Rio Tinto is reportedly considering a counter-bid for BHP Billiton as a defense against a $140 billion takeover proposal from its bigger mining rival, but analysts said such a move was unlikely.

The Wall Street Journal, citing unnamed sources, reported Rio was considering a broad array of potential options to fight off BHP, including a so-called Pac-Man defense, selling assets and other moves that could raise shareholder value.

The term Pac-Man defense is a reference to a computer game popular in the 1980s where attackers can become the attacked.

BHP shares in London jumped as much as 2.4 percent on the speculation it might become a target and were trading 1.3 percent higher at 1,618 pence by 4:55 a.m. EST.

Rio shares ticked 0.24 percent higher to 5,433 pence, outperforming a 0.5 percent fall in the UK mining index.

However, analysts told Reuters on Friday Rio was unlikely to counter-bid as expectations are growing that BHP may sweeten its offer, and it may be difficult anyway for the smaller Rio to pull off such a move.

At face value you'd say it's unlikely and high risk, said Peter Chilton, investment analyst at Constellation Capital Management, one of several Sydney-based fund managers BHP chief Marius Kloppers tried to persuade this week to back his idea of a mega-miner, controlling much of the world's supply of raw materials.


Rio had already planned a general investor briefing for November 26 before BHP announced its planned bid last week and will use the opportunity to give its perspective on the situation, Rio spokesman Nick Cobban in London said.

Neither Rio nor BHP would comment on the newspaper report.

Earlier this month, Rio Tinto said BHP's three-shares-for-one takeover proposal significantly undervalues Rio Tinto and its prospects.

I would be very, very surprised if it happened, analyst Tom Gidley-Kitchin at Charles Stanley said in London.

If Rio was to do a Pac-Man defense, they would be conceding all arguments on the validity of merging the two companies. They haven't conceded that rationale yet.

Gavin Wendt, mining analyst with Fat Prophets in Sydney, said: We believe a higher bid of closer to four BHP shares for every Rio share will be required to secure Rio board interest.

UBS, which has acquired a 5 percent stake in Rio, indicated in a report this week BHP could afford to add $27 billion in cash to its all-share offer for Rio.

The value of BHP's proposed bid is around 12 percent lower than the value of Rio's share price, indicating investors expect a higher bid.

Perennial Growth Management partner Ken West said Rio was unlikely to counter-bid for BHP as BHP's growth options in the resource-rich Pilbara region in Western Australia were not as strong as Rio's.

They're on a clear path with their own options in iron ore, said West. You combine that with Alcan -- they're pretty happy. Why would you defend yourself by making a bid for BHP? It seems a bit messy.

ABN Amro called suggestions Rio would turn from prey to predator the latest rumor in the potential takeover battle.

BHP's Kloppers, who is continent-hopping in coming weeks to press the case for combining the companies to big investors and customers, said earlier this week he was ready for a long fight.

They were very careful not to give any indication on whether they might raise their offer. They want to keep their options open, said Constellation's Chilton.

He said competition between BHP and Rio had kept them on their toes in recent years and that would be lost in a merged group.


(Additional reporting by Eric Onstad in Johannesburg)

(Editing by Ian Geoghegan/Sue Thomas)