Rio shares break $100 on takeover talk

Rio Tinto shares have punched through the $100 mark amid speculation the resources giant may again on the radar of bigger rival BHP Billiton. The latest rumour comes four months after takeover talk linked the two major miners in a potential $122 billion-plus deal. However, this time the equation involves a third player - Brazilian giant CVRD - the world's largest exporter of iron ore. Shares in Rio Tinto, which has a market value in Australia of $46.1 billion, soared above $100 mark after gaining $2, or two per cent, to $101. BHP Billiton also enjoyed strong gains, adding 85 cents or 2.2 per cent to $39.75. Shares in both companies advanced to six-week highs. "Rio Tinto and BHP Billiton were the standout performers with both back trading at levels of July," IG Markets head of sales trading Harley Salt said. "Rio Tinto broke through $100 again on continuing bid speculation." Rumours surfaced this week that BHP Billiton and CVRD were planning to buy and break up Rio Tinto. But analysts rejected the talk. ABN AMRO analyst Warren Edney was blunt in his assessment, labelling it "rubbish". "It is not going to happen," Mr Edney told AAP. One of the major sticking points of any potential takeover was the dominance of the three companies in the iron ore sector, which would raise competition issues if a deal was proposed. Between them, CVRD, Rio Tinto and BHP Billiton account for about 70 to 80 per cent of the world's seaborne iron ore business. Anti-trust issues aside, Rio Tinto's $US38.1 billion ($A46.02 billion) takeover of Canadian aluminium producer Alcan would make any tilt for the major miner complicated. BHP Billiton declined to comment on the latest market rumours. In May, investors were abuzz with talk that BHP Billiton could be preparing a bid for Rio Tinto, following a research report from Citigroup. The broking and investment house mused that Rio Tinto's strong cashflow could make it an attractive target for private equity firms, but that BHP Billiton was a more likely bidder given the synergies that could be generated. Citigroup noted that such a bid would be fraught with competition issues, although the disposal of non-core assets could allay those concerns. BHP Billiton has also been under the spotlight with investment bank Merrill Lynch in May suggesting private equity groups could strip and sell off its various divisions for $201 billion.