Rio Tinto has formally walked away from its third merger discussion with Glencore since 2014, ending months of negotiations that would have created the world’s largest mining company. Based on public statements issued by both companies, no agreement was reached due to differing views on valuation.

Project Blue previously published a view that, valuation aside, potential areas of contention could include geographic factors and commodity exposure (particularly Glencore’s coal assets), as well as an unlikely corporate culture fit. We expected that these issues could override the potential for a strong, diverse copper asset portfolio.

Glencore stated that the proposed terms significantly undervalued its relative contribution, particularly its copper business, growth pipeline, and potential synergies, whilst also failing to offer an adequate control premium.

However, Glencore experienced a greater share price decline, presumably reflecting the unwind of a deal premium that the market had expected Rio Tinto to pay in order to maintain its Chair and CEO roles in the merged entity.

As with other recent high-profile mining transactions that have failed to progress, the outcome emphasises that transactions in the sector remain difficult to execute, even when long-term commodity fundamentals are supportive.