Rio Tinto hunts for dealmaking chief
The news that Rio Tinto is seeking a dealmaking specialist as its new chief executive has reignited speculation about its deal-making abilities as it tries to draw a line under past mistakes in the mining industry.
Chair Dominic Barton is reportedly seeking someone capable of delivering large-scale acquisitions while cutting costs and increasing productivity —a rare combination.
The mining industry has been well-known for its obsession with acquisitions. The sector completed a frenzy of deals between 2006 and 2011.
But the tide turned when commodity prices entered a prolonged downturn, and miners were criticised for massively overspending on deals.
Rio was one of the worst offenders, with a series of disastrous takeovers leading to the ousting of chief executive Tom Albanese in 2013 amid huge writedowns. It had suffered a $14bn (£10.3bn) writedown after buying Canadian aluminium group Alcan and Mozambique-focused Riversdale Mining.
Rio Tinto looks to future deals
The firm needs someone with a “bold vision” to take to the next level and “widen the gap against competitors,” Dan Coatsworth, investment at AJ Bell, said.
But he cautioned against repeating “previous mistakes” with so-called transformational acquisitions that “ended up destroying value.”
It comes amid forecasts of booming mergers and acquisitions in the mining sector, with mining bosses, including Rio Tinto’s departing chief Jakob Stausholm, warning against plunging into deals recklessly.
There was speculation that Rio may counterbid for Anglo American after BHP’s attempts to buy the FTSE 100-listed miner in 2024, although this never come to fruition. Chatter surrounding a merger between Glencore and Rio earlier this year also failed to lead to anything substantial.
“A lot of deals were made between 2005 and 2012 and a lot of these turned out to be really bad,” Stausholm told the Financial Times in March.
“Now it feels like things are opening up a little bit . . . but from the Rio Tinto perspective, that’s not that relevant: I have no fomo, or fear of missing out.”
Shares in Rio Tinto are trading down nearly 10 per cent over the last year.