rio bhp bid rumuor, page-3

http://www.bloomberg.com/apps/news?pid=20601081&sid=a8jasn.DjCgk&refer=australia

Jan. 18 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, rose, reversing an earlier loss in Sydney trading, on speculation BHP Billiton Ltd. may increase its takeover offer by 32 percent as soon as tomorrow.

BHP may bid 3.5 shares and A$16 ($14) for each Rio share, said Michael Birch, who helps manage the equivalent of $140 million at Wallace Funds Management in Sydney. London-based Rio rejected a three-for-one stock proposal from BHP in November

``That's the rumor going around,'' Birch said.

Rio's shares have been trading above the offer, valued at $110 billion as of the close in London yesterday, signaling some investors expect an increase before the Feb. 6 deadline set by the U.K. Takeover Panel. Buying Rio will make Melbourne-based BHP twice the size of its nearest rival, Cia. Vale do Rio Doce.

Rio rose 40 cents, or 0.4 percent, to A$119 in Sydney trading on the Australian Stock Exchange at 3:19 p.m. local time. It was down as much as 7.4 percent earlier as global stocks plunged on U.S. recession concerns. An offer at the rumored price would value Rio's shares at about A$138 each. BHP fell 3.8 percent to A$35.12.

Amanda Buckley, a spokeswoman for Rio Tinto, and BHP spokeswoman Samantha Evans both declined to comment.

Rio Tinto is in a better position to benefit from China's growing demand for minerals than BHP, Rio Chief Executive Officer Tom Albanese said in a presentation sent to the Australian Stock Exchange today. He had previously rejected BHP's initial proposal as ``dead in the water.''

``Rio Tinto has higher growth prospects in iron-ore, aluminum and copper,'' Albanese said in the presentation.

Bid Higher

``Clearly the first move seemed inadequate,'' Ken West, who helps manage A$3 billion at Perennial Investment Partners Ltd., said from Melbourne. BHP may offer 3.6 shares and A$30 cash, he said, adding that he hadn't heard a bid was coming tomorrow. ,

A combined group would be able to deliver more iron ore faster to Asian steel mills, BHP Chief Executive Officer Marius Kloppers has said. Rio, the world's second-largest exporter of iron ore, says it can mine the raw material quicker and cheaper on its own.

``Rio Tinto is investing proportionally more to grow its minerals business than BHP,'' Albanese said in today's presentation. He wants to triple iron-ore output to 600 million tons to meet the demand led by China. Rio's iron-ore output rose 11 percent to a record in the fourth quarter, it said this week.

Kloppers said Dec. 12 his company had delivered better growth and returns to shareholders than Rio in the past five years and outlined a proposal to expand its Olympic Dam and Pilbara iron-ore assets in Australia