Rio Tinto (NYSE: RTP) might accept a higher takeover bid from rival BHP Billiton (NYSE: BHP). So far, Rio has told the markets that a deal is not possible.

Perhaps Rio's shareholders are putting some pressure on management. After rising to $484 on BHP's initial bid, RTP shares have fallen as low as $341 in the last week. That's a lot of money out the window. Management at Rio Tinto says it can improve returns at the company to get its share price up, but Wall Street clearly does not believe that.

According to Reuters, "Rio Tinto Chief Executive Tom Albanese on Sunday left the door open to a sweetened takeover offer from BHP."

A merger of the two companies has every chance of failing. Even with its recent dip, Rio Tinto's shares have moved from a 52-week low of $200 to $367. If a premium offer is made to close the deal, the price could be well over $400 a share. Commodities prices would have to continue to rise to justify such a high price for the miner, and a global slowdown could actually cause prices to retreat. RTP's shares are also up more than BHP's in the past year, so, if the deal is mostly done in stock, the acquirer will pay an especially rich price.

No wonder most mergers don't work.

Douglas A. McIntyre is an editor at 247wallst.com.

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Rio Tinto (RTP) might accept higher bid originally appeared on BloggingStocks on Sun, 20 Jan 2008 12:10:00 EST. Please see our terms for use of feeds.