Analysts dismiss latest Rio Tinto takeover rumour

A rumour that mining groups BHP Billiton and CVRD want to break up Rio Tinto is unlikely due to the trio's dominance in the iron ore sector, analysts said on Thursday. "The big problem is that the jewel in the crown of Rio and much of its value is the iron ore business and you'd have to materially get rid of it or change it," one London analyst said, referring to monopoly issues. Rio Tinto shares in London surged as renewed rumours circulated that Rio was a takeover target. They rose 3.8 percent to 3,660 pence by 1251 GMT, paring gains that earlier took it 6.4 percent higher, versus a flat FTSE 100 index .FTSE. The latest speculation is a variation of a rumour that swirled in the market in May, when BHP was named as the only suitor and Rio denied it had been approached. "I thought the BHP and Rio rumour was nonsense then and I think this is even more nonsense," the analyst said. Talk of a short squeeze in Rio shares was providing a fertile environment for this sort of rumour, he added. The three firms together account for something in the region of 70-80 percent of the world's seaborne iron ore business, said a second analyst. "If they tried to split Rio between BHP and CVRD, it doesn't matter how that is split there will be anti-trust issues, and Japanese steel makers will be up in arms. I just can't see it happening." has been closed to outsiders, analysts said. "If the companies merge, are acquired, taken over, I reckon it's almost a certainty that the Australian courts will rule that those railway lines much be given access to third parties," the second analyst said. Any acquisition would be complicated since Rio Tinto itself is in the midst of an $38.1 billion takeover of Canadian aluminium producer Alcan . BHP does not need to acquire Rio since it has already made plans for good organic growth, the first analyst added. "BHP Billiton already has a big aluminium business and decent growth in it. They've already got decent growth throughout their portfolio pretty much." The Rio rumour sent BHP shares up 2 percent to 1,445 pence and Anglo American also rose 2 percent to 2,896 pence, making basic resources the top sectoral gainer and Rio the top European blue-chip gainer. CVRD shares closed 1.87 percent lower at $50.14 in New York on Wednesday.