KEY POINTS:
Time is on BHP Billiton's side in a standoff with Rio Tinto over an informal takeover approach for its smaller mining rival, with no pressure from British regulators to make a formal bid.
While some BHP shareholders want a quick move to resolve the uncertainty around the firm's US$125 billion ($163.8 billion) takeover proposal that has depressed BHP shares, most signs point to a waiting game as the holiday season approaches.
BHP is likely to take its time due to a range of reasons, including financing issues, market conditions and Rio's strong share price, analysts and fund managers say.
BHP Chief Executive Marius Kloppers has repeated several times the firm is "patient" in seeking to draw the management of Rio Tinto into talks after Rio rejected BHP's three-shares-for-one proposal as vastly undervaluing Rio.
"This is a process that could take some time and we will be patient with regards to our approach," BHP London spokesman Illtud Harri said.
Under British takeover regulations, BHP can take as much time as it wants after announcing a "possible offer" on November 8 before making a formal bid or a sweetened proposal.
The rules stipulate a 28-day deadline to make a bid only when a company announces a "firm intention" to make an offer.
Rio Tinto, whose shares have shot up by a quarter since BHP said it wanted to bring together the world's first- and third-biggest mining groups, can force the issue, but told Reuters it had no current plans to rock the boat.
Takeover rules allow a target company to ask regulators to set a deadline - commonly known as the "put-up or shut-up" provision - for a firm to make a formal bid or abandon it.
"We don't have any plans to do that at this stage, that remains an option, but certainly not something that we're going to do at this stage," Rio's London spokesman Nick Cobban said.
A hedge fund manager in London who owns shares in both firms is not counting on any early move by BHP to increase its offer or make a formal bid.
"From everything we hear, most likely nothing will happen before Christmas," he said, asking to remain anonymous.
One issue is finalising the US$70 billion in finance needed for a takeover bid amid a global credit crunch.
Banking sources told Reuters Loan Pricing Corp on November 27 that seven banks have pledged to participate in what is likely to be the biggest loan to date in the European syndicated loan market.
The banks, however, would rather not hold the loan on their balance sheets over the year-end due to capital constraints for 2007, the hedge fund manager said.
BHP might also wait for more positive market developments.
"I think from BHP's point of view with commodity prices easing back a bit, maybe they're not in too much of a hurry because sentiment is probably not as positive as it might have been," an analyst in London said.
Benchmark copper prices on the London Metal Exchange have shed nearly a fifth since touching a high of US$8315 a tonne in October.
BHP might also hope for a retreat in Rio's share price, which rallied after a presentation last week when it robustly defended its growth prospects as an independent firm and promised shareholders better dividends.
Further developments might also be delayed as both companies become embroiled in annual iron ore contract talks, which have recently been launched to agree on prices for the next 12 months from April.
Steelmakers from Europe to Asia have cried foul about the proposed link-up of the two firms, which would control more than a third of the seaborne iron ore market. BHP has acknowledged that anti-trust regulators will scrutinise any takeover, especially in the iron ore sector, so it may be wary of making a formal bid amid the talks.
Matt Brenzel, portfolio manager at Cadiz African Harvest Asset Management in Cape Town who own BHP shares said: "The last thing you want is for this to drag on and for the share price to suffer further."
- Reuters
