Liberum crushes hopes for renewed Glencore approach for Rio Tinto

7th Oct 2014 09:27

Hopes of a renewed Glencore approach for Rio Tinto sent shares in the latter surging on Tuesday, but analysts at broker Liberum reckon that a merger of the two parties won't come to fruition.Rio revealed that it had turned down the advances of Glencore after an approach from the mining and commodities giant in the summer. The board said the deal "was not in the best interests" of its shareholders.It is thought that Glencore's chief executive Ivan Glasenberg wants to tap into Rio Tinto's low-cost, high-quality iron ore operations to run alongside his already strong copper, nickel, zinc and coal portfolio.Rio Tinto on Tuesday responded to press speculation after reports that Glencore was in talks in recent weeks with Rio Tinto's biggest shareholder, Chinalco, to gauge its interest in a potential deal.Liberum said that the leaking of the news that Glencore was laying the groundwork for a potential bid "could be enough to ensure that the deal won't happen".The broker explained that the best timing for a deal - from Glencore's point of view - would be if the iron ore price dropped below $70 a tonne and the relative prospects for Glencore's commodities improved."Next year provided potentially the best opportunity for such a move, but today's news should put a relative floor under Rio's shares, preventing an opportunistic bid."Liberum has lifted its target price for Rio Tinto slightly from 2,712p to 2,800p, but has kept a 'sell' rating as it still suggests downside from current prices.The stock was up 5.8% at 3,170.5p by 09:51.