Six months ago, when merger talks between Glencore and Rio Tinto were revealed, the latter’s share price was a little more than nine times that of Glencore’s. Today the gap is ten times. One analyst has suggested in the past week that the gap has to shrink to nearer eight times before a merger is financially feasible.
That is one reason why I do not believe that Glencore, which is free under Takeover Panel rules to renew its aproach this week, will do so. There are any number of others.
There are good reasons why Glencore needs Rio, not least because the creation of one of the biggest mining companies on the planet offers potential savings that will offset the damage being done by the