Rio Tinto (RIO AU/LN): Glencore Musings

• Back in August 2024, Jakob Stausholm, Rio Tinto (RIO AU)‘s previous CEO, said any stock issuance to fund Arcadium Lithium (LTM AU)‘s takeover would just add a layer of complexity.

• Eight months later, Stausholm “stepped down”, with Simon Trot taking over the reins. Now the mining giant has revived talks with Glencore Plc (GLEN LN), via an all-scrip Offer.

• Given Rio’s dual-headed structure, the deal mechanics for Glencore have not been publicly fleshed out. The drop in the Aussie line is indicative.

From here-on, I’ll use “Limited” for Rio’s Aussie line, and “Plc” for the UK line.

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The Trade:

• A merger makes sense.

• Rio has taken its lucrative, yet low growth, iron ops for granted. Investors deserve an improved investment environment.

• Yet, given Rio’s (debateable) deal-making track records versus Glencore’s, I’d tilt negative here.

• Ideally, Rio should resolve its DLC prior to pursuing mega scrip deals.

• Unless it’s Rio’s goal to run both in parallel; an unwieldy, long-dated proposal.