The Aluminum Corp. of China is expected to support the planned takeover of Glencore by Rio Tinto. This merger would allow the Chinese company to expand its presence in the copper sector and at the same time create the world's largest mining group.
Bloomberg News reported on Monday that Chinalco, which holds a 14.55% stake in Rio Tinto's London-listed shares, is negotiating the deal with Chinese authorities.
While final approval requires Beijing's consent, the state-owned company appears willing to accept a reduced stake in the enlarged company, Bloomberg reported, citing people familiar with the matter.
Chinalco could demand compensation from Rio Tinto for the dilution, although the details are still unclear, the news agency said.
Rio Tinto $RIO (-1,2 %)
$RIO (-3,25 %) and Glencore $GLEN (-0,15 %) confirmed merger talks earlier this month, but have not yet given details of the proposed structure.
Under UK Takeover Panel rules, Rio Tinto must either specify or withdraw its offer by February 5.
Earlier negotiations at the end of 2024 broke down due to disagreements over the premium Rio Tinto was willing to pay.
Chinalco has held a significant position in Rio Tinto for almost two decades, with its current stake approaching the 14.99% threshold agreed with Australia at the time of the original investment.
Given its position as the dominant consumer of most metals, China's approval remains essential for major mining transactions.
The antitrust authorities in Beijing will scrutinize any merger closely. When Glencore took over Xstrata in 2012, the Chinese authorities gave their approval subject to certain conditions, including the divestment of a Peruvian copper asset.