Billiton Ltd.'s shares are down
18% over the same period.
In August, Mr. Glasenberg said he wouldn't rule out a takeover
bid that makes "economic sense," though he added he wasn't
entertaining any offers at that time.
Mr. Walsh said Rio will look to use its solid balance sheet to
make deals even as other miners struggle. He said he is
particularly interested in "tier one" copper assets.
Write to Scott Patterson at scott.patterson@wsj.com and Alex
MacDonald at alex.macdonald@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 13, 2015 14:55 ET (18:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
BHP (ASX:BHP)
Historical Stock Chart
From Feb 2024 to Mar 2024
BHP (ASX:BHP)
Historical Stock Chart
From Mar 2023 to Mar 2024