China takes stake in Rio, threatens BHP bid plan

By Eric Onstad and Lucy Hornby

LONDON/BEIJING (Reuters) - China teamed up with U.S. aluminium producer Alcoa (AA.N: Quote, Profile, Research, Stock Buzz) to buy a $14 billion stake in Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) on Friday and said it may make a bid, threatening miner BHP Billiton's (BLT.L: Quote, Profile, Research, Stock Buzz) efforts to win Rio.

The move by state-owned Aluminum Corp of China (Chinalco) is the country's biggest ever investment overseas -- Alcoa spent only $1.2 billion -- and comes days before a regulatory deadline on Wednesday for BHP (BHP.AX: Quote, Profile, Research, Stock Buzz) to make a firm offer for Rio (RIO.AX: Quote, Profile, Research, Stock Buzz) or to walk away.

Chinalco and Alcoa said they had bought a 12 percent stake in Rio's London-listed shares giving them a holding of over 9 percent, including Rio's Australian listed shares.

They said in a statement they did not currently intend to make an offer for the whole of Rio, but reserved the right to do so if another party made a firm bid.

Rio, the world's No.2 miner by market value, has rejected a 3-for-1 all-share offer from No.1 BHP, worth $126 billion at current prices. Analysts have long tipped China to seek an influence as both companies' biggest customer.

Investors said the stake was not enough to stop BHP from buying Rio.

"They (BHP) would have to bid really big," said Graham Birch, a fund manager at BlackRock (BLK.N: Quote, Profile, Research, Stock Buzz), which is a major shareholder in both Rio and BHP and sold some stock to Chinalco.

Investment bank Lehman Brothers LEH.N said it bought the stake in Rio for Chinalco and Alcoa at 60 pounds a share, 21 percent above Rio's closing price of 49.56 pounds on Thursday.