Rio Tinto challenged BHP Billiton on Tuesday to make a formal bid to create a mega-mining house or walk away from what could be the second biggest takeover ever.
Rio said it asked Britain's Takeover Panel to set a deadline under a "put up or shut up" rule by which BHP would have to formalize its approach, more than a month after BHP's $140 billion 3-for-1 share proposal was made public.
"The (BHP) proposal is getting a bit stale," said James Wilson, a mining analyst with DJ Carmichael in Perth. "A marriage between Rio and BHP is the logical next step, and Rio is saying 'come on BHP, get on with it, stop dilly dallying'."
The proposal has eclipsed Rio's $38 billion acquisition of Canadian aluminum giant Alcan, prompted widespread speculation of looming counter bids and triggered protests from the world's steelmakers fearing a combined group would have too much clout in setting raw materials prices.
A combined BHP-Rio would hold about 27 percent of the world market for iron ore. It would also control the global flow of coal, copper, uranium and diamonds.
Rio has rejected BHP's overture, which it received in the form of letter, as "out of the ballpark," and has declined to meet BHP face-to-face to discuss a merger.
BHP Still 'Committed'
"All we can say at this stage is that we remain committed to what we believe is a logical and compelling proposal and we would like Rio Tinto to engage with us," a BHP spokeswoman said. UBS has said BHP could afford to put a further $27 billion in cash into the offer on top of a promised $30 billion share buyback.
Rio Tinto shares in London slipped 2.5 percent to 5,636 pence, losing more ground than BHP as investors factored in the possibility that BHP might walk away. BHP shed 1.4 percent to 1,654 pence along with other mining shares as copper prices fell.
Rio's stock represented a 13.6 percent premium to the value of BHP's all-share deal, down from 17 percent several days ago.
"This is a clear signal that Rio wants BHP to act on a bid and is hoping it will be bigger than the one out there now," said an analyst who asked not to be identified.
BHP was expected to boost its takeover proposal by about a fifth, possibly by adding a cash sweetener, a Reuters poll of investors and analysts last month showed.
If it succeeds in its present form, the merger would be the second-biggest takeover after Vodafone's $203 billion buyout of Mannesmann in 2000.
"BHP is in the box seat. But they will have to come back with a bit more to get over the line," said Richard Herring, director with stockbroker Burrell & Co, noting it was unlikely many other companies could get as much synergy from a Rio merger as BHP.
Under Britain's corporate takeover regulations, once a proposal has been initiated, the target company can ask the panel to set a deadline for the bidder to formalize its intentions.
If this "put up, or shut up" rule is triggered, BHP would need to either make a firm offer within a designated period -- typically 1-2 months -- or withdraw for at least six months before coming back with a firm bid or proposed offer.
The takeover panel holds talks with both parties to agree a deadline, then makes public the decision with a statement through the stock exchange. A source close to the panel said it was unclear when a decision would be made.
Rio's request follows weeks of speculation that a number of other suitors were readying offers, though none has emerged.
Rio Chief Executive Tom Albanese late last week called BHP's proposal "dead in the water," and said other companies were calling, though Rio had not been responsive.
Analysts have speculated that South Africa's Anglo American, Brazil's CVRD and Switzerland's Xstrata might step forward with rival offers.
Investment group Blackstone on Monday denied a British newspaper report it was planning a counterbid for Rio with a consortium believed to include China's sovereign wealth fund.