After its bold but unsuccessful attempt to acquire Anglo American in 2024, BHP Billiton (BHP.US) had hoped to position itself early for the major copper cycle it has long been bullish on. Now, two years later, as copper prices and the merger wave have heated up as anticipated, the world's largest mining company finds itself unexpectedly on the "sidelines" of this acquisition frenzy. Sources familiar with the matter revealed that recent news of Rio Tinto (RIO.US) and Glencore (GLNCY.US) nearing a deal has caused unease within BHP. Should the transaction succeed, the new entity is poised to surpass BHP in both market capitalization and copper production capacity. However, insiders downplayed the possibility of BHP launching a swift counter-offer to acquire Glencore, stating the company is currently still in a "wait-and-see" mode.

BHP's failure to secure Anglo American back then indirectly facilitated two major consolidations among its competitors. Anglo American had already agreed to merge with Canada's Teck Resources Ltd. last year. Late last year, BHP made a last-minute attempt to disrupt the Anglo American-Teck Resources Ltd. deal, which was perceived by the market as "half-hearted" and raised investor questions about its M&A strategy. The company's CEO, Mike Henry, has since stated that he has "moved on" from Anglo American.

In contrast, responding to the Rio Tinto-Glencore negotiations is more complex. Both BHP and Glencore are among the world's largest producers of coking coal; a merger would inevitably face stringent antitrust scrutiny. Theoretically, BHP could acquire Glencore in its entirety and then divest the coal assets to secure regulatory approval, but this would be an extremely difficult maneuver. Furthermore, Henry's tenure is nearing its end, which could weaken the company's ability to negotiate a "transformative acquisition."

Sources indicate that BHP is closely monitoring the Rio Tinto-Glencore talks and is assessing the situation and its options with advisors. Henry has long emphasized M&A discipline, gradually winning back investor acceptance for deals after painful lessons from acquisitions in the previous cycle. His decision to abandon the Anglo American bid in 2024 was partly conditional on Anglo American divesting its South African operations. Now, Anglo American has restructured along similar lines, and buoyed by the copper boom and the deal with Teck Resources Ltd., its market capitalization has reached approximately $52 billion, exceeding the offer price at which BHP walked away.

Should Rio Tinto and Glencore merge, their combined copper production capacity could exceed that of BHP and even surpass Chile's state-owned Codelco, making it the world's largest copper miner. The merged Anglo American-Teck Resources Ltd. would also rank among the top players, though its scale would still be slightly smaller than BHP's. Mark Kelly, head of merger arbitrage fund MKI Global Partners, noted in a client report that many in the market believe BHP can no longer afford to sit back and watch others consolidate. "Despite BHP repeatedly stating that an acquisition is not a necessity, mining circles were abuzz last year with talk that Glencore was 'beautifying itself' to attract competing bids from BHP and Rio Tinto, aiming to secure the best possible sale price."

Currently, Glencore's market capitalization is around $73 billion, compared to BHP's approximately $158 billion and Rio Tinto's roughly $138 billion. A merger between Rio Tinto and Glencore would, due to antitrust factors, likely place the new company beyond BHP's acquisition capabilities. However, once the merger of Anglo American and Teck Resources is completed, it could still emerge as a potential target for BHP.