The Rio Tinto Ltd (ASX: RIO) share price is down 0.5% on speculation that the ASX mining share is considering a merger with Glencore.
Potential merger
According to reporting by Bloomberg, Rio Tinto and Glencore are discussing merging. It was reported that the two resources businesses have held “early-stage talks” about a deal and it is not clear whether the talks are ongoing.
Mining.com reported that this merger is focused on copper because the commodity is seen as essential for electrification and the global energy transition.
Their combined copper production could come to more than 1.7 million kt of copper.
Mining.com said that representatives from both Rio Tinto and Glencore declined to comment.
What to make of this
Clearly this is still at a very early stage of discussions. The ASX mining share hasn’t announced anything to the market, so this is just external speculation at this point.
A combination could make sense for the cost synergies that could create. There would be a lot of duplication that could be removed.
Greater scale of a combined business may also help with revenue synergies if it means unlocking greater deposits or being able to invest more in the best equipment.
There are questions about what this would mean for Australia and ASX investors. What would the corporate structure be and where would the business be located with its headquarters and tax base? Would the dividends still be fully franked?
As an Australian investor, I would be hesitant about supporting the deal before seeing the details.
Final thoughts on the Rio Tinto share price
I think Rio Tinto is one of the strongest ASX mining shares because of its diversification and the exposure to copper.
International institutional investors may like the prospect of a merger but a lot needs to happen to get a deal across the line, including deciding on a price that both sets of shareholders approve.
I don’t think this is a great time to invest in Rio Tinto shares, so I’d look at other ASX dividend shares.
