BHP raises Rio bid

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BHP hopes to sell Rio shareholders its idea of assembling a super miner, supplying the lion's share of the world's industries with millions of tonnes of minerals, but runs the risk of igniting a bidding war with Rio's largest shareholder, state-run aluminium group Aluminium Corp of China (Chinalco).

BHP sweetened its initial approach by 13 percent, offering 3.4 of its shares for every Rio share after a November proposal of three shares for one failed to persuade the Rio board to bless a friendly tie up.

"Rio Tinto shareholders will now decide," BHP Chief Executive Marius Kloppers told reporters. He added: "This is our first and only offer," though he later would not say if that meant it was the final one.

Some analysts doubted the sweetened bid would be enough to win Rio and create the world's third-richest company, ranked behind only Exxon Mobil and General Electric.

"It's a lot fairer than the offer we've had before, (but) it's by no means a knock-out offer," said Bertie Thomson, a fund manager at Aberdeen Asset Management, who holds both Rio and BHP shares.

"Given our market conditions and the outlook, if you look at comparative mergers and acquisitions, it probably is not going to get there," said Ken West, a Perennial Growth Management partner.

Shares in BHP, which posted a 2.4 percent dip in first-half profit to $6.017 billion, fell 7.5 percent to A$36.66 in Sydney - their steepest one-day percentage fall in 20 years - while Rio closed down 0.2 percent at A$127.14.

Rio was trading close to BHP's offer, suggesting investors were betting Kloppers would stick with the 3.4 shares for one bid. BHP needs at least 50 percent of holders of Rio's Australian and London shares to accept.

CHINA HOLDS FIRE

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