Rio Tinto (ASX:RIO) and Glencore are reportedly weighing a potential spin-off of selected assets, including coal, on the ASX as part of early-stage discussions around a mooted $300 billion mega-merger.
While both companies have remained publicly silent since the proposal emerged last week, advisers to Rio are understood to be examining a range of deal structures ahead of a Feb. 5 deadline to lodge a formal proposal under UK takeover rules.
Analysts say the complexity lies in combining overlapping copper assets, Rio’s highly profitable iron ore division, and Glencore's global coal and trading operations.
Glencore’s coal assets across Australia, Africa and Latin America contribute about 8% of the combined group's US$45.6 billion in EBITDA and could be worth tens of billions of dollars, while the trading arm accounts for a further 9%.
Market speculation has centred on Glencore spinning off coal before any merger, or Rio acquiring only its copper business, following Glencore’s decision last year to abandon a standalone coal demerger.
An ASX-listed coal spin-off would dwarf local peers Whitehaven Coal and New Hope Corporation.