BHP Billiton CEO, Marius Kloppers is continuing to push hard for the merger idea for rival Rio Tinto, even hinting at a possible hostile offer to be made direct to Rio shareholders.
Kloppers was in his home country, South Africa last weekend where he was selling the suggested deal in public and talks with Government and shareholders.
He's been in London, South Africa and will travel to China and elsewhere to sell the idea.
Kloppers was quoted by Reuters as saying that BHP management may consider taking an offer directly to Rio shareholders in the future and bypassing the board.
That wouldn't have much chance of winning as a hostile offer of this size might produce ratings downgrades and concern with some shareholders wanting to see due diligence done on the basis of an agreed offer to limit any damage.
The offer would have to have a high cash component to be credible while an agreed off would be more likely to be a mixture of shares and cash
As well, with Rio there is understood to be a change of control clause in the $US38 billion of funding for its Alcan purchase. A hostile bid for Rio would see that change of control clause triggered and might cause problems for BHP, even if it has a funding deal in place to replace the Rio facility.
As well there are agreements in place with Canadian and Quebec Governments, as well as the French and Swiss Governments that would need to be renegotiated. A hostile offer would see that in jeopardy, especially if there was opposition from competition regulators.
In fact competition regulators might sink the whole hostile approach by delaying the offer to look at it: BHP would not be able to keep funding in place in today's nervy credit markets, while regulators took months to approve or reject the offer.
But, according to comments from Mr Kloppers, BHP is aiming to bring Rio's board to the table by asking Rio shareholders to put pressure on management.
The majority of Rio shares are held outside Australia, mostly in London.
It's why he went there first after briefing local groups and the media in Australia a week ago last Friday. It's why the regulators in the UK forced a statement from BHP there before regulators could act in Australia because the talks had been conducted in Britain, not here.
Reuters quoted Mr Kloppers as saying on Saturday: "We are talking directly to shareholders; we ask shareholders to ask management to engage to deliver this."
BHP advisers say the company has talked to more than half of Rio's institutional shareholders over the past week after announcing its proposal to forge a world mega-miner controlling much of the world's supply of raw materials.
Rio says the three-shares-for-one takeover proposal "significantly undervalues Rio Tinto and its prospects".
The all-share proposal was worth $US140 billion before the plans were announced, but has declined in value to around $US126 billion as BHP shares slipped.
Kloppers was asked how long BHP would wait for talks with Rio management before taking a bid directly to Rio shareholders.
"We are hopeful that management will engage with us, but certainly that is one of the options that should be considered down the track, but that is simply not a decision that we've got to take today."
He stressed that BHP had not made a formal offer, but had only presented a proposal to Rio's management.
The Wall Street Journal, citing unnamed sources, reported on Friday that Rio was considering a broad array of potential options to fight off BHP, including a counter-bid, selling assets and other moves that could raise shareholder value.
Analysts, however, said Rio was unlikely to counter-bid as expectations were growing that BHP may sweeten its offer, and it might be difficult anyway for the smaller Rio to pull off such a move.
Rio is due to hold an investor briefing next week (on Monday) to give details about its views on BHP's proposal.
But if BHP wants to succeed in its offer, and Rio wants the merger to happen at a realistic price, then both will have to reach an accommodation with the upstart Fortescue Metals Group.
Both companies are opposed to third party access.
To get ACCC approval, that will have to happen because it is a way the regulator ties to maintain competitive pressures on merged groups. Much of the brawling between Telstra, Optus, other competitors and the Federal Government and ACCC is over third party access regimes.
It is already just a High Court challenge away from muscling its way into BHP's Mount Newman line;
On Friday it cleverly revealed plans to try and push for access to the rail network in the Pilbara open to third parties.
It's all to do with the new discovery announced on Thursday in the Pilbara by FMG. The discovery has a billion tonnes or more of inferred resource, grading around 56% Fe (which is lower than its 60% higher grade ore in the existing deposits).
But to access the new areas, FMG needs access to rail: it could build its own railspur of 100 kilometres, but that would be too time consuming or expensive.
So FMG has taken advantage of the BHP move on Rio and the certainty that the fate of the offer will be decided by competition regulators here, in the US, Europe and by major Chinese steel mills and resource groups who are the customers for the FMG ore.
FMG's three and a half year battle to gain access to BHP Billiton's Mount Newman rail line – which Fortescue wants to use to allow the development of its Mindy Mindy iron ore deposit – is now before the High Court.
Now it has asked the National Competition Council to declare Rio's Hamersley Iron rail network and BHP's rail network open to third parties.
The Hamersley Iron network passes close to Fortescue's newly discovered
