BHP Billiton Still Mulling Options On Rio Tinto Bid — Source

BHP Billiton Ltd. (BHP.AU) is still considering the next move in its takeover tussle with rival Rio Tinto Ltd. (RTP) despite ongoing rumors that it may soon lodge a higher offer, a person familiar with the situation said Tuesday.

There has been speculation out of London that BHP may lodge a revised offer ahead of the Feb. 6 deadline set by the U.K. Takeover Panel, sweetening its current proposal of three of its shares for every Rio Tinto share held.

However, a person familiar with the situation said Tuesday that BHP hasn’t yet made a decision on its next move and is still considering its options.

The rumors from London have included the suggestion BHP is considering a higher offer of 3.6 of its shares for every Rio Tinto share along with a cash component of GBP6 per share.

Stock Resource mining analyst Steve Bartrop said it seemed unlikely BHP would increase its bid by that much.

"There is an expectation that (BHP Billiton Chief Executive Marius Kloppers) will have to lift it to get some action out of the Rio board, and 3.5 looks a reasonable limit, but above that and you are starting to give away too much to Rio," he said.

Bartrop said he believes BHP is unlikely to offer a cash component as this could open up an opportunity for rival bidders and erode the argument that the value in the BHP deal lies in the synergies that can be extracted by merging the assets of the two companies.

At 1044 GMT, BHP was trading up 1.7% at A$38.86, making its three for one share offer worth A$116.58, while Rio Tinto was trading up 1.5% at A$126.90.