glencore and rio merger inevitable hedge funds told 902542014

A boutique advisory run by a London-based deal maker says the merger would create a ‘super-major’

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By :  ,  Financial Analyst

A London investment banker specialising in mining deals told a clutch of over 20 investors earlier this month that a takeover of Rio Tinto Limited (ASX:RIO) by Glencore PLC (LON:GLEN) was all but inevitable, according to Bloomberg.

The investors included prominent hedge funds GLG Partners, DE Shaw & Co, and Pentwater Capital Management, which collectively hold over $70 billion in assets under management.

Ian Hannam, a prominent London investment banker who was previously Chairman of global capital markets at JPMorgan Chase & Co. (NYSE:JPM), invited the investors to Corrigan’s restaurant in Mayfair and made a presentation on the potential deal.

“If not today, this deal will happen sometime in the near future,” Hannam said in his presentation, according to Bloomberg. “Glencore is M&A savvy and times deals well. The combination will create a super-major with a diversified portfolio of world-class mining assets.”

Last month, it was revealed that Glencore sounded out Rio Tinto on a merger proposal in August but was turned down. UK takeover rules prohibit Glencore from making a fresh bid until next year. An assessment of a potential ‘GlenTinto’ deal, in Canada's Financial Post, said it would marry Rio Tinto’s superior iron ore assets to Glencore’s commodity trading expertise and create the world’s largest miner with an estimated market capitalisation of US$150 billion.

Hannam is likely jockeying for a role in the huge transaction whenever it happens, according to Bloomberg, which said the presentation highlighted his previous record in big ticket mining deals, such as the merger of BHP Ltd and Billiton PLC that created BHP Billiton Limited (ASX:BHP), currently the world’s largest miner. Hannam also said he was an advisor to Xstrata in its 2012 takeover by Glencore.

Hannam’s presentation said the potential transaction could suffer headwinds such as anti-trust scrutiny, Glencore’s already high levels of debt and the possibility that Rio shareholders would demand a ‘material premium’.

However, Neil Passmore, CEO at Hannam & Partners, said that his firm had not been engaged by either Rio Tinto or Glencore, nor was it in discussions for such an appointment. Spokesmen for the mining companies declined to comment.

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