Rio Tinto rises on bets BHP readying new offer

SYDNEY (Reuters) - Shares in Rio Tinto Ltd (RIO.AX: Quote, Profile, Research, Stock Buzz) jumped 7.6 percent on Thursday on bets its rival BHP Billiton Ltd (BHP.AX: Quote, Profile, Research, Stock Buzz) was poised to launch a slightly sweeter offer than it proposed last November.

Three fund managers said the general view in the market was that the world's biggest miner would make a formal offer to Rio Tinto by next Wednesday, meeting a deadline set by the UK Takeover Panel for it to bid or go away for at least six months.

On Thursday's close in Australia, BHP was up 2.6 percent at A$37.05, while Rio leapt to A$123.00, or 3.3 times the value of BHP, up from levels below 3.2 earlier in the week. At 3.3 times, a bid would value Rio at $122 billion.

"I just expect them to come back with a definite offer and get the ball rolling. And their first offer won't be their last offer," said Warwick Cumming, deputy head of equities at Tyndall Investment Management, which holds shares in BHP and Rio.

"I can't imagine BHP will walk away from this situation having had it in the planning for the past 10 years and made such a compelling case for the merger."

The market showed investors were betting BHP would make a slightly better offer than its proposal of three BHP shares for each Rio Tinto share, which Rio rebuffed last November.

Rio said in November that a three-for-one share was too cheap and it would be better off riding out a boom in commodities markets on its own. The two sides have aimed all of their arguments so far at the market and not engaged each other.

"It's all about value. They just desperately need dialogue between the two," said Ken West, a partner with Perennial Growth Management.

Some analysts and fund managers said there was a sense in the market that BHP and Rio might reach an agreement ahead of February 6.