If BHP Billiton wants to gauge Rio Tinto investors' appetite for an alternative to a planned $19.5 billion deal with Chinalco, the world's largest mining group won't have too far to go.

Chinalco aside, at least 15 of the biggest 20 institutional holders of Rio's London shares are also major BHP shareholders, according to Thomson Reuters data. They include Legal & General Investment Management, Barclays Global Investors, AXA Investment Managers UK and State Street Global Advisors.

The deal, unveiled Thursday, would involve China's top aluminium maker paying $12.3 billion for stakes in Rio's key iron ore, copper and aluminium assets and $7.2 billion for convertible notes potentially doubling its equity stake in Rio to 18 percent.

Some Rio (RIO.L) (RIO.AX) shareholders have already publicly said they are disappointed, or even furious, with the agreement -- which they say overrides pre-emption rights that should allow existing investors to take part in any fundraising. [ID:nN1631458] [ID:nSYD152729]

BHP (BLT.L) (BHP.AX), Citigroup and Merrill Lynch declined to comment on Tuesday on a Financial Times report that the trio had canvassed Rio investors about their support for an alternative to the Chinalco deal.

But the two banks are corporate brokers to BHP and BHP is running investor roadshows after its Feb. 4 first-half results -- offering plenty of opportunities to talk with disgruntled Rio investors.

A spokesman for Rio declined to comment on BHP's actions but said Rio was continuing to listen to investors, holding a series of meetings to discuss the Chinalco deal.


A spokesman for the Association of British Insurers (ABI) -- which represents many of the country's biggest investors and wrote to Rio before Thursday about pre-emption worries -- said its members remained concerned about the deal.

Times are tough, no one's arguing otherwise, and access to credit is at a premium, but if you sacrifice the principle (of pre-emption) for short-term expediency that's going to lead to a lot more difficulties in the future, the spokesman said.

He declined to comment on a report in the Times newspaper that the ABI could issue a rare red top alert signaling its disapproval. The ABI issues recommendations on all big UK shareholder resolutions, but they are usually much closer to shareholder votes, in this case set for May.

Analysts say a counter-offer could not be for single assets, but would need to match Chinalco's comprehensive package. [ID:nLD732249]

A combined rights issue -- which Rio sought to avoid -- and asset sales might be one way to do this.

For its part, Chinalco insisted it will not change its plan, even if a rival bid emerges, according to the China Securities Journal. We are not going to (alter our) bid. We think what we offered is most reasonable, it quoted Xiao Yaqing, Chinalco's president, as saying. [ID:nSHA77938]

Chinalco is the parent of Hong Kong-listed Aluminium Corp of China (Chalco) (2600.HK) Rio and BHP are also among companies vying to develop Mongolia's prized $2 billion Tavan Tolgoi coal mine. Two sources with direct knowledge of the matter said the rivals had submitted proposals -- as have Vale (VALE5.SA), Xstrata (XTA.L) and coal giant China Shenhua Energy (1088.HK) (601088.SS). [ID:nHKG100388]

(Editing by David Holmes)

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