By James Regan
"I still don't think it's good enough for BHP to win the day, given Rio's assets and potential," said DJ Carmichael & Co analyst James Wilson.
Rio has rejected BHP's sweetened 3.4 shares for each Rio share offer, a 13 percent improvement on its initial informal approach in November.
Numis Securities analyst Simon Tyrone said in a report that BHP's bid reflected a high level of discipline on valuation that creates value for both sets of shareholders.
Asian and European customers of both companies, particularly steel mills in China and Japan that buy hundreds of millions of tonnes of iron ore each year, have raised concerns about the clout a merged BHP/Rio would have on pricing of raw materials.
"BHP would love to have a situation where it can be the dominant player, a one-stop shop, in commodity markets across the globe," said Fat Prophets mining analyst Gavin Wendt.
"A company with high quality assets like Rio doesn't come along every day and, with the furious takeover activity in the resources sector over recent years, the cupboard is getting increasingly bare," Wendt said.
Chinalco and Alcoa have reserved the right to make a full bid for Rio, backed by China Development Bank funding, if another bid was made.
"No, but who else can afford Rio? The Chinese, maybe, but my experience has been they would rather be a partner than an outright owner," he said, adding he has resisted offers from Chinese investors to acquire a stake in his company.
Analysts have suggested BHP would need to pay as much as 3.58 of its shares, plus A$16 cash, to win over Rio.
BHP Chief Executive Marius Kloppers insists his bid offers fair value. He expects a deal to take up to a year to complete, given the geographic spread of both companies' assets.
(Editing by Ian Geoghegan)
