SHARES in Rio Tinto (rio.ASX:Quote,News) soared 21 per cent in London trading overnight as traders cited market talk that rival miner BHP Billiton (bhp.ASX:Quote,News) was close to tabling a bid for the company.
"Markets are betting that an offer is due soon," one trader said.
BHP Billiton (bhp.ASX:Quote,News) was up 5.4 per cent.
A spokesman for Rio Tinto said the share price move was based on speculation and said the company had not received a bid and was not aware of any offer from BHP Billiton.
Record struck on ASX
Talk that Rio had rebuffed a friendly offer from BHP drove Rio's share price up more than 11 per cent in Australian trade yesterday, the stock surging towards $100 in mid-afternoon trade.
About 90 million shares changed hands, with the stock touching an all-time high of $99.69 before slipping to end the day at $95.50, a rise of 6.5 per cent.
The surge prompted a speeding ticket from the Australian Securities Exchange, which queried reports Rio (rio.ASX:Quote,News) had been approached by the world's biggest miner.
Rio responded that it was not aware of any takeover approach from BHP.
But the announcement after the Australian market closed did nothing to dampen enthusiasm for the rumour which saw Rio shares up about 6 per cent in early London trade. Rio is listed in Australia and London.
Analysts trigger takeover talk
The trading frenzy follows a report last week by Citigroup which suggested BHP could make a $US100 billion-plus ($121 billion) bid for Rio.
Analysts believe the two companies would make a good match, but yesterday cast doubt on an offer any time soon.
BHP boss Chip Goodyear is preparing to stand down and the company is yet to name his successor -- although carbon steel materials chief Chris Lynch yesterday threw his hat in the ring.
Analysts said BHP could fund a $US100 billion bid, but questioned whether it could manage such a big deal with the top job still open.
They said the company already had ple
nty on its plate with $US17.5 billion worth of developments on the go.
The surge in Rio shares was pinned to the potential for further corporate activity following Alcoa's $US33 billion bid for Alcan on Monday night.
It was suggested that hedge funds who had speculated on the Qantas-APA takeover had taken advantage of the hype sparked by the Citigroup report and shifted their money into resources.
About 164 million Qantas shares were sold on Tuesday.
A marriage between BHP and Rio would create the world's largest producer of coking coal, thermal coal and copper, and put the company on par with Brazilian iron ore giant CVRD.
UBS analyst Glyn Lawcock said a tilt at Rio was the most logical growth path for BHP, but talk of a bid was just market speculation.
"Rio's extremely complementary in my view, so I think it is the most logical deal for them, but whether it can be achieved is another matter, or whether it occurs is another matter," he said.
Michael Birch, of Wallace Funds Management which owns shares in Rio and BHP, said a takeover by BHP was feasible, but fund managers would likely want more than the $110 a share it was rumoured BHP would offer for Rio.
Mr Lynch, who said yesterday he was interested in the top job at BHP, played the company line on the Rio rumour when asked to comment at an ASX seminar.
"We obviously look at a lot of different things," he said. "We wouldn't comment specifically about any specific potential target."
He said persistent talk of private equity players entering the mining game was not to be discounted.
"Probably one of the cheapest resources to access today is money," he said. "Without being alarmist or accepting any real proposition, I think it would be dangerous to assume that it couldn't happen to you.
"It would appear the access to cash is not the issue."
A successful bid by BHP for Rio would be the third largest in history, according to Bloomberg, after America Online's $US186 billion takeover of Time Warner in 2000, and Vodafone AirTouch's $US148 billion bid for Mannesmann AG in 1999.